What We’re Watching – Trump Meets Xi

Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.

In this roundup, we look at:

• The latest night of slaughter in Gaza by the US – Israel Alliance
• Russia’s advances in Pokrovsk and Kupiansk, key cities for the Ukrainian army’s supply lines to the front; and its strategic positioning in the face of western pressures
• The Trump – Xi meeting in South Korea; where 3W explains why the outcome in our view indicates that China is in the stronger position
• The US Fed’s decision to lower its benchmark interest rate for the second time this year
• The US government’s energy policy, which is shunning renewables and focusing on nuclear; where 3W notes its $80 billion deal with nuclear power company Westinghouse highlights current trends in geopolitics and macro-economics
• Bill Gates’ call for the UN to stop focusing on climate

Geopolitics

Gaza – on Tuesday 3W wrote that Israel is looking for excuses to return to its genocidal war. On Tuesday it concluded it had enough excuses, and Israeli Prime Minister Benjamin Netanyahu ordered “powerful” strikes in Gaza. On Wednesday morning over a hundred Palestinians were dead, writes Axios, among them 46 children and 20 women. After the slaughter, Israel said the ceasefire was back on, writes The Associated Press. In the view of 3W, the affair indicates the continued one-sidedness of the international community. Israel can use the flimsiest of excuses to kill more than a hundred people, mostly women and children. And when it is done with its slaughter, and blood has filled the streets of Gaza, it can says “ceasefire” and everyone is expected to hold back from retaliation..

Ukraine – Russia claims it has now fully encircled the key strategic cities of Pokrovsk and Kupiansk, writes The Associated Press. Ukraine denies, but it is clear the Ukrainian armed forces have for months now been strained to the maximum in order to maintain control of the two cities, both critical for the Ukrainian supply to the front.

In addition, after last week announcing the successful test flight of the Burevestnik nuclear powered intercontinental missile, this week Putin said on Wednesday that Russia had successfully tested a Poseidon nuclear-powered super torpedo, writes Reuters. “There is nothing like this,” he said, adding there was no way to intercept the Poseidon, which analysts believe has a range of 10,000 km (6,200 miles) and can travel at about 185 km per hour. The Burevestnik and Poseidon tests are intended to send a clear message that Russia, in Putin’s words, will never bow to Western pressure over the war in Ukraine.

Macroeconomics

US – US president Trump met face-to-face with Chinese president Xi Jinping on Thursday, writes The Associated Press. Before they sat down for the 1 hour and 40 minute meeting in Busan, South Korea, there was a rough idea of the agenda, including tariffs, computer chips, rare earth minerals and other points of tension. Trump repeatedly said he expected to be able to reach a deal with Xi. But there was no immediate word on their conversation once it ended. Trump boarded Air Force One without speaking to reporters, and the White House did not make any announcements. Later on Thursday Trump said he agreed to lower tariffs on Chinese goods, while Beijing will buy American soybeans and delay rare-earth export controls, writes Nikkei Asia. “I put a 20% tariff on China because of the fentanyl coming in,” Trump told reporters. “Based on his statements today, I reduced it by 10%.” 3W notes this is not a breakthrough, but a successful attempt at preserving the current status quo. It also shows, in our view, that China is in the stronger position. The US has had to take a step back, lowering tariffs, while China could just not do what it had threatened to do.

The US Federal Reserve cut its key interest rate Wednesday for a second time this year, writes The Associated Press. The rate cut — a quarter of a point — brings the Fed’s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades before implementing three cuts last year. But Fed Chair Jerome Powell also cautioned that further rate cuts weren’t guaranteed. Powell said there were “strongly differing views about how to proceed in December” at its next meeting and a further reduction in the benchmark rate is not “a foregone conclusion — far from it.”

Energy

In 2010, the International Energy Agency estimated that there would be 410 gigawatts (GW) of solar panels installed around the world by 2035. There is already more than four times that capacity, with about half of it in China. Many countries in Africa and the Middle East, even in petrostates such as Saudi Arabia, are now rapidly developing solar power, writes The Financial Times. China’s vast production of solar panels and batteries has pushed down the prices of renewables hardware for everyone, meaning it has “become very difficult to make any other choice in some places”, according to the IEA. The only country being left behind is the US, FT writes, as Trump’s tariffs and flipflopping on policies are creating massive hurdles to renewables investment.

Instead of renewables, the Trump administration wants nuclear. The US government and the owners of Westinghouse have struck an $80 billion deal to build a fleet of nuclear reactors, using funding from a trade agreement with Japan, writes The Financial Times. US president Trump’s goal is to quadruple US nuclear capacity by 2050. The investment announced would fund about eight Westinghouse AP1000 power plants, or a mix of larger facilities and small modular reactors. Washington’s spending commitment is funded by the $550bn deal Trump has agreed with Tokyo as part of the tariff negotiations. The Westinghouse deal comes with a profit share mechanism that could see the US government eventually build a large equity stake in the company. 3W notes this deal not only provides insight into how the global electricity system is likely to develop. It also highlights the new trend in geopolitics, where the US actively “shakes down” its allies in order to finance the programs it deems of strategic interest to the US. This is, in fact, a sign of imperial decline, not a sign of strength. Empires shake down vassals when they run out of money. An Empire on the rise has enough wealth to spread it around. As such, the deal speaks of the decline of the “US Empire”. Third, the deal highlights the new trend in macroeconomics, where “markets” are out and “industrial policy” is in. After decades of the US telling the world to make markets free(er), now it is side-lining the markets in the areas of the economy that it deems of strategic interest to the US geopolitical objectives. It is picking winners, helping and guiding them, and take a stake in them such that takes some of the money generated in this way.

Other

Bill Gates has called for the UN to make a “major strategic pivot” from climate goals towards funding vaccines and alleviating poverty, writes The Financial Times. In an open letter ahead of the UN COP30 climate summit in Brazil next month, which he will not attend, Gates said he did not believe the funds designated for climate were being spent on “the right things”, and that temperature goals alone were not the best metric for human welfare. Although climate change would have serious consequences and every fraction of warming mattered, it would not lead to humanity’s demise, he said, advocating for more spending on crop resilience and healthcare. A few 3W thoughts in response. Firstly, in our view private individuals, no matter how wealthy they are, should not determine government policy, or have privileged access to the political leaders and institutions that do. Sorry, mister Gates, but that is in fact the main driver for the increase in economic inequality in the western world. Secondly and more importantly, as Gates despite our first point does have significant influence globally, his commentary provides insight into how the “climate change” subject is likely to develop henceforth. It will stick around, but will drop significantly on the list of global priorities, we venture to say.