Quantum Strategy’s David Roche has warned that “NATO is dead” as the United States distances itself from its European allies and moves closer to Russia. This shift in geopolitical strategy makes Russia’s Vladimir Putin and China’s Xi Jinping “the big winners,” while the US becomes “the big loser,” he told CNBC on Tuesday.
The Decline of US Treaty Trust
“The big loser is actually the US, because nobody will trust a US treaty again,” Roche said, emphasizing that many Global South nations will align with China as a result.
NATO Skepticism and US Security Commitments
His comments come as President Donald Trump continues to express skepticism about NATO, an alliance he has long criticized for its defense spending disparities. “If they don’t pay, I’m not going to defend them. No, I’m not going to defend them,” Trump told reporters in the Oval Office on Thursday, making it clear that US military support will be conditional on financial contributions.
Since Trump’s first term, NATO members have increased their military spending, with three-fourths now meeting the 2% of GDP benchmark, compared to just the US, UK, and Greece in 2015, according to the Associated Press. Despite this, Trump has continued to demand further increases from allies.
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Europe’s Response and Military Investments
With the US stepping back from its security commitments, the European Union has announced a plan to boost defense spending by more than $800 billion as it prepares for “a world without a US security shield.” Roche suggested that it could take Europe “five to six years, or perhaps even more,” to rebuild its military capabilities.
Financial Market Impact and the Rise of the Yen
Beyond geopolitical consequences, Roche highlighted the financial market impact, advising investors to “keep out of the euro and own the yen, which is now the new safe haven as the US is getting to look very dangerous and US exceptionalism will suffer from the costs of Trump’s commercial tariffs.”
Trump’s trade policies have raised concerns about potential retaliation in currency and debt markets. “Others have also warned that his tariffs could prompt countries to retaliate outside of the trade arena, including in the debt markets and currency markets by de-dollarizing.”
De-Dollarization and Global Economic Shifts
Even before Trump’s return to the White House, there has been a growing “wariness about the dollar.” The US-led sanctions on Russia after its invasion of Ukraine, including the freezing of Russian dollar and euro assets, have made other countries question the security of their own dollar holdings.
“China and Russia have led the de-dollarization movement to reduce their reliance on the dollar in international trade transactions and central bank reserves,” the article noted.
Nassim Taleb, author of The Black Swan, has also warned that these sanctions could create long-term risks for the dollar. “So I’m really afraid of a progressive loss of the role of the dollar,” he told Bloomberg TV in October. “People nominally conduct transactions in dollars, but they don’t store it in dollars, and that is what the problem is.”
The Future of Global Power Balance
As the US recalibrates its foreign policy, the implications stretch beyond alliances to financial stability. With Europe scrambling to bolster its defenses and countries diversifying away from the dollar, the global order is shifting in ways that could reshape the balance of power for years to come.
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