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The Rachman Review
2025: A year of chaos and confusion
00:30:56
Will Donald Trump continue to upend the world order in 2026?
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- [00:00]
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- [00:32]
Gideon Rachman
Hello and welcome to the Rachman Review. I'm Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week's podcast is a recording of an FT live event from earlier in December in which we look back at 2025 and forward to the big political trends that will shape the world in the coming year. I was joined by three of my favourite geopolitical commentators. Leslie Vinjamuri is president of the Chicago Council on Global Affairs, Daniel Dresnes, professor of International Politics at the Fletcher School at Tufts University in Boston, and James Crabtree is author of an acclaimed book on Modi's India and a forthcoming book on US China. Tensions in the Pacific so, amid all the turmoil of the first year of the second Trump presidency, what are the big trends we should be looking out for?
- [01:23]
Donald Trump
I, Donald John Trump, do solemnly swear that I will faithfully execute the office of President of the United States and will, to the best of my ability, preserve, protect and defend the Constitution of the United States, so help me God. Congratulations, Mr. President.
- [01:41]
Gideon Rachman
That was, of course, Donald Trump being sworn in earlier this year for his second term as US President. There's no doubt that Trump has set the tone of world politics this year, from his terrorist wars to his efforts to make peace in the Middle east and Ukraine while also bombing Iran and threatening Venezuela.
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Daniel Dresner
Now, President Trump has said that the next steps in this campaign will be.
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US Airstrikes on land in Venezuela, he's been saying.
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Gideon Rachman
So how do we make sense of the apparent chaos? I started the conversation by asking each of my guests to come up with a single theme or event that they would pick out from the last year.
- [02:22]
Daniel Dresner
Daniel Dresner first, as someone who teaches.
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About the global political economy and US Foreign economic policy, I'm going to stick to my sort of home soil and say it was the announcement of the Liberation Day tariffs, that Liberation Day should be put in quotes that were made in April in which Trump basically jacked up the average tariff rate in the United States to something on the order of 20%. But it's not just the tariffs themselves. It was the whole pageantry of the thing, for lack of a better way of putting it. The fact that we applied tariffs on islands that did not, in fact, export anything to the United States. I believed, among others, we tariffed Diego Garcia, which includes a US Military base, so we were technically putting a tariff on the US Military. And then the fact that he. A week later, the tariffs were suddenly paused, during which Scott Besant, who was the Treasury Secretary, claimed it was an example of the art of the deal in the making. And then Trump was asked why he did it, and he admitted it was because the bond markets had freaked out. I think it was emblematic of Trump's willingness to basically do anything in a unilateral and sort of quick fix way. The President has significant authority to raise tariffs for a variety of reasons, but Trump chose to use the International Emergency Economic Powers act, which it turns out seems increasingly likely the Supreme Court will strike down because it was the first time that the President had used that authority to try to raise tariffs rather than just restrict trade. So it's emblematic in some ways of Trump's slapdash approach to how he sees the world. But I think the fact that he's done it and that as a result US Tariff rates are now higher than at any point during the post Cold War era, and then you have at least some countries trying to cut deals of some kind or another, demonstrates the degree to which the liberal or national order, which has been a phrase that has been bandied about for the last decade, turns out not to have rested so much on rules, but on norms.
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Leslie, you were based here in London till quite recently. You're now in the States. Follow global affairs and US Foreign policy. For you, what was the big moment?
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Leslie Vinjamuri
There's so many big moments, Gideon. But I think for me, really, it would have to be the inaugural speech when President Trump, you know, we're sort of all waiting for it. China, the pacing threat. And we didn't get that. What we got was Canada should be the 51st state, and we're going to focus on the Western Hemisphere. It was a signal that these eight decades where America has been deeply committed to allies, you know, committing to the liberal international order, gone. When you start taking Canada as your.
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First whipping boy in your inaugural speech.
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It was a very clear signal that those longstanding, deep, multilayered relationships just simply don't and didn't matter to this US President. And it was the beginning of Donald Trump sort of coming at almost with a visceral antipathy towards America's closest partners in Europe and Canada and elsewhere, more so than our longstanding adversaries in Russia, in China and so on. So I think it was really that inauguration speech, when people's jaws dropped, it was really a stunning and shocking reversal.
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Of fortunes for many of America's allies.
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Daniel Dresner
James, you're writing a book at the moment on the Asia Pacific area, so with that kind of hat or lens on hat and lens, why not both? What do you think was most striking for you?
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James Crabtree
I think the thing that really stands out is the complete role reversal of America's relationship with the two Asian giants, China and India. When Trump came in, many people predicted this would herald a very sharp deterioration in relations between Washington and Beijing. But actually, as the year goes on, it becomes clearer and clearer that this is a period of, if not rapprochement, improving ties between Washington and Beijing, culminating in his Tweet at the APEC summit about the convening of the G2 in anticipation of his meeting that we think is likely to happen in Beijing next year. By contrast, we all thought that US India relations were on a long term upswing after a decade, maybe two decades of closer ties. And yet Trump hit The Indians with 20% tariffs, then 20% more tariffs, got entangled in a spat over his role in the military confrontation between India and Pakistan. And so at the end of the year, you have US China relations in the best position that they've been in for a long time, and US India relations in the worst position they've been in probably for 20 years. Years. I don't think anybody saw that coming.
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Daniel Dresner
Absolutely. Just a quick follow up before I come back on trade. How much of that deterioration in the relationship with India is associated with Trump's own rather quixotic effort to win the Nobel Peace Prize? Because I think that gets to a bigger point, which is that so much of what's happening seems to be driven by Trump's whims, by his personality. Was it really because the Indians wouldn't nominate him for the Nobel Peace Prize?
- [07:25]
James Crabtree
I think we need to take Trump's aspiration to win the Peace Prize very seriously as a sort of driver of American policy. In the Indian case, I don't know if it's the Peace Prize directly, but basically he feels personally slighted that India didn't give him due credit for the role that he thinks that he played in bringing to a conclusion the short military engagement between India and Pakistan a few months ago. So I think it is a big part of that. There are other factors in play, but I think this is an administration that is run along court politics lines, and it reflects the whims of the king. And if the king is annoyed with you as he does seem to be with India and Prime Minister Modi at the moment, then that can have very dramatic geopolitical consequences.
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Daniel Dresner
Okay, Dan, let's get back to trade, because I think we talk about Trump's whims, but this is one thing on which he's been very consistent. He's been a protectionist his whole life. And you mentioned that he backed off after a week, but then he came back. And then the second round of tariffs seem not to provoke the bond markets in quite the same way. So it's six months since they've revised the tariffs. What effects can we see? How bad has it been for the world economy? And are we beginning to see inflation rise in America as conventional economists predicted it would?
- [08:40]
Inflation has risen over the past year. It was down to, I think, 2.5 or 2.7% on Inauguration Day. It's now over 3%. And that's before U.S. producers, U.S. importers have passed on much of the price. And I think part of the reason the inflation has been a little more muted than folks expected is that because everyone anticipated that Trump was going to raise tariffs. I think you saw a lot of surge buying before Liberation Day or before the tariffs came on in the anticipation that people needed to stockpile. I think the effect on the global economy has been mostly negative, but it hasn't caused a calamity. The United States has actually not done terribly well as a result of the tariffs. But that's been masked by the fact that we've also been in the middle of the largest investment boom in quite some time due to AI and particularly the performance of the Max 7. And so from the American perspective, you know, you still see equity markets doing pretty well. You still see the economy in positive shape. There are people complaining about affordability. And if you take a look at public opinion polls, Americans are not happy about the state of the economy. But I think they would be even more unhappy if they looked at how, let's say US Stock markets are doing compared to global equity markets. Where, yes, the US Equity market is positive, but it's nowhere near close to how the rest of the world is doing. So the one way in which this might be a positive is I think there were some fears that when Trump imposed these tariffs, it would then trigger a sort of global trade war. And that really hasn't happened. And even Trump has gone back on some of these things, like the deal that Nvidia just cut with the Chinese government to allow really high end chips to be exported. So in some ways, the one consistent thing about this has been the complete lack of consistency.
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Okay, Leslie, it seems to me that one of the things about this year is the duality between Trump the peacemaker, but also Trump's aggressive instincts where he says, we're going to expand America's territory. And also is the first president to actually carry through on the threats to bomb Iran, albeit after Israel has kind of dragged him into the conflict. So how do you strike the balance between Trump the peacemaker and Trump the guy who's prepared to bomb Iran and make all these aggressive noises?
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Leslie Vinjamuri
Okay, first, let me add one data point, if I may, on the tariffs, because it's a really interesting one. The Chicago Council, where I now am, as you know, has been doing polling of Americans for five decades. And we polled Americans this year on their attitudes towards tariffs, and we polled them last year. Last year, 64% of Americans thought that tariffs were somewhat or very effective in.
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Achieving U.S. foreign policy goals.
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64%. This year, 44%, it's dropped 20%. The other thing to watch is how.
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It'S affecting rural interests in the US which are key to Donald Trump's coalition's farmers in particular. But on this question that you actually posed to me, it is an interesting duality, isn't it? On the one hand, you're sort of disrupting those relationships with the allies that have helped you to keep the world.
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Calm and stable to a degree.
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And on the other hand, you're sort of trying to do peace with the disruptors. Some of this is, I think, Donald Trump's own feelings about people. I think Donald Trump wasn't a particularly big fan of Justin Trudeau, even though Trudeau was out and going out, I do think that that influenced his attitude towards Canada. He was also setting a signal to Canada, even to Mark Carney, that the U.S. mexico Canada Agreement is up for review and possible renegotiation. And signaling with that, it's not going to be easy. What are you going to give on Europe? You know, we've known for a long time getting peace in the conflicts that we're talking about is all part of sort of half grand strategy, which is reorienting the world towards great powers, dealing with each other on their own terms, devoid of any question of values, democracy, liberalism. And so pushing hard on Europe is.
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You know, come on, buck up.
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You are not the part of the world that actually really matters. Russia is. And the Ukraine problem needs to be solved in order to get that US Russia relationship back to where he wants it to be. So in some ways, these things that.
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Seem counterintuitive to us.
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They're only really counterintuitive to us because we have the lens and the framework of the so called law liberal international order of eight decades. He just simply hasn't brought that to the table. If you have a different starting point, sorting things out in the Middle east so that you can focus on China, sorting things out in Ukraine so you can focus on Russia, and kind of letting Europe and Canada fall by the wayside, it's not so hard to explain.
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Daniel Dresner
What do you think Trump sees as the end point of all this? I mean, is it driven by business? Because there does seem to be a lot of business deals on the table. And perhaps it's quite astute of the Russians to put a former Goldman Sachs banker who speaks fluent English, Kirill Dmitriev, as their frontman, because he kind of talks the same language as Witkoff and others. So is it a business thing? Is it this fear that Europe might drag America into war, or is there maybe also a grand strategic thing going on about trying to detach Russia from China because they don't like the sort of condominium between those two countries?
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Leslie Vinjamuri
I mean, look, I think all of the above. But, you know, one thing I would say is that we all know that most post Cold War US Presidents have entered office wishing to reset America's relationship with Russia. So Trump's not really an outlier on that. He's an outlier only because when he entered office, there was already a war in Ukraine, a war of aggression instigated by Russia. So it was surprising to us that he tries to reset the relationship in that context. But I do think he has a, you know, somewhat halfway strategic vision of international relations. And in that getting strategic stability, to use the language of the recently released National Security Strategy, getting that stability between the US And Russia is critical towards a broader balance of power politics. If it also means that he makes some money, absolutely. A good thing. It's clearly also underpinned by the fact.
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That he just, for whatever reason, we.
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Didn'T understand it in his first administration, we don't understand it now. He likes this guy, Vladimir Putin.
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Gideon Rachman
Yeah.
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Daniel Dresner
And the other guy he likes, James, is Xi Jinping, who he's constantly saying is a great man, a strong leader, and so on. So I'd like your take on where you think things stand in the U.S. china. I'll give you mine briefly first, which is that I think that the tariffs that Dan talked about, I think China was hit particularly hard on Liberation Day, but as the year has worn on, it's become, I think, apparent that China has a very strong hand, particularly through rare earths and critical minerals, and that the US has had to back off. Is that how you see it?
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James Crabtree
Yeah, I think that's exactly right. If you think about it from President Xi's point of view, the first Trump administration was a wake up call about the way that America could behave and the vulnerabilities that China had. And therefore China, through its made in 2025 manufacturing process, but in particular through a strategy known as dual circulation, began to look at ways in which the US could hurt China economically through interdependence and ways that China could potentially fight back. And what you've seen this year, some eight years later, is that Chinese strategy has worked pretty well. America hit them with tariffs and semiconductor restrictions. China replied with rare earths restrictions, and the US had to de escalate. And now we're at a point where we have a temporary truce that will lead, we think most likely in the new year to a kind of broader deal of some description that's most likely to be economic as opposed to have things about Taiwan in there, but most likely to buy a period of relative stability before the tectonic shifts of long term competition bite back. In the long term, I think the US And China are still set on a path of competition with one another, but you can have temporary lulls in that. And I think what Trump and Xi, for their own reasons, are doing at the moment is negotiating one of those temporary lulls.
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Daniel Dresner
Dan, is that how you see it, a temporary lull? Or might there be a kind of relationship in which America gives China more strategic space and tries to rebalance the economic relationship and some of the tensions are taken out of it?
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If there has been one through line in terms of the Trump administration's first term and its current term, it has been that Trump has been perfectly willing to trade off geopolitical bones of contention in the Asia Pacific for a better economic deal with China. Think about it in terms of saying he wasn't going to criticize China's treatment of the Uyghurs when China cracked down in Xinjiang. He also refrained, really from criticizing China's crackdown in Hong Kong during that same period. It would not surprise me if Trump himself would personally decide, look, what I want is a rebalanced economic arrangement, and I don't care as much about Taiwan or anything else because it's an away game for the United States. So why can't we just get more money as a result? Now, the catch with Taiwan of course, is that someone has presumably told him the US Economy runs on semiconductors that are manufactured pretty much only in Taiwan, that while the US companies design those chips, they are still primarily manufactured in Taiwan. Now, someone might also then tell him, well, the US is building foundries, and so pretty soon we won't necessarily need to worry about that. There's a variety of reasons to be somewhat skeptical of that. But the thing to realize about Trump, increasingly this term, is that it's sometimes a mistake to assume that the reason the US is doing something in terms of foreign policy is because he wants to. It can often be that he's doing something because he doesn't care and someone under him cares very much about it. So, for example, if you're asking, why is Trump doing what he's doing in the Caribbean and Venezuela, yeah, There's a way in which it's in accord with Trump's general interest of having a sphere of influence and being concerned about inflows of drugs and immigrants. But this is about Marco Rubio and Steve Miller, but particularly Rubio. The only intellectual through line of Marco Rubio, from the neoconservative version of in 2014 to the America first version now, has been his hawkishness on Latin America. And so it is unsurprising that you are seeing what's going on in terms of US sort of bellicosity in that region.
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Do you think one could say, well, America's demographics are shifting, so is it almost natural that America, as its demography changes and becomes less of a society with European forebears, might look more towards the Western Hemisphere and less towards Europe?
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I mean, bear in mind that the Trump coalition is not keen about that shift in demographics. In fact, they are trying to fight it as much as humanly possible. Take a Look at the U.S. national Security Strategy. It is all about promoting U.S. birth rates. And really, the only demonstration of any discipline for that strategy document is that the word white doesn't appear in it, because that's clearly what's going on.
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And in Priority one, Stop mass migration.
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Yeah, stop mass migration, Exactly. But you're right that if you were going to put an intellectual patina on what Trump is doing, it is a sort of spheres of influence kind of world as far as he's concerned. He thinks that powerful actors matter and less powerful actors don't. And in his mind, the powerful actors are China and Russia. Now, as someone who studies power and studies international relations, I would have some vigorous contestation about whether you think Russia is really as powerful as he says it is, but in his mind, that's what matters. And the other thing that I think also matters is his almost 19th century conception of what the drivers of power are, which are territory and industrial might. And here I will give him 10% credit. He is correct to be concerned about the degree to which China is going to be a manufacturing almost monopoly going forward. I think one of your colleagues at the FT pointed out last month that China doesn't seem really interested in importing from anyone else. They just want to export to everyone. And I think the OECD estimates that by 2030, China's manufacturing capacity will be roughly half of global capacity. And this creates imbalances that lead to problematic reactions like Trump, but also should lead to more sober responses from the rest of the world.
- [21:08]
Yeah, I mean, Leslie, we talked about his attitudes to Russia, to China, but his attitudes to the allies are pretty extraordinary. Dan was talking about the national security strategy. Were you surprised by the kind of, I wouldn't say it's open antagonism to sort of cultural despair about Europe. They say we are sentimentally attached to Europe for the kind of almost racial reasons that Dan was referring to. But the Europeans are committing civilizational erasure. And so for those reasons, Trump seems to be, or the people around him, at least in theory, willing to give up on the current set of European governments and hope that a new set of far right governments come to power. Is that how you read it?
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Leslie Vinjamuri
I was at the Doha Forum when that was released, along with many other Europeans, not that many Americans, although Donald Trump Jr. Was there, as was Tucker Carlson. Shocked for sure. Not surprised. You know, first thing to say, it's just phenomenally patronizing to have this US Administration speaking to its longstanding European allies, wealthy Democratic countries and holding up the international order. It's just shockingly insulting and patronizing. But when you move past that, it's dangerous. This is an administration that suggests that it wants to focus on sovereignty and not values across the globe. Now is going completely deep in on the values debate, but on the other.
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Daniel Dresner
Side, saying they're going to check the social media profiles of people applying for American visas.
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Leslie Vinjamuri
And today we hear, right, that even if you're coming from the United Kingdom, they're going to go back through many.
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Years of your social media, media engagement and public statements.
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I mean, who's going to make it.
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Into the US But I think this is the part of the national security strategy that reads very much as JD Vance, Munich 2025, repeat.
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But it suggests that if there's going.
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To be a transatlantic partnership. It's one that should be reforged along lines of family values. You know, they're not going to say it, but white nationalism and pro far right, anti immigrant, populist nationalist parties. It was the most subversive and unsettling part of the national security strategy.
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On the other hand, one sort of.
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Wonders, you know, is it really going to stick? This is going to come down to Europe, not to Donald Trump.
- [23:32]
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- [24:03]
Daniel Dresner
James I wanted to ask you about Asian allies because the year's ending with a pretty tense confrontation between Japan, the new Japanese prime minister, and China over Taiwan. And I gather, according to excellent reporting in the FT, that the Japanese are not 100% happy by the rhetorical support or lack of it from the United States.
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James Crabtree
I think it's been a roller coaster year for the US Allies. So Australia, Japan, South Korea, Philippines in particular for most of the year, the relationships were as bad as they've been in the last decade because of the Liberation Day tariffs. I mean, particularly Japan and Korea were really shocked that they, as model allies were going to get treated in this cavalier, unthoughtful way. I think to be fair to him, President Trump has repaired a little bit of that damage in the second half of the year. So for Australia, Prime Minister Albanese had a visit that everyone was delighted with. A month or so ago. They struck a big, critical raw materials deal. Trump and Takaichi met in Tokyo. Takaichi handed over a box of golden golf balls. He seemed to be very pleased with that. The meeting with the South Koreans at the APEC summit also seemed to go well.
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Daniel Dresner
So I think a little bit of.
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James Crabtree
That damage has been undone. The allies of America are always nervous about American perfidy and abandonment, but I think at the moment they're particularly nervous and with very good reason, as in that tweet I mentioned earlier, the G2 tweet. We know the Chinese are interested in a world in which the world's issues are divided between themselves and America. They call it a new model of great power relations. They tried this on with Obama at the end of his second term and eventually he decided that it wasn't worth doing very sensibly. And so they're keen on this and if America is also keen on this and acts in that way, then that leaves the US Allies and partners really out on a limb because they don't have a plan B. It isn't like Europe and Russia, where, in theory at least, the Europeans, if they get their act together, can handle the Russians on their own, but the Japanese and the Koreans can't handle the Chinese on their own. I mean, it's just not possible. So there's no strategic balance in the Indo Pacific without America. And so the way that Trump's behaving is leaving them very nervous indeed. And they'll be watching very carefully to see exactly what happens between China and the United States in the meeting that's due to happen in the spring, and in particular, what will happen with Taiwan and whether Trump begins to trade away Taiwanese security for economic benefits. It's pretty clear he doesn't really care about Taiwan as he doesn't care about Ukraine. And the question is, will he act on that impulse or not?
- [26:36]
Daniel Dresner
Yeah. Which brings us very nicely to predictions for the year ahead. So I'll ask all three of you, if you look ahead to 2026, what are you going to be looking out for?
- [26:45]
Dan, first, I think I'll be looking for two things. The first is whether the AI bubble actually pops. We're now at the phase where I think everyone does really recognize there's been massive overinvestment. And while I don't mean, therefore to rubbish the utility of AI, some of the structured economic deals that you're seeing the AI producers create with others, like, let's say, Oracle, don't seem sustainable. And so if that bubble pops, what is the wider effect on the global economy? Does it create larger ramifications? Or is it like the dot com bubble of 2000, 2001, which was not minimal, but also not, in the end, terribly systemic in terms of its negative effects. The other thing, if Trump is all about pageantry, I am legit curious how the World cup goes off in the United States. There are potentially a lot of people who are supposed to be coming from the rest of the world. The whole world follows this sport in some ways far more keenly than Americans. And I am curious the degree to which there are going to be incidents incidentally and, or, you know, possible moments of violence at these things. And to what extent does Trump try to prevent this by, let's say, putting the National Guard out again in places where there are games going on?
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Well, as a serial goer to World Cups, I'm also curious, and I would Say, actually the most welcoming I've ever seen Russia was in the 20th century. Well, you know, interestingly, the security obsessed Russians allowed anyone with a ticket just to wave it at the border. And they let you in. Which I don't think the United States is going to do.
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No, they are not.
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So, Leslie, year ahead, what are you looking out for?
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Leslie Vinjamuri
Yeah, this is perhaps the highest stakes year for the United States in eight decades. I'm glad that Dan talked about the World cup. It's the 250th birthday of the United States. It's the year of US G20 leadership. But it's a year of midterm elections. It's a year where I think everybody's waiting to see how far does Donald Trump push the line when it comes.
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To the rule of law and the norms that shore up the rule of law?
- [28:49]
How far is he gonna push it.
- [28:50]
And how far is everybody else gonna push back? I think the world, and especially Americans were very surprised at how far Donald Trump was willing to go in the first quarter of his leadership and how unhappy Americans were, but basically silent. Now we're seeing a few more people on the streets still seeing major universities make pretty big concessions and strike deals, Northwestern being one of the most recent. But as we get to those midterms in November, will Democrats take the House? If they do, what will they do with that oversight authority? You know, all the kind of big democracy questions are really on the table in the year ahead. And that, I think, will tell us a lot about the future of the United States. And the United States is the bellwether. It sets the bar for democracy globally. You know, the bar has come down, but I think that Americans will have a lot of choices to make, and it's going to unfold in a variety of, I think, largely unpredictable and unforecastable ways.
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Daniel Dresner
Yes, that I think is probably a safe prediction with Trump in the White House. It'll be unpredictable. James, can you finish this off? And also can you have a go at a question that's come from one of the audience, which is, do we think the Russia, Ukraine war will come to an end with will there be a peace deal in the coming year?
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James Crabtree
So the thing that I'm looking at most closely will be in this Trump SEA meeting? And I think the real question is to what extent does the deal that gets done involve anything to do with Taiwanese security? It's not implausible that you could have some trading away of Taiwan's security status in a way that would be extremely damaging. To the Indo Pacific architecture and the of long term position of the US allies and partners. So I think if I was in Taipei I'd be pretty worried and there are certainly people within the US Administration who are worried about that. One other thing that I'd look forward to is the vote for a new UN General Secretary. In a funny way, the role of the US with these multilateral institutions is now partially benign, neglect and ignoring it. But then occasionally it decides it's going to put its finger on the scales. And this could be one of those times where the US has already hinted that it's looking for a MAGA aligned candidate to take over at the un and that could turn out to be an a really interesting example of the US interfering in systems that are not very well disposed towards Trump. As to Ukraine, it really does depend the extent to which Trump forces Zelenskyy to say yes, the Russians are quite happy to fight on and I think ideally the Ukrainians would fight on as opposed to accepting the deal that is currently being offered. However, if Trump makes it impossible for Ukraine to fight on, then they may have to fold, which would be a moral tragedy, but that is more likely to be the direction that we're heading in.
- [31:37]
Gideon Rachman
That was James Crabtree ending this year end edition of the Rachmann Review. You also heard from Daniel Dresner and Leslie Vinjamuri. Thanks for listening and please join me again in 2026 for another year of Rachman Review.
- [32:01]
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