Trump 2.0 expectations

Rethink NATO

President Donald Trump has said that under his presidency, the United States will fundamentally rethink “NATO’s purpose and NATO’s mission.”
He has pledged to ask Europe to reimburse the United States for “almost $200 billion” in munitions sent to Ukraine.  

During the latter part of his first term, Trump cut defense funding to NATO and he has frequently complained that the United States was paying more than its fair share.

In recent weeks, he has said NATO members should be spending 5% of gross domestic product on defense, a figure well above the current 2% target.

Ukraine

On the war in Ukraine, Trump said during the 2024 election campaign that he would resolve the conflict even before his inauguration. But since his election, he has not repeated that pledge and advisers now concede it would take months to reach any peace agreement.
Trump has indicated that Kyiv may have to give up some territory to reach a peace agreement, a position backed by his key advisers. While there is no clear Trump peace plan, most of his key aides favor taking NATO membership off the table for Ukraine as part of any peace agreement, at least for the foreseeable future. They also broadly support freezing the present battle lines.
Trump signaled last spring he would be open to sending additional aid to Ukraine in the form of a loan, but later, he remained mostly silent on the issue during contentious congressional negotiations over a $61 billion aid package.

Israel

Trump’s Middle East envoy-designate, Steve Witkoff, worked closely alongside officials in the administration of Democratic President Joe Biden to hash out the peace deal recently announced between Israel and Palestinian militant group Hamas. Reuters notes that sources close to the talks said he applied significant pressure on both sides to strike an accord quickly, though the precise details of his involvement are still coming out in the press.
Trump had said there would be “hell to pay” if Israel and Hamas did not reach a ceasefire deal resulting in the return of hostages held by the Palestinian militant group in Gaza before he takes office.

Iran 

Trump’s advisers have indicated they will renew the so-called maximum pressure campaign of his first term against Iran.
The maximum pressure campaign sought to use strong sanctions to strangle Iran’s economy and force the country to negotiate a deal that would hobble its nuclear and ballistic weapons programs.
The Biden administration did not loosen the sanctions that Trump put in place, but there is debate about how firmly the sanctions were enforced.

Missile defence

Trump has pledged to build a state-of-the-art missile defense “force field” around the U.S, similar to the Israeli Iron Dome. He has not given any details, beyond saying that the Space Force, a military branch created during his first term, would play a leading role in the process.

Markets’ reaction

European shares edged higher on Monday, supported by banks and technology stocks, as investors braced for Donald Trump’s inauguration as U.S. president.
The pan-European STOXX 600 was up 0.2% as of 0813 GMT, after adding more than 2% over the last week. U.S. markets were closed for Martin Luther King Day, keeping trading volumes lighter than usual.
Donald Trump will be sworn in as U.S. president at 12:00 pm ET (1700 GMT) in a highly anticipated global event, with investors’ focus on his policies, including trade tariffs, which are expected to keep markets volatile in the coming days.
The annual gathering of the world’s political, business and financial leaders at the World Economic Forum (WEF) in the Swiss town of Davos is another key event this week.

Germany

For European power house Germany, the question of how to tackle the incoming administration of U.S. President-elect Donald Trump, which has already flagged the possibility of increased tariffs and lower military support for Europe, is particularly sensitive. The United States remains the top destination for German exports and its main security ally.
The SPD’s Scholz sharply countered Trump’s comments on Greenland and Canada, while frontrunner Merz warned against lecturing him, emphasizing instead areas of possible cooperation like a potential EU-U.S. trade deal or joint China strategy.
The Greens’ Habeck warned that the EU must stand united and seek talks with the U.S. because a trade war will ultimately harm all sides.
All of the mainstream parties have voiced skepticism about Trump’s demand for European countries to increase spending on defence to 5% of economic output, given that Germany will already struggle to keep to 2% after its special fund for the military runs out. Habeck, however, has already proposed an increase to 3.5%.
Unsurprisingly, the party that has most embraced the incoming U.S. administration among the German parties is the AfD, which received multiple endorsements from Trump’s ally Elon Musk, resulting in his conversation on X with the party’s chancellor candidate Alice Weidel.

China

Chinese officials and ordinary people are hopeful but on edge as Donald Trump returns to the White House, eager to avoid a repeat of the bruising trade war that drove a wedge between the economic superpowers during his first term.
Chinese Vice President Han Zheng, in meetings with Tesla CEO Elon Musk and other members of the U.S. business community in Washington ahead of Trump’s inauguration, said he hoped U.S. companies would “take root” in China and help to stabilise bilateral relations, the official Xinhua news agency reported.
When Trump was last president, he heaped tariffs on more than $300 billion of Chinese imports. In recent months, he has said he would add tariffs of at least 10% on top of what is already imposed on Chinese goods, a move that would hurt China at a time when its economy is struggling to find a firm footing.
At the same time, Trump made the seemingly conciliatory move of inviting Chinese President Xi Jinping to attend his inauguration on Monday. Xi sent Han in his place, considered a gesture of goodwill given that China was only represented by its ambassador at the previous two U.S. presidential inaugurations.
At a meeting on Sunday, Han told Elon Musk, appointed by Trump to lead a department aimed at creating a more efficient U.S. government, that he “welcomed Tesla and other U.S. companies” to share in the benefits of China’s development and contribute to China-U.S. relations.
The Chinese vice president’ had a meeting with U.S. businesses that included the heads of eight U.S. firms from a range of industries including technology, banking and logistics, according to an American executive in the room, who added, for Reuters, that the meeting over-ran its allotted time and was very cordial.

Crypto president

The U.S. dollar dropped and bitcoin hit an all-time high on Monday before Donald Trump’s inauguration as U.S. president later in the session, with investors focusing on policy announcements that could immediately affect the greenback. Softer U.S. inflation data and the prospect of multiple Federal Reserve rate cuts have recently boosted risk assets, including Bitcoin, which hit a record high on Monday at $109,071.86 and was last up 4.2% at $108,025. Trump has promised to be a “crypto president”, and is expected to issue executive orders aimed at promoting widespread adoption of digital assets.

Carmen Gavrila is senior foreign affairs correspondent for the Romanian public radio, focusing on the Middle East

GSPI does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of GSPI, its staff, or its trustees.