This article is based on ideas originally published by VoxEU – Centre for Economic Policy Research (CEPR) and has been independently rewritten and extended by The Economy editorial team. While inspired by the original analysis, the content presented here reflects a broader interpretation and additional commentary. The views expressed do not necessarily represent those of VoxEU or CEPR.
Restructuring of Europe’s 1,300 Trillion KRW Defense Market Unofficial Entry Barriers for Non-European Companies Clear Limitations for ‘Outsiders’ Without Technological Capabilities
As Europe reawakens its defense ambitions in response to rising geopolitical tensions, the door is slowly closing on foreign defense contractors. But rather than retreat, South Korea’s Hanwha Aerospace is charging forward—determined not to remain a "welcomed outsider" but to become a permanent fixture within Europe's defense industrial base. The company is taking bold, multidimensional steps to localize operations and embed itself deeply into the region’s defense infrastructure. What began as a supplier relationship is now evolving into strategic partnerships, local job creation, and collaborative research. Yet in this delicate balancing act of politics, technology, and timing, the real test for Hanwha will be whether it can not only enter but endure in Europe’s rearming era.
Hanwha Aerospace is making tangible inroads in Europe by establishing local production bases and investing in collaborative ventures. In Warsaw, the company recently signed a term sheet with WB Group, a leading Polish defense firm, to form a joint venture aimed at producing "Chunmoo" guided missiles for the Polish military. This facility is expected to break ground next year, signaling a shift from simple exports to boots-on-the-ground production.
A similar approach is underway in Romania, where Hanwha plans to manufacture K9 self-propelled howitzers and K10 ammunition resupply vehicles. With a supply deal already signed—valued at KRW 1.4 trillion for dozens of K9s and K10s—the company has selected a factory site and is preparing to begin production as early as 2027.
Importantly, Hanwha is ensuring its European footprint isn’t just industrial but also human. It has signed MOUs with both Bucharest Polytechnic University and Pusan National University to support local recruitment, scholarships, and R&D center development. These agreements aim to cultivate engineering talent through internships, exchange programs, and deeper academia-industry collaboration, building a pipeline of skilled workers aligned with Hanwha’s long-term ambitions.
Behind Hanwha’s localization push lies a strategic calculation shaped by Europe’s internal defense politics. The European Commission’s re-armament plan, announced last month, pledges a €800 billion investment by 2030 to boost arms procurement. However, this funding comes with a caveat: EU Commission President Ursula von der Leyen made it clear that to strengthen Europe’s defense base, the region must “buy more European-made products.” The message was unmistakable—foreign companies must localize or be left out.
While this approach raises protectionist barriers, it also reveals structural cracks in Europe’s defense ecosystem. After decades of post-Cold War military drawdowns, many European manufacturers are now overwhelmed by the surge in demand. Fragmented supply chains, overreliance on subcontractors, and soaring logistics costs have exposed the inefficiencies of a system focused more on job creation than performance.
This is where Hanwha sees its window. By presenting itself not as a foreign vendor but a "local production partner," the company taps into Europe’s unmet demand for capacity and speed. Eastern European nations like Poland—with their lower entry barriers and warm political ties with South Korea—are proving especially receptive. Hanwha’s competitive advantage in cost, fast delivery, and streamlined execution offers practical solutions to European countries eager to rebuild their defense readiness without the burden of technological overcomplexity.
For many EU stakeholders, Hanwha’s presence offers a twofold benefit: delivering urgently needed defense systems while generating local employment and revitalizing industrial bases. It’s a calculated synergy—Europe gets capability and jobs, while Hanwha secures a strategic foothold.
Still, for all its early success, survival in Europe’s defense market requires more than just swift deliveries and attractive pricing. The long-term goal for European defense policy is to cultivate high-tech capabilities that can rival the United States. This poses a challenge for Hanwha Aerospace, whose core strengths lie in cost-effectiveness and speed rather than premium technology. Without a major innovation edge, short-term collaborations could be short-lived.
To address this, Hanwha is aggressively scaling up its R&D investments. The company has entered a high-stakes arena with efforts to independently develop aircraft engines, a technology currently monopolized by a handful of nations such as the U.S., UK, and Russia. Aircraft engines, which function through the Brayton cycle of intake, compression, combustion, and exhaust, represent one of the most technically demanding feats in modern engineering—requiring advanced skills in thermodynamics, materials science, and precision controls.
Hanwha’s commitment includes participating in Risk and Revenue Sharing Programs (RSPs) with original engine manufacturers, which allow it to jointly develop, produce, sell, and maintain high-tech systems while sharing the financial risk. At the same time, its annual R&D expenditure has grown significantly—rising from KRW 586.7 billion in 2022 to KRW 814.1 billion in 2023, with a projected KRW 887.8 billion in 2024.
Beyond propulsion systems, Hanwha is also aligning with the next frontier of warfare: artificial intelligence. The company is working to launch an array of Unmanned Ground Vehicles (UGVs) by 2028, including the Arion-SMET and GRUNT, as well as explosive ordnance disposal robots set to be operational this year. In a significant step, Hanwha has strengthened its strategic partnership with Milrem Robotics, Europe’s largest UGV firm, to co-develop next-generation unmanned technologies.
Hanwha Aerospace is no longer content to be a guest in Europe’s defense industry—it wants to be part of the family. With a mix of local partnerships, targeted investments, and long-term technological vision, it is navigating a complex terrain where politics, capacity, and innovation collide. The company has secured its entry; now, its challenge is to survive, evolve, and lead in a continent seeking not just defense, but defensive independence.
Market instability grows due to pressure on the Federal Reserve Reemergence of the 'political uncertainty → capital outflow' scenario China moves to strategically expand the yuan-based economic bloc
A quiet but consequential shift is taking place in the global financial system. As markets reel from political uncertainty in the United States, many countries and corporations are increasingly turning their attention to an alternative currency—China’s yuan. While the dollar continues to hold sway as the dominant global reserve currency, the cracks in its foundation are beginning to show. In this emerging gap, Beijing sees opportunity. Capitalizing on financial market turbulence and geopolitical discontent, China is swiftly expanding the yuan’s role in cross-border trade and finance, aiming to build a parallel system of settlements that could someday rival the greenback’s reach.
Market volatility in recent months has often traced back to one source: former President Donald Trump. As he continues to pressure the U.S. Federal Reserve to lower interest rates, his remarks have sparked shockwaves through Wall Street and beyond. On April 21, Trump took to social media, calling Fed Chair Jerome Powell a “major loser” and demanding immediate rate cuts, arguing that inflation was no longer a concern. The market reaction was swift and brutal—Dow Jones plummeted 2.48%, the S&P 500 fell 2.36%, and the Nasdaq dropped 2.55%. The Wall Street Journal remarked it was the sharpest stock decline since 1932.
This latest turmoil comes at a time when trust in dollar-denominated assets is already fragile. A survey by the International Monetary Institute (IMI) of Renmin University of China found that 24% of firms currently using the U.S. dollar for international payments are now considering switching to the yuan. The trend has been gaining momentum—up from 21.5% in mid-2024 to 23% by year’s end and continuing to rise into 2025. Currently, 68% of surveyed firms already use the yuan in international trade, and 53% utilize it in foreign exchange.
Yet challenges remain. Over 40% of businesses cited reluctance from trade partners to use the yuan, while others pointed to capital controls, limited convertibility, and vulnerability to external influence. Still, IMI Deputy Director Tu Yonghong believes the fragmented state of global finance will favor diversification—and by extension, the yuan. As U.S. protectionist measures grow stronger and monetary policy independence comes into question, doubts about the long-term stability of the dollar are becoming difficult to ignore.
As financial turbulence intensifies, the world’s ultra-wealthy are quietly moving their assets abroad. Trump’s confrontational economic policies—especially his combative stance toward the Fed and escalating protectionism—have spurred capital flight at unprecedented levels. Switzerland has emerged once again as a safe haven, with local banks reporting surging demand for account openings and fund transfers from American clients, describing the inflow as "like a wave."
This movement reflects a broader defensive strategy. Wealthy individuals are seeking insulation from political risk and erratic policy shifts. The logic is simple: in an environment where a single tweet can move markets, capital needs to reside in jurisdictions perceived as more stable. Another factor is tax strategy. Amid rising uncertainty, high-net-worth Americans are increasingly drawn to tax havens and considering dual citizenship or real estate acquisitions abroad to diversify their financial and legal positions.
More than a temporary reshuffling of portfolios, this wave of asset migration reveals deep-seated distrust in the U.S. financial system’s durability. The possibility that the Federal Reserve might bow to political interference is being taken seriously by investors, many of whom now prioritize tangible, “real-world” risk mitigation over blind faith in institutions. This growing perception threatens the very foundation of the dollar’s dominance: the belief that it represents a safe, stable, and politically neutral store of value.
Amid this reshuffling of global trust, the yuan has been making quiet but significant gains. According to the People’s Bank of China, cross-border yuan settlements between China and nations such as Cambodia and Malaysia surged by 45% in Q1 2025 compared to a year earlier. This is more than a trade uptick—it signals increasing adoption of the yuan as a preferred settlement currency in international transactions.
South Korea is also joining the shift. The Bank of Korea reported that 1.5% of the country’s total trade last year was conducted in yuan. For imports specifically, yuan usage rose for the sixth consecutive year, reaching 3.1%—a 0.7 percentage point jump. The trend is largely fueled by a dramatic twentyfold increase in semiconductor imports paid in yuan. Overall, yuan-denominated imports rose 27.9% year-over-year, while dollar-based import payments fell from 82.8% to 80.3%.
Seizing this momentum, China is doubling down on regional diplomacy to further embed the yuan in Southeast Asia’s financial networks. Starting April 14, President Xi Jinping visited Vietnam, Malaysia, and Cambodia to strengthen trade and financial cooperation. These visits are seen as part of a broader Chinese strategy to counter rising U.S. economic nationalism by tightening regional alliances. The yuan’s expanded use fits neatly into this playbook—reducing dollar dependence while elevating Beijing’s financial influence in a region caught between two powers.
Dow Jones, S&P 500, and Nasdaq All End Lower Trump: "Powell Risks Economic Slowdown by Delaying Rate Cuts" Also Launches Attacks, Calling Him 'Mr. Too Late' and More
The U.S. financial markets are once again in turmoil, rattled by a volatile mix of political pressure and economic uncertainty. President Donald Trump has escalated his attacks on Federal Reserve Chairman Jerome Powell, igniting fears over the independence of the nation’s central bank. As trade negotiations stall globally and investor confidence wavers, Trump’s latest remarks have triggered a dramatic market reaction—one that signals deeper concerns about the future direction of U.S. economic policy.
On April 21, the New York Stock Exchange saw a sharp sell-off as Trump's social media outburst intensified pressure on the Federal Reserve to lower interest rates. By 1 p.m. that day, the Dow Jones Industrial Average had plummeted by 1,091 points (2.79%), while the S&P 500 fell by 2.9% and the Nasdaq Composite dropped a staggering 3.17%. Big tech and industrial giants led the losses—Tesla plunged 7%, Nvidia over 5%, and Amazon, AMD, Meta Platforms, and Caterpillar all shed around 3%.
The downturn was largely driven by a post on Trump’s Truth Social account, where he referred to Powell as “Mr. Too Late” and a “major loser,” warning that failure to cut rates could lead to an economic slowdown. Trump argued that while inflation is not currently a concern, delaying a rate cut could trigger a downturn. He emphasized that grocery and energy prices, including what he mockingly called “Biden’s egg prices,” have dropped, and suggested Powell was acting too slowly—unlike European central banks that have already cut rates seven times. Trump even claimed the only time Powell acted swiftly was to support the electoral success of Joe Biden and Kamala Harris.
The markets responded with immediate anxiety. The U.S. dollar slumped to its lowest level in three years, and gold prices soared to an all-time high of over $3,400 per ounce. Financial analyst Adam Crisafulli described the attack as introducing a “new macroeconomic risk,” adding that the Fed may now struggle to lower rates due to lingering inflation concerns tied to tariffs. He further noted that the simultaneous fall in stocks, the dollar, and U.S. Treasury bonds could signal a broader exodus from American financial assets driven by fears of a deepening trade war.
Trump’s attacks didn’t end with name-calling—he also raised the possibility of firing Powell, marking a continuation of the previous week’s criticism. However, economists across the U.S. believe the chances of such a dismissal are slim. Removing the Fed Chair would not only contradict a 1935 U.S. Supreme Court ruling—originating from President Franklin D. Roosevelt’s failed attempt to oust the FTC chairman—but also strike at the heart of the Fed’s legal and institutional independence.
Powell’s tenure is protected by law, and he has remained firm in asserting that the president lacks the authority to remove him. Trump, for his part, appears to understand the risks: Wall Street has issued stern warnings that interference with the Fed could provoke a historic market crash. Michael Brown, senior strategist at Pepperstone, cautioned that Powell’s dismissal would trigger “the most dramatic sell-off of U.S. assets imaginable,” with serious implications including a weakened dollar and the erosion of U.S. financial leadership.
According to The New York Times, Trump’s advisers have privately warned him that firing Powell could provoke greater market panic. Powell, unfazed, has made it clear he won’t resign under pressure. Speaking recently at the Economic Club of Chicago, he reaffirmed that the Fed’s independence is “widely understood and strongly supported in Washington and Congress.”
Though the legal and political odds are stacked against Trump, his rhetoric seems to have another goal: to influence monetary policy and redirect blame. During a press conference with Italian Prime Minister Giorgia Meloni, Trump told reporters he had voiced his dissatisfaction with Powell and said that if he wanted him out, “he’s got to go—and quickly.” A day later, he insisted that if Powell “understands what he’s doing,” he would lower interest rates.
Trump’s fury traces back to Powell’s recent speech criticizing tariffs—a cornerstone of Trump’s economic strategy. Powell had warned that tariffs could hinder growth and drive inflation, and his refusal to cut rates sparked Trump’s aggressive response.
Behind the political spectacle lies a strategic motive. Trump appears determined to frame any looming recession not as a consequence of his own trade policies, but as a failure of the Fed to act decisively. Francesco Bianchi, a professor of economics at Johns Hopkins University, suggested that Trump’s repeated attacks could condition the public to blame the Fed in the event of an economic downturn. As Bianchi put it, the more Trump insists, the more people will believe “the Fed must cut rates.”
This article is based on ideas originally published by VoxEU – Centre for Economic Policy Research (CEPR) and has been independently rewritten and extended by The Economy editorial team. While inspired by the original analysis, the content presented here reflects a broader interpretation and additional commentary. The views expressed do not necessarily represent those of VoxEU or CEPR.
U.S. Seeks to Secure Interests While Minimizing Provocation Toward Russia Notable Shift in Tone Just 30 Days After Black Sea Ceasefire Ukraine May Be Preparing to Cede Parts of Its Territory
U.S. President Donald Trump has called for a ceasefire agreement between Russia and Ukraine, specifying that such a deal could be reached “this week.” He also openly expressed ambitions for the United States to lead Ukraine’s infrastructure reconstruction and industrial recovery, thereby securing political and economic influence in the post-war landscape. In diplomatic circles, Trump’s remarks are being interpreted not merely as optimistic speculation but as a sign that behind-the-scenes negotiations may already be underway.
April 20 (local time) — President Donald Trump has ignited new speculation over a potential ceasefire in the Russia-Ukraine war, posting on his social media platform that he hopes “Russia and Ukraine reach a ceasefire agreement this week.” He added that the two nations could “begin constructive business with a prosperous America,” suggesting a possible minerals-based economic arrangement. Trump previously told reporters that a U.S.-Ukraine mineral deal would be signed on April 24.
This follows a warning Trump issued on April 18, stating he could “withdraw from mediation efforts” if no progress was made. In response, Russian President Vladimir Putin announced a temporary Easter ceasefire from April 19 to midnight on April 20. Ukrainian President Volodymyr Zelensky proposed an extension, but the Kremlin quickly rejected it, affirming the ceasefire would end as scheduled.
Observers interpret Trump’s reference to “this week” as a strong signal that a broader behind-the-scenes agreement may be near. Russia is increasingly wary of further escalation, and Ukraine, struggling with prolonged economic and human losses, remains heavily dependent on continued U.S. support. Analysts say the U.S. could be repositioning itself not merely as a military backer but as a direct stakeholder in Ukraine’s post-war economy.
What stood out in Trump’s latest message was his reference to “constructive business,” not military deployments. While Putin is acutely sensitive to the idea of U.S. troops in Ukraine, an American-led economic footprint could stabilize Ukraine’s security and reconstruction while avoiding overt military confrontation. This has led to growing speculation that a foundational agreement is already in place: the war must end, and the U.S. will emerge as a central power broker.
The seeds of this potential breakthrough were sown a month earlier. Russia and Ukraine agreed to a 30-day limited ceasefire around the Black Sea following a two-hour phone call between Trump and Putin. According to a Kremlin statement released on March 20, Trump proposed a halt to attacks on energy infrastructure. Putin reportedly responded favorably and issued immediate orders to his military.
Zelensky had initially floated a broader ceasefire, including airstrikes and naval activity, but Russia only agreed to suspend attacks on infrastructure, postponing further negotiations. While seen as a limited deal at the time, the fact that the ceasefire held and back-channel diplomacy intensified lent weight to the possibility of fast-moving, more comprehensive talks.
If Trump’s prediction of a ceasefire this week comes to pass, the previous month may well have served as a quiet withdrawal phase — a time for both sides to prepare for an end to active conflict under politically acceptable terms.
Analysts believe the remaining negotiations are now entering their final phase, with border realignment being the most sensitive issue. The leading scenario suggests a new status quo based on current front lines: Ukraine would forgo reclaiming all occupied territories, effectively ceding them to Russian control in exchange for peace and a clear path to reconstruction.
In this new phase, the U.S. is likely to transition from mediator to economic actor. Trump’s mention of “constructive business” is viewed as a clear indicator that American capital will play a major role in Ukraine’s infrastructure rebuilding and industrial revitalization. This would allow Washington to expand its economic and geopolitical influence in Eastern Europe.
Some analysts describe this shift as a transition from “military dominance to economic hegemony.” While Ukraine may not regain its full territorial integrity, a stable reconstruction plan backed by American investment could offer a practical path to ending the war and building a new regional order.
As the final chapter of this long and tragic war nears, one question looms larger than ever: who will shape the post-war future — and to whose benefit?
U.S. Economists Slam Reciprocal Tariff Policy as Deeply Flawed “A Rejection of Liberal Economic Principles, Based on No Valid Evidence” “It Will Trigger Inflation and a Self-Inflicted Recession—American Workers Will Bear the Cost”
Prominent U.S. economists—including several Nobel Prize laureates—have publicly denounced President Donald Trump’s tariff policies. In a joint declaration, they warned that the administration’s strategy is divorced from economic reality and could ultimately trigger a self-inflicted recession.
April 20 (Local Time) – A wave of backlash is mounting within the U.S. economic community as more than 900 economists, including two Nobel Prize winners, have issued an open letter denouncing President Donald Trump’s tariff policy. The signatories argue that the administration’s approach is disconnected from economic reality and poses a serious risk of triggering a recession.
In the declaration, titled the “Anti-Tariff Statement,” Nobel laureates James Heckman and Vernon Smith, along with hundreds of scholars and researchers, criticize the notion that tariffs promote “economic liberation.” Instead, they argue that tariffs undermine the liberal economic principles that fueled decades of American prosperity.
“Those advocating tariffs may portray them as tools of economic freedom, but in reality, they overturn the very liberal principles that have underpinned the prosperity led by the United States,” the letter reads. “The current administration’s tariff policy stems from a fundamental misunderstanding of the economic conditions faced by everyday Americans.” The economists warn that ordinary American workers will ultimately pay the price in the form of rising inflation and heightened risk of economic slowdown. They also sharply criticize the principle of “reciprocal tariffs” applied indiscriminately to most countries.
“President Trump’s notion of ‘reciprocal tariffs’ is based on an ad hoc and economically unsound formula,” the letter continues. “It bears little resemblance to economic reality.”
At the heart of the criticism is how Trump’s administration calculates tariff rates. According to the White House, the President personally selected a method that divides the U.S. trade deficit by total imports—a simplistic ratio seen by many experts as amateurish. While the U.S. Trade Representative (USTR) claimed to account for price elasticity and cost pass-through effects, economists contend that the approach lacks analytical rigor.
Earlier this month, Trump dismissed concerns about inflation and investment slowdowns triggered by tariffs, calling any hardship “temporary” and asserting that “things will work out in the end.” But economists argue that the underlying formula is fundamentally flawed and not grounded in data or sound economic modeling.
Trump has repeatedly imposed and then suspended tariffs since his reelection. On April 2, he unveiled sweeping new tariffs on global imports, only to defer the steepest rates for 90 days and maintain a basic 10% tariff for most countries a week later, sowing further market confusion.
This policy flip-flopping has heightened market volatility. On April 11, the U.S. Dollar Index—a measure of the dollar’s strength against six major currencies—dropped to 99.01, its lowest level since July 2023, marking a decline of over 9.4% compared to the start of Trump’s term.
U.S. Treasury markets also reacted with unease. Yields on 10-year bonds spiked to 4.448% after bottoming out at 3.886% just days earlier, indicating a sharp drop in bond prices as investors fled. Normally, in times of equity market stress, investors flock to safe havens like the dollar and U.S. Treasuries—but not this time.
Strategists interpret this divergence as a loss of market confidence. “The decline in bond and dollar values represents a de facto vote of no confidence in Trump’s economic strategy,” said Nomura Holdings strategist Masuzawa Naka.
The Wall Street Journal recently noted that the U.S., long buoyed by fast growth, technological dominance, and affordable energy, is no longer seen by international investors as a safe bet. The era of “American exceptionalism,” it warned, may be waning. Economists also worry about the return of stagflation—a toxic combination of stagnation and inflation not seen since the late 1970s. Adam Posen, president of the Peterson Institute for International Economics, puts the chance of recession at 65% due to Trump’s trade policy. “Even if trade agreements are reached, tariffs are likely to remain,” Posen said, adding that the policy is “likely to raise prices, stoke inflation, and ultimately suppress economic activity.”
Posen also expressed skepticism about the potential impact of tax cuts and deregulation, citing the "chronic uncertainty" emanating from the White House as a deterrent to spending and investment. He warned that Trump’s confrontational trade stance may fracture decades-old economic alliances and prompt other nations to band together to shield themselves from American policy volatility.
“Trump’s fundamentally different approach to trade will only amplify global uncertainty and could lead allies to unite—not behind the U.S., but against it,” he said. Furthermore, if the administration attempts to mitigate tariff-related damage through subsidies or increased government spending, Posen cautions, the result could be runaway inflation. “Providing subsidies to offset tariffs would only accelerate fiscal expansion and fuel further inflation,” he concluded.
Major Southeast Asian Countries Prepare to Negotiate Tariff Cuts on U.S. Imports Security Ally EU Strengthens Independent Course Amid “Europe Bypass” and Tariff Bombs Trump Administration May Pressure Trade Partners to Limit Deals with China
When President Donald Trump granted a 90-day reprieve on newly imposed reciprocal tariffs, countries across Asia and Europe moved swiftly to seize the opportunity. For some, this was a chance to defuse escalating trade tensions. For others, it marked a pivotal moment to reevaluate their economic alignment in a world where the U.S. increasingly uses tariffs as a geopolitical weapon. As Trump’s second-term administration turns up the heat on trade partners, regions are responding in distinctly strategic ways—from bolstering bilateral ties with Washington to forging stronger partnerships with one another. The result is a reconfiguration of global trade diplomacy that’s intensifying by the day.
Southeast Asia’s response has been pragmatic and calculated. Vietnam, often accused of serving as a backdoor for Chinese exports to the U.S., has taken major steps to present itself as a cooperative partner. According to The Wall Street Journal, Hanoi recently signed a $300 million aircraft deal with Boeing and granted Elon Musk’s Starlink permission to offer satellite internet services until 2031. In a further gesture of goodwill, Vietnam approved a Trump-linked resort project when his re-election appeared imminent last year. These moves are widely interpreted as a strategy to reduce Vietnam’s massive $123.5 billion trade surplus with the U.S.—a figure that dwarfs even the U.S. deficit with China. In return, Vietnam has been hit with a 46% reciprocal tariff.
Thailand, subject to a 36% tariff, is sending a delegation to Washington led by Deputy Prime Minister Pichai Chunhavajira. Their negotiation arsenal includes potential tariff cuts on U.S. energy imports and agricultural products—such as LNG, corn, soybeans, pork, and beef—along with defense procurement and cybersecurity tech integration.
Meanwhile, Cambodia, bearing the highest ASEAN tariff at 49%, has vowed to lower tariffs on 19 U.S. product categories in a bid to offset its past role as a transshipment hub for Chinese goods. Malaysia, which faces a 27% tariff, is pivoting toward reinforcing intra-ASEAN trade and advocating for a more integrated regional economy modeled after the EU.
While ASEAN is attempting to reconcile with Washington, Europe is choosing a path of resistance and realignment. Trump’s decision to target traditional NATO allies with over 20% in reciprocal tariffs has sparked backlash across the continent. According to The Wall Street Journal, even America’s long-time European partners are questioning the durability of the transatlantic alliance, already weakened by recent diplomatic sidelining during Ukraine peace negotiations.
To reduce reliance on the U.S., the EU is reviving stalled trade talks with third parties. Negotiations with the UAE have resumed for the first time since 2008, and a long-delayed free trade agreement with South America’s Mercosur bloc has finally been finalized after 25 years. The most dramatic shift, however, is in Europe’s approach to China. While the EU previously labeled China its greatest diplomatic challenge, the shared pressure from U.S. trade policies has led to renewed cooperation. Though EU officials insist their China strategy remains unchanged, they are now reportedly reviewing high tariffs placed on Chinese electric vehicles, suggesting a potential thaw in economic relations.
President Xi Jinping wasted no time in capitalizing on the geopolitical tension. From April 14 to 18, he embarked on a regional tour of Vietnam, Malaysia, and Cambodia—nations all hit by U.S. tariffs—offering solidarity and strategic alignment. While the trip had been scheduled in advance, the timing proved critical. In his meetings, Xi urged regional leaders to unite against “protectionism and hegemony,” framing China as a “reliable partner.”
Reuters described the tour as a “charm offensive” aimed at exploiting the vacuum in U.S. leadership. Given ASEAN’s long-standing engagement with Beijing through the Belt and Road Initiative and decades of infrastructure partnerships—including Chinese-funded railroads in Vietnam, dams in Cambodia, and ports in Malaysia—their mutual interests remain deeply embedded.
However, Trump viewed Xi’s diplomatic blitz as a direct affront. He denounced it as a “conspiracy to destroy America” and signaled plans to counter it through tougher trade tactics. According to WSJ, the Trump administration is now leveraging tariff negotiations to compel allies to limit trade with China. The strategy includes offering tariff relief in exchange for commitments to:
- Block Chinese goods shipped through third countries,
- Prevent the relocation of Chinese manufacturing to avoid tariffs,
- Stop the dumping of cheap Chinese products into foreign markets.
Speaking with Fox Noticias on April 15, Trump explicitly warned that major trade partners may be forced to “choose between America and China.” The initiative is reportedly being led by Treasury Secretary Scott Bessent, who laid out the plan during an April 6 meeting at Mar-a-Lago. His approach hinges on extracting concessions from U.S. trade partners to ensure Chinese firms cannot circumvent sanctions and trade restrictions.
China-fication of the Robotics Industry” Officially Underway Musk Acknowledges Dependence on Chinese Supply Chains Tariff Bomb Could Trigger Sharp Rise in Production Costs
Tesla’s ambitious journey into the realm of humanoid robotics has met a formidable challenge—one that transcends engineering prowess and automation. As geopolitical tensions between the United States and China intensify, Elon Musk’s futuristic vision for Optimus, Tesla’s humanoid robot, is increasingly overshadowed by supply chain vulnerabilities, trade barriers, and an emerging battleground where China is quickly asserting dominance. Though Tesla's technological edge is undisputed, the real test lies not in innovation alone but in navigating the global forces shaping the robotics industry.
Tesla’s plan to mass-produce Optimus, a flagship for its future portfolio, now stands on uncertain ground. Experts warn that the robotics industry’s deep reliance on Chinese supply chains could expose Tesla to crippling risks from escalating U.S. tariff policies. As this dynamic unfolds, a growing number of observers believe that China—not the U.S.—could seize control of the Optimus project’s momentum.
Chinese manufacturing no longer revolves around cheap labor and basic assembly. Instead, it now commands advanced automation systems, integrated AI-driven process controls, and an ecosystem capable of delivering quality at competitive costs. Xu Xuecheng, a senior researcher at China’s Humanoid Robot Innovation Center, noted that Tesla’s dependency on components such as actuators, joints, and ball screws—mostly produced in China—means that any disruption could derail production plans. He warned that Tesla’s mass production ambitions are likely to face delays, given the depth of supply chain entanglement.
More broadly, China is shifting from its old label as the "world’s factory" to that of a global industrial leader and nowhere is this clearer than in robotics. The integration of high-tech infrastructure with local innovation has enabled Chinese companies to challenge international incumbents not only with speed but also with execution. Tesla’s manufacturing expertise, once unmatched, now faces a formidable rival with both technological and geopolitical leverage.
Beijing’s “Made in China 2025” initiative has placed robotics at the center of its industrial policy. With robust government support in the form of R&D grants, tax breaks, and facility investments, both nimble startups and electric vehicle giants like Xiaomi, BYD, Chery, and XPeng are plunging into the humanoid race. Startups such as Unitree, Unix, Booster Robotics, and Agibot have already accelerated their development pipelines, leveraging domestic infrastructure to inch closer to mass production.
Meanwhile, a report by SemiAnalysis projects that China’s disruptive influence in the EV industry could soon be mirrored in humanoid robotics. Chinese startups, backed by state investment and fast-growing production lines, are already establishing a capacity to produce 5,000 robots annually, offering prices low enough to threaten Tesla’s competitiveness. Their strategy: customize general-purpose humanoids for local industrial needs, dominate the domestic market, and build scale before foreign rivals can react.
Even Tesla’s CEO Elon Musk has publicly acknowledged that a $20,000 unit price tag for Optimus is unachievable without Chinese collaboration. But Tesla now finds itself looking at China less as a manufacturing partner and more as a direct competitor. With mass production still constrained by U.S.-based high-cost structures and global supply risks, Tesla is being outpaced in logistics even before its humanoids hit factory floors.
Despite the headwinds, Musk is pushing forward with a goal to produce over 10,000 Optimus units within the year. Tesla is expanding its robotics workforce and upgrading automation capabilities to meet this target. But experts argue that these efforts rest on a shaky foundation—a supply chain deeply entwined with China. As U.S.-China relations deteriorate, many in the industry now believe that Optimus may become less a beacon of innovation and more a liability in a rapidly polarizing global environment.
The U.S. has already tightened restrictions and tariffs on Chinese exports in semiconductors, solar panels, and EV batteries—and robotics is widely expected to be next. If parts must be imported under heavy tariffs or if finished robots are reimported from Chinese plants, the projected production cost becomes economically untenable.
The risks don’t stop there. The success of Optimus hinges on stable, high-volume production, and any long-term supply chain disruption could jeopardize both Tesla’s launch timeline and its market strategy. Should that happen, Musk’s grand plan to democratize humanoid robots may be one of the first casualties of geopolitics.
In the end, Tesla’s superior technology may not be enough to overcome the weight of geopolitical realities. The race to lead the humanoid revolution will not be determined by innovation alone, but by who can move fastest—and smartest—amid shifting global tides.
Dollar-Yen Exchange Rate Falls Below ‘Black Monday’ Levels of Last August Global Weak-Dollar Trend Deepens, Yen Emerges as Alternative Safe-Haven Asset BOJ Rate Hikes and Tariff Uncertainty Likely to Fuel Yen Strength
The global financial landscape is once again shifting under the weight of geopolitical decisions and evolving central bank strategies. Following a turbulent policy turn from the Trump administration involving sweeping reciprocal tariffs, the U.S. dollar has shown signs of weakness. In its place, the Japanese yen has emerged as a surprising safe-haven contender, drawing the attention of investors worldwide. As uncertainty swells and the Bank of Japan (BOJ) signals a possible departure from ultra-low interest rates, anxiety is mounting over a potential unwinding of yen carry trades—a strategy that has defined cross-border investing for years.
The yen's recent surge can be traced back to a dramatic dip in the dollar-yen exchange rate. On April 18, the rate slipped into the 142-yen range, its lowest since September of the previous year. This sharp decline was notable even when compared to last August, when the BOJ surprised markets with an unexpected rate hike and briefly shook global risk appetite. The primary driver of the current drop, however, lies in President Trump’s erratic tariff maneuvering.
On April 9, the Trump administration imposed reciprocal tariffs ranging from 10% to 34% on major trading partners. Just a day later, the White House walked back these actions—excluding China—by delaying implementation for 90 days. Tariffs on certain auto parts were also postponed in quick succession. This policy volatility weakened investor confidence in the dollar, pulling down the U.S. dollar index to 99.40—its first sustained drop below the 100 mark in three years.
As the dollar’s dominance falters, investors have begun to seek stability elsewhere. The Japanese yen, historically perceived as a safe-haven asset, has filled that role. Speculative positions in the yen reached an all-time high of 121,800 contracts as of April 12, according to the U.S. Commodity Futures Trading Commission (CFTC). This shift signals a significant move away from dollar-denominated assets and toward the yen, accelerating its appreciation.
Adding to the yen’s allure is the BOJ’s evolving stance. BOJ Governor Kazuo Ueda recently noted that Japan’s real interest rates remain “very low,” hinting at the likelihood of another rate hike between June and July. Markets are now anticipating a steady tightening path, making the yen even more attractive to foreign capital.
With the yen gaining strength and interest rate differentials between Japan and the U.S. narrowing, fears of a yen carry trade unwinding have reemerged. The carry trade strategy—borrowing low-yielding yen to invest in higher-yielding foreign assets—relies heavily on a stable or weakening yen. Any reversal in this dynamic could cause investors to rapidly unwind their positions, flooding the market with yen purchases and potentially triggering volatility in emerging markets.
These concerns are not unfounded. A 2023 report by the Bank of Korea estimated that the total volume of yen carry trades stood at 506.6 trillion yen (about $340 billion or ₩4,700 trillion) as of the previous March. Of this, 32.7 trillion yen—roughly 6.5%—was considered susceptible to unwinding. Should even a fraction of this capital be liquidated, emerging market currencies and equities could face serious turbulence.
Moon Hong-chul, a researcher at DB Financial Investment, warned of the systemic risks involved. “The volatility in interest rates, the Nikkei index, and the dollar-yen exchange rate is considerable,” he noted. “Such fluctuations could trigger a repositioning of deeply entrenched carry trade positions accumulated over the last 15 years.” If this repositioning unfolds, he added, it could usher in a major transformation in global asset allocation—far more disruptive than the short-term chaos seen during last year’s yen short trade unwinding.
Despite these concerns, many analysts believe a repeat of the abrupt “Black Monday” seen in August 2023—when yen carry trades unwound suddenly and rocked financial markets—is unlikely. This time around, investor behavior has shifted. Unlike last year’s surprise scramble for yen, the current rally has been driven by proactive accumulation, which reduces the risk of panic buying.
With the yen gradually losing its position as the world’s lowest-yielding currency, attention is turning toward the Swiss franc as the next funding currency of choice. The Swiss franc recently overtook the yen in volume of carry trades. According to CFTC data, as of December, trades selling francs to buy dollars surpassed those involving yen sales—a reversal from trends just a month earlier.
Switzerland’s central bank has helped facilitate this shift. On March 20, the Swiss National Bank (SNB) cut its benchmark interest rate from 0.5% to 0.25%, marking its fifth consecutive rate cut amid easing inflationary pressures. By contrast, the BOJ has moved in the opposite direction, ending its negative interest rate policy last year with a historic hike and following up with gradual increases. Japan’s current 0.5% benchmark rate now places it above Switzerland for the first time since September 2022.
For years, Japan’s near-zero interest rates made the yen the go-to currency for global carry trades. But the forex landscape is evolving with that era drawing to a close. The Nihon Keizai Shimbun recently reported that the reversal in interest rate differentials is making yen carry trades more difficult. Keiichi Iguchi, Chief Strategist at Resona Holdings, put it succinctly: “The Swiss franc is becoming an increasingly likely candidate as a funding currency for carry trades.”
