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| Trump and Indian Prime Minister Narendra Modi - Turmp responded to the EU-India deal by announcing a reduction of US tariffs on Indian products |
Repositioning the defence, trade chessboard
The “Board of Peace”, unveiled by Trump on his second day at the Davos conference last month – ironically after spending the first day trying to walk back his threats to take over Greenland by force – is another example of the tectonic shift in international relations and the growing break between the US and the traditional West.
As if the aggressive rhetoric over Greenland were not reason enough to strain the western alliance, the creation of the “Board of Peace” has now formalised that divide. None of America’s traditional allies have joined. Only Hungary and Turkey from Nato have taken part so far. Their common denominator appears to be their autocratic tendencies rather than their Nato credentials – a trait they share with most of the other countries that have joined the board. Russia was also invited and has said it would join if it were allowed to use part of its frozen assets as payment for the board’s reported $1 billion permanent entry fee.
Countries left outside the board – either by exclusion or by choice – have been scrambling to formulate a coherent response to this new global reality. The so-called Carney doctrine, following Canadian Prime Minister Mark Carney’s historic speech at Davos, offers one such path. Canada, the EU, and Europe more broadly (including the UK and Norway) have begun to re-orient their partnerships away from Washington and towards one another.
The EU has focused heavily on trade. It first concluded a deal with the Southern American Common Market (Mercosur), comprising Argentina, Bolivia, Brazil, Paraguay and Uruguay. This was followed by agreements with Vietnam and then India, with European Commission President Ursula von der Leyen describing the latter as “the mother of all deals”.
China, too, has been eager to exploit the widening rift between the US and its allies. After French President Emmanuel Macron’s visit to Beijing, he was followed by Canada’s Mark Carney and then the UK Prime Minister.
Trump was quick to react. Observing that the UK had also signed a trade agreement with India, he responded to the EU-India deal by announcing a reduction of US tariffs on Indian products from 50 to 18 per cent. Trump claimed India had agreed to stop buying Russian oil as part of the accord, though Prime Minister Narendra Modi did not confirm that condition.
Trump’s response to the Canadian and British outreach to China was less conciliatory. He threatened Canada with 100 per cent tariffs should it proceed with a China trade deal, while warning the UK that doing business with Beijing was “very dangerous”. Nevertheless, his policies are clearly pushing traditional allies away from the US. The stakes may rise further when German Chancellor Friedrich Merz visits China later this month. Recognising this, Trump himself announced plans to visit Beijing in April. What that trip will yield remains to be seen.
Trade, however, is not the only concern for countries reassessing their relationship with Washington. Defence is emerging as an equally critical issue – and the link between trade and security is becoming increasingly explicit.
This was recently highlighted by Mario Draghi, former Italian prime minister and former president of the European Central Bank. Speaking in Belgium, he argued that the global shift in power “requires Europe to move from confederation to federation” in order to speed up decision-making, and warned that “where trade and security intersect, our strengths cannot protect our weaknesses.” He added pointedly that “a Europe unified on trade but fragmented on defence will find its commercial power leveraged against its security dependence, as is happening now.”
A similar view was expressed by Nick Thomas-Symonds, the UK minister for the constitution and European Union relations, who wrote in the Financial Times that “international events in recent weeks have also given us the starkest of reminders that economic co-operation is not an addendum to security co-operation but an essential part of it.” His remarks followed a meeting with the EU trade commissioner on strengthening UK-EU ties.
If the US can no longer be relied upon as a guarantor of the post-war order, how should other countries respond? Nato secretary-general Mark Rutte was criticised recently for suggesting that Europeans were dreaming if they believed they could defend themselves without American support. He may not be entirely wrong. Yet reliance on assistance that can be withdrawn on a whim carries its own risks.
Europeans have likely understood this for some time but may have been hoping to buy time – or even for a political miracle. It now appears that time has run out, and miracles are better left to God than to politicians.
This urgency has revived talks on the UK joining the EU’s €150bn (£130bn) Security Action for Europe (Safe) defence fund – talks that collapsed in November 2025 amid claims that the bloc’s entry price was too high. Canada has already joined, while Turkey still hopes to do so despite opposition from Cyprus and Greece. The concerns of Cyprus and Greece, though understandable, should be viewed in a broader strategic context: pushing Turkey further away – especially as it is already a member of the board – does little to strengthen Europe’s collective security.
The renewed focus on defence comes at a particularly dangerous moment. On Thursday, New Start, the last remaining arms-control treaty limiting US and Russian strategic nuclear forces, expired. We appear to be on the brink of a renewed nuclear arms race.
According to the Stockholm International Peace Research Institute (SIPRI), cited by the Financial Times, “of the total global inventory of an estimated 12,241 warheads in January 2025, about 9,614 were in military stockpiles for potential use. Of these, the US and Russia possess about 90 per cent. China, with an estimated 600 warheads, lags behind – but is catching up quickly.”
Whether Europe, Canada and the remaining traditional West can forge a workable defence cooperation with China – alongside closer trade relations – is doubtful. The main obstacles are Beijing’s positions on Ukraine and Taiwan, not to mention a retaliatory US. Hence the urgent need for the traditional West to build up its own nuclear deterrence based on the existing French and UK arsenal. I argued about this in this column over a year ago on 12 January 2025.
Nevertheless, closer ties with China are still required. Incentives do exist that could encourage China to shift its stance on Ukraine and Taiwan. Beyond trade, China has long sought the internationalisation of the renminbi, hoping it might one day achieve reserve-currency status. This goal is unattainable without the cooperation of the West (minus the US). If managed carefully, a compromise may be possible.
It is ironic that the Board of Peace has helped divide the world into rival camps. Perhaps Elon Musk was right when he joked at Davos that the spelling of the “peace” part was wrong – that it should really be “piece”, because the board’s true aim was to secure a piece of Venezuela, Cuba, Greenland or Iran.
China and the traditional West should recognise that unless they find common ground, they themselves risk becoming yet another piece in Trump’s puzzle.
Loukis Skaliotis is an economist
