Recommended Weekend Reads
Focus On The Indo-Pacific During Trump 2.0, Looking at US Debt in the Face of the Pending Tax and Budget Reconciliation, and Measuring Geoeconomic Power
Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend. And let us know if you or someone you know wants to be added to our distribution list.
The Indo-Pacific Region
The Indo-Pacific: What You Need to Know Now The Rand Corporation
As the United States navigates a pivotal leadership transition, the Indo-Pacific region stands at the forefront of global strategic interests. The region is home to an uncertain mix of political disquiet, military peril, and economic potential, with issues like North Korea's nuclear ambitions, China's assertive territorial claims, and the delicate balance of power involving Taiwan shaping the narrative. All this makes the Indo-Pacific a crucial arena for U.S. foreign policy and the alliances and partnerships that will influence global trade and security frameworks moving forward. We asked a team of RAND researchers – some of the very best experts in the field - with deep expertise on the various countries that make up the Indo-Pacific to assess the issues, objectives, and outlook for the region at this critical moment.
Howdy Modi under Trump II The Interpreter (Lowry Institute/Australia)
The trajectory of India-US relations is on the upswing. The first Trump administration further strengthened the strategic partnership with India, taking significant steps to enhance bilateral defence and security cooperation. One notable move was the renaming of the US Pacific Command (PACOM) to the Indo-Pacific Command (INDOPACOM), underscoring India’s growing strategic role in the region. The administration also approved the sale of Sea Guardian drones to India, making it the first non-NATO country to acquire these advanced systems – a landmark development in defence ties. Additionally, India was granted Strategic Trade Authorization Tier-1 (STA-1)status, allowing access to license-free military and dual-use technologies, a privilege extended to only a select group of US partners.
Can China Cross the Strait? Council on Geostrategy’s China Observatory
‘Can does not mean will’ is a good starting point when discussing the future of cross-strait relations. It prevents a simplistically straight line being drawn between Xi Jinping’s call for his military to be ready to take Taiwan by 2027 and an invasion in two years’ time. A leader can wish to have an option without having a definite plan to pursue it. Moreover, even if Xi is confident he ‘can’, that is, have his troops physically land on and occupy Taiwan while defeating any American forces which may intervene, he will still need to ask himself: ‘at what cost?’ The answer to which will remain: ‘at a very high one’. Still, ‘can’ is important. While Xi remains unconfident, Washington and Taipei can feel more assured that so long as they do not act in a way whereby Beijing can cry ‘provocation’, a crisis is unlikely. When he thinks the People’s Liberation Army (PLA) – the PRC’s armed forces – is ready, however, the risk of a premeditated attack increases. So where do we stand?
Is the End of the Chinese Miracle the Start of More Trouble? Peterson Institute for International Economics
What will slower economic growth of China mean for the global economy and balance of power? How will US policy respond, and how should it respond? PIIE president Adam S. Posen delivered this presentation as part of the 2025 UC San Diego Economics Roundtable Lecture Series. Additionally, you can read Posen’s accompanying PowerPoint presentation HERE.
China’s Xi Is Building Economic Fortress Against U.S. Pressure Wall Street Journal
China is racing to make itself less reliant on the outside world’s products and technology—part of a yearslong effort by leader Xi Jinping to make China more self-sufficient and impervious to Western pressure as tensions with the U.S. rise. Beijing has poured hundreds of billions of dollars into favored industries, especially in high-end manufacturing, while exhorting business leaders to fall in line with the government’s priorities. In many ways, the effort is succeeding.
The 2025 Budget and Tax Reconciliation Debate
Assessing the Risks and Cost of the Rising US Federal Debt Economic Studies at Brookings
“A number of developments could set off a fiscal crisis. This study see four main sources of risk, not all of which are necessarily linked to the level and trajectory of the debt:
Demand or supply of Treasuries could abruptly shift for reasons unrelated to inflation or default risk such that interest rates spike, causing financial market disruptions that the Federal Reserve is unable or unwilling to mitigate.
Investors could come to believe that the U.S. Treasury might default on interest or principal payments because of political brinkmanship, and policymakers would be unable or unwilling to regain credibility.
The Federal Reserve could be perceived as abandoning its mandate to preserve price stability and instead allowing for hyperinflation.
The long-term fiscal outlook could deteriorate so significantly and so sharply that investors abruptly worry about some form of default, leading them to abandon Treasuries until policymakers take actions to rein in deficits.”
US sovereign wealth fund debate: a solution in search of a problem? OMFIF
On 3 February, President Donald Trump signed an executive order directing Treasury Secretary Scott Bessent and Commerce Secretary-designate Howard Lutnick to develop a plan for a US sovereign wealth fund within 90 days. The idea is ambitious, but is it a good one? Would it even qualify as a SWF? Globally, well-regarded SWFs have clear mandates and specific funding mechanisms. The US proposal, as presented, lacks these elements, making it an unusual potential entrant in the SWF landscape. Understanding this distinction is critical in evaluating its feasibility and implications.
Trump Tax Priorities Total $5 to $11 Trillion Committee for a Responsible Federal Budget
In a closed-door meeting with House Leadership today, President Trump reportedly outlined his tax priorities. According to press reports, they included extending the expiring pieces of the 2017 Tax Cuts and Jobs Act (TCJA); expanding the State and Local Tax (SALT) deduction; enacting tax breaks for goods made in America; cutting taxes on income from tips, overtime pay, and Social Security benefits; and eliminating tax breaks for carried interest and stadium owners. Depending on the details of these proposals, our rough estimate is that a package of this nature would:
o Reduce revenue by $5.0 trillion to $11.2 trillion over ten years.
o Lower revenue by 1.3 to 3.0 percent of Gross Domestic Product (GDP).
o Boost debt to between 132 and 149 percent of GDP by 2035, if not offset, compared to nearly 100 percent today and 118 percent under current law.
Such a package could also lead to significant income shifting and tax avoidance, weaken the Medicare and possibly Social Security trust funds, dramatically boost interest costs, and increase the risk of a debt spiral.
Americas
Mexico Is Growing Old. Can It Build a Care System in Time? Americas Quarterly
Mexico will soon have to reckon with these kinds of challenges on a mass scale for one big reason: The country is growing old. Long able to trumpet having a large, young working population as a comparative advantage over its North American peers, Mexico’s median age will jump from 18 in 1987, when León left home, to 40 in 2050, per National Population Council projections. The country’s 60-year-long demographic dividend, the period when the working-age population outnumbers dependents, will come to an end in 2030—just as Claudia Sheinbaum’s presidency draws to a close.
Will Designating Cartels as Terrorists Help Fight Them? The Dialogue of the
As one of his first actions just hours after taking office on Jan. 20, U.S. President Donald Trump signed an executive order to designate international drug cartels and other gangs as foreign terrorist organizations. What will the order practically mean for the fight against organized crime groups? How useful will it be? How effective will cooperation be between U.S. authorities and their counterparts in Mexico and elsewhere in Latin America?
Africa
The Six Areas in Trump’s Executive Orders that Countries in Africa and the Global South Should Pay Attention to Carnegie Endowment for international Peace
There are six key issues addressed by Trump’s initial executive orders (EOs) that low- and middle-income countries in Africa and the Global South should pay close attention to: foreign aid, reframing energy diplomacy, the Global Tax Deal and U.S. FDI, global trade relations, WHO and global health, and spillovers of adversarial relations with China. While the Trump administration continues to implement these EOs, and indeed, facing the prospect that many aspects will be challenged in the courts, these initial executive orders provide a sense of the overarching policy direction.
Geoeconomics
Measuring Geoeocnomic Power: An Index for 41 Major Economies Finish Institute for International Economics
This Research Paper presents a set of methodologies and concepts for measuring the geoeconomic power of states – the potential to exert power over other states through economic means – and applies them to publicly available data covering 41 major economies from 2010 to 2022. This analysis leads to the development of a combined index of geoeconomic power, designed to reflect the supplier power of states in the areas of trade in goods, oil and oil products, and international finance. The main finding is that the United States is the world’s leading geoeconomic power, although it falls far short of being in a hegemonic position. Its lead over the second-largest geoeconomic power, the European Union, has grown in recent years. However, China’s geoeconomic power has expanded rapidly, almost matching that of the European Union in 2022. These recent shifts point to a more competitive and contested global order.
The Evolution of Global FDI: Patterns of Investment in Tax Havens and China Federal Reserve Bank of St. Louis
Global foreign direct investment (FDI) has experienced remarkable growth over the past two decades. As the figure below shows, total global FDI liabilities1 have more than tripled, surging from about $21 trillion in 2006 to over $67 trillion by 2023. We can observe two periods of rapid expansion: 2006 to 2015, during which FDI liabilities more than doubled from about $21 trillion to over $45 trillion, and 2015 to 2023, during which they reached over $67 trillion despite the global COVID-19 pandemic.
