The Weekly Rundown: A Summit, a Trade War and a Hard Brexit

7 MINS READJun 16, 2018 | 16:15 GMT
North Korean leader Kim Jong Un follows U.S. President Donald Trump into Singapore's Capella Hotel for their summit June 12.
(Kevin Lim/The Strait Times/Handout/Getty Images)

North Korean leader Kim Jong Un follows U.S. President Donald Trump into Singapore's Capella Hotel for their summit June 12.

Stratfor's geopolitical guidance provides insight on what we're watching out for in the week ahead.

On the Record

I think the entire world is watching this moment ... Many people in the world will think of this as a scene from a fantasy ... science fiction movie.

Kim Jong Un talking to Donald Trump at the Singapore summit.

On the Radar

The Handshake Seen 'Round the World. Despite the hype, the summit between U.S. President Donald Trump and North Korean leader Kim Jong Un resulted not in a dramatic reveal but in a political framework amenable to both sides for kick-starting lower-level talks. The summit has changed how the two sides manage their relations and intermittent crises. Washington moved past its long-standing focus on change before dialogue, and Pyongyang appears to have empowered its negotiators to steer talks themselves, without having to shuttle back and forth to the top. This in itself is progress, even if denuclearization never happens. Though the North Korea problem is far from solved, a flurry of outreach to Pyongyang followed the summit. Malaysia now plans to reopen its embassy in North Korea, which it shuttered last year after the assassination of Kim's older brother in Kuala Lumpur's airport. Japanese and North Korean officials met in Mongolia, renewing efforts for a summit between Kim and Prime Minister Shinzo Abe. And Russian President Vladimir Putin met with top North Korean official Kim Yong Nam just as Gazprom announced it had restarted talks over running a natural gas pipeline through North Korea.

Trump Takes on China. The gloves are off now that the United States has announced it will impose 25 percent tariffs on $34 billion worth of Chinese exports starting July 6. China responded in kind, rolling out tariffs on U.S. exports, including soy. Talks may still occur, but the world's two largest economies are teetering on the brink of a full-blown trade war. The United States has threatened to respond to China's retaliatory moves and is reportedly close to finalizing its list of imports worth $100 billion to do so. If Washington follows through with another round of tariffs, Beijing will be in a precarious position and may feel it has no choice but to match the U.S. measures by placing tariffs on $100 billion worth of American goods — effectively all the goods China imports from the United States. The United States could then slap tariffs on all Chinese imports. Cooler heads may yet prevail. Nevertheless, the United States and China are closer to a trade war than ever before. All dialogue and talks between the two will be critical to watch as Beijing tries to avoid that scenario.

A Hard Brexit More Likely. British Prime Minister Theresa May's government remains deeply divided over the future of Brexit, and Parliament's patience is wearing thin. Last week, May's government survived a series of votes on Brexit-related legislation in the House of Commons, but only after promising that Parliament would have a significant role during the final stages of the process. Now May seems to have backtracked on that promise, opening the door for new conflicts when both chambers of Parliament debate the EU withdrawal bill next week. Though May's government has pledged to leave the EU single market and customs union, lawmakers want to stay at least in the customs union. Should Parliament take control of Brexit, it could lead the United Kingdom to a softer exit from the European Union than May's government would like.

Argentina's Economic Scapegoat. The head of Argentina's central bank resigned June 14 after the value of the Argentinian peso plunged more than 6 percent in a single day. President Mauricio Macri appointed a former finance minister in his stead. Higher interest rates in the United States, along with Buenos Aires' high current account and trade deficits, will probably keep driving the peso down. Argentina, however, is unlikely to draw on its limited international reserves to slow the depreciation, since the conditions of its $50 billion stand-by loan from the International Monetary Fund (IMF) forbid such an intervention. Argentina's financial woes and the controversial IMF loan will weaken Macri's position in the run-up to elections next year and blunt the business-friendly policies he set out to implement at the start of his term.

Between a Rock and a Hard Place. Glencore is being squeezed on multiple fronts in the Democratic Republic of the Congo. The Swiss mining company resumed royalty payments to Israeli businessman Dan Gertler and also agreed to forgive $5 billion worth of debt in a joint venture with state-owned mining firm Gecamines. Glencore and other foreign mining companies will have to deal with a more aggressive government in Kinshasa for the next several years. After years of favorable conditions for mining companies in the Democratic Republic of the Congo, producers are too invested in operations to extract not only strategic cobalt but also other commodities to pull out of the country. The global mining sector currently has few alternative options for producing enough cobalt to meet the growing demand for the metal, but the Congolese government's heavy hand and onerous mining regulations — on top of humanitarian concerns and political uncertainty — will accelerate the development of alternative mining sites and new technologies.

On Our Minds

The Polish Conundrum. It will be a crucial week for Polish-EU relations, as the government in Warsaw tries to resist pressure from the bloc to backtrack on controversial domestic reforms. Polish Prime Minister Mateusz Morawiecki will meet with European Commission Vice President Frans Timmermans on June 18 and with German Chancellor Angela Merkel the following day. The meetings will set the stage for the EU General Affairs Council to discuss the state of the rule of law in Poland on June 21. These are bittersweet days for Poland. On the one hand, Warsaw expects to benefit from the United States' growing interest in the Russian borderlands. But on the other, disagreements with the European Union are threatening the continuity of structural and agricultural funds from the bloc.

A Caucasus Spring? Georgian Prime Minister Giorgi Kvirikashvili resigned June 13, making Georgia the second country in the Caucasus to experience major political change in the last three months. Like former Armenian President Serzh Sargsyan, who stepped down from office in April, Kvirikashvili left his post after weeks of protests in his country over corruption and the perceived lack of transparency in the ruling party. The situation in Georgia differs from that in Armenia in important ways, but it suggests a broader trend in the region of protests growing beyond governments' control.

Russians in Central Africa. Russia seems to be sensing an opportunity in Central Africa. After months of increasing its influence in the Central African Republic, Russia agreed to a deal with the Democratic Republic of the Congo to supply arms, conduct advisory missions and provide training to Congolese officers. The deal also follows talks between Russia and Rwanda over increased military ties and the possible sale of a Russian air defense system to Rwanda. Central Africa is rich in mineral resources and replete with weak governments looking for outside help. Russia appears to be taking advantage of these factors for its own economic gain.

In Case You Missed It

The U.S. and China Escalate Their Trade Tiff With Tit-for-Tat Tariffs

Trump and Kim Break With the Past

Can Japan's Prime Minister Win a Third Term?

On Our Calendar

In the week ahead, the British House of Lords will vote on the EU withdrawal bill. Georgia's ruling party will also have to submit a new list of Cabinet members following the prime minister's resignation. For more, see our Geopolitical Calendar for the week of June 18. 

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