Donald Trump Now Lynchpin for Geopolitical Stability

The unpredictability of Trump in the foreign policy arena and his flexible approach to US engagement has become a geopolitical wildcard, according to Verisk Maplecroft’s Geopolitical Risk Outlook.

This is especially the case as he struggles to stamp his authority on the domestic front, leaving foreign policy as the area where he can make his greatest mark.

So far, he has taken a more measured approach in foreign affairs than was expected, especially on some of the trickiest trade relationships. Disruption to global trade - a central concern before Trump took office - has not materialized.

The administration’s backtrack on China’s Renminbi manipulation and the growing clout of pro-business White House advisors suggests significant trade volatility is unlikely.

The quickly struck trade deals between the US and China underline Trump’s pragmatism on this issue. NAFTA reform, which will also be less radical than initially envisaged, has in turn been welcomed by policymakers in Mexico City.

Foreign policy unpredictability though has been a hallmark of the administration so far. This was reflected in the bombing of the Shayrat Airbase in Syria, which caused consternation in Moscow and left the Kremlin unable to project how Washington will act.

For the moment Putin seems content to adopt a policy of ‘wait and see,’ but Verisk Maplecroft sees this as unlikely to last. Moscow can be expected to revert to type and test Trump’s resolve in the foreign policy arena before long.

Tighter monetary policy from the Federal Reserve is increasing political risk in those emerging markets with significant external credit liabilities.

Europe dodges geopolitical risk bullet with France election

With Emmanuel Macron installed as president, France has for now defused the run of electoral bombshells that have buffeted geopolitical stability over the last year.

However, the global outlook remains rocky, according the report which asserts that the elections in France and South Korea will delay the most immediate threats to global stability, but investors and business also remain exposed to multiple drivers of risk across other key markets.

The dynamics of another key geopolitical flashpoint will likely improve over the short-term with the election of Moon Jae-in as South Korean president. Despite instant provocations from North Korea, which fired a missile within days of his inauguration, Moon is set to adopt a more conciliatory approach.

However, Verisk Maplecroft believes he is unlikely to achieve a major breakthrough on nuclear disarmament and find a lasting resolution, which will require the support of both China and the US.

The North is likely to fall back onto its time-tested policy of agreeing to renewed talks with the hope of extracting economic benefits, before ramping up tensions to wring further concessions.

Talks will only delay a set of unappealing options for a resolution and how patient the US will be as Kim Jong-un’s weapons programme progresses is the key variable.

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