On the Record
I think NATO is much stronger now than it was two days ago.
U.S. President Donald Trump
On Our Radar
Welcome to the Trade War. The White House is making good on its threat to impose additional tariffs — 10 percent on $200 billion worth of Chinese imports — as punishment for China's retaliation to the Trump administration's first round of 25 percent tariffs on $34 billion worth of mostly Chinese industrial goods. (A second round of 25 percent tariffs on $16 billion in Chinese imports will arrive in August.) This move puts us squarely in trade war territory. After the public has had a chance to comment on the list of goods to be tariffed, the new duties would take effect around early October, on the cusp of the U.S. midterm elections. For its part, China will likely shift to less visible retaliatory measures, such as boycotts, customs delays targeting U.S. goods and creating more regulatory hurdles for American companies in China. Theoretically, the White House's escalation — and all of the economic uncertainty and political risk it entails — could be the groundwork for a future negotiation, allowing President Donald Trump to claim a victory just in time for the November elections — assuming that a negotiation is the endgame for this White House. There are still hard limits to what the United States is going to be able to extract from China in the way of economic concessions.
The High-Stakes Helsinki Summit. Even as another round of indictments from special counsel Robert Mueller is clouding Trump's July 16 meeting with Russian President Vladimir Putin, there will still be a lot for these two leaders to cover when they meet in Helsinki, Finland. Putin seems to be brewing up a bargain that would entail Moscow restricting Iranian activity in southwest Syria. Arms control talks, military buildups in Europe, a potential peacekeeping plan around Ukraine and Russian participation in the North Korean denuclearization and economic opening are also fair game in this dialogue. But there is only so much Russia can realistically offer and enforce in any of these areas, and Trump already faces a strong congressional check on any concessions his administration entertains, including the easing of sanctions. No grand bargain will emerge from the Helsinki summit, but we'll be watching for any movement on the margins of these thorny issues.
Brexit Rebels Everywhere! With only eight months to go before the United Kingdom leaves the European Union, London's roadmap to the exit door is getting muddier by the week. On July 16, the House of Commons will vote on a trade bill, and Prime Minister Theresa May will face challenges from soft-liners in her party who want the United Kingdom to remain in the customs union, as well as from hard-liners who want to sever most ties with the European Union for full autonomy on trade. May's Brexit plan, which calls for a joint United Kingdom-European Union rulebook to regulate trade in goods, will come under attack from both groups as they present amendments to the bill. Beyond the United Kingdom, the picture doesn't look any better. The European Union is going to pick apart any proposal that cherry-picks trade benefits with the bloc and Trump has given ammunition to the hard-liners in stating that May's Brexit plans could kill prospects for a U.S.-United Kingdom free trade deal.
Road Bumps With North Korea. The first Trump-Kim Jong Un summit follow-up visit to North Korea did not go well for U.S. Secretary of State Mike Pompeo. He walked away empty-handed, had no meeting with Kim and was harshly rebuked in state media by North Korea's foreign ministry. Pompeo's one tangible takeaway was a scheduled July 12 working-level meeting on returning wartime U.S. remains — a meeting North Korea unexpectedly skipped. Further, the United States has asked the United Nations to rebuke China and Russia for alleged massive transfers of oil to North Korea. But all is certainly not lost. Abrupt walkaways and harsh rhetoric are part of the North Korean negotiating style. And the maximum pressure campaign has been the U.S. calling card on North Korea for more than a year. Both sides are trying to enhance their negotiating positions. And North Korea has been clear that it wants discussions on a Korean War peace deal and trust-building meetings at many levels. To this end, Pyongyang is pushing for high-level military talks, ideally involving a U.S. general.
Libya Brings Some Relief to Oil Markets. Just two weeks after taking nearly 800,000 barrels per day of Libya's oil hostage, Libyan National Army commander Khalifa Hifter and his backers in the United Arab Emirates were forced to reverse course and restart exports under heavy pressure from France and the United States. With one oil crisis settled, at least for now, the next big thing to watch is how quickly Iran's oil exports decline as foreign buyers prepare for U.S. sanctions scrutiny. An Iranian delegation visits China this week in hopes of securing assurances that China — Iran's largest oil customer — will maintain its imports.
On Our Minds
China's Growing Role in the Mideast. Chinese President Xi Jinping announced a multibillion-dollar loan, investment and aid plan for Middle Eastern countries that he dubbed "oil and gas plus." A prominent China-UAE economic forum in Abu Dhabi this week will also put China's expanding role in the region on display. But as China expands its economic footprint in the Middle East, it will inevitably wade deeper into the region's many political frays. This raises a longer-term question of how the Chinese approach to balance-of-power politics in the Middle East will differ from the traditional Western modus operandi. China, for example, doesn't have the military presence in the region to provide the same level of security guarantees as the United States. However, Beijing doesn't come with ideological baggage, and it has a lot of technology prowess to bear in helping regimes maintain a tight surveillance state.
A Remarkably Rapid Rapprochement. Ethiopia and Eritrea signed a joint declaration of peace amid a slew of economic pledges to propel forward their rapid rapprochement. Their fast pace may be a way for both leaders to try and head off internal opposition to their moves, but will that resistance catch up with them? And given that these are two powers that have supported active insurgencies against each other, what kind of security guarantees will be demanded and what can be enforced when the rubber meets the road in this ambitious round of diplomacy?
Jolting U.S. Afghanistan Strategy. A rumored White House review of its Afghanistan strategy in the coming months could herald a new direction for the United States in its longest running war. With Trump's frustration growing over a lack of progress on the battlefield, he may begin exploring a more significant drawdown. Such a move would open the door for greater involvement from regional actors, especially Russia, China, Pakistan and Iran — all of which have contact with the Taliban and are coordinating on intelligence sharing to manage the transnational jihadist threat posed by the Islamic State's Khorasan chapter. We can envision a postconflict Afghanistan that would involve regional players carving up spheres of influence in a loose and fragile confederation.
The Emerging AMLO Agenda. Mexican President-elect Andres Manuel Lopez Obrador plans to introduce legislation to make it easier to hold referendums. Lopez Obrador already has the numbers in Congress to easily hold a national vote, but he could be trying to alter federal law to expand the subjects on which a referendum can be held, such as public spending. Lopez Obrador is also pledging to strip immunity for officials, including the presidency, as he proceeds with his anti-corruption drive. But will he take a mild approach or will his anti-corruption plan include legitimate enforcement measures and institutions to shake up the system?
In Case You Missed It
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Stuck Between the U.S. and the EU, Poland Explores Its Options
On Our Calendar
In the coming week, U.S. President Donald Trump will meet with Russian President Vladimir Putin in Helsinki, Finland; China will host the Sino-European summit in Beijing; and Turkey is expected to end the state of emergency it imposed after the failed coup attempt in July 2016. For more, see our Geopolitical Calendar for the week of July 16.
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