Trump’s approach to Taiwan could jeopardize its future. Indo-Pacific allies are taking note Expert comment LToremark 19 May 2026 Trump’s comments on Taiwan after his meeting with Xi and an apparent move towards ‘strategic stability’ with China could have consequences for Taiwan’s future and erode trust among US allies. When US President Donald Trump met with China’s President Xi Jinping in Beijing last week, there was concern that he might negotiate the future of Taiwan to strike a deal with China. For Beijing, Taiwan is the most important issue in the US-China bilateral relationship. Xi even warned that if the issue is mishandled, it could trigger ‘clashes and even conflicts’.Reports in the run-up to the meeting suggested that China would seek a change in America’s long-standing position on Taiwanese independence. Rather than merely ‘not support’ it, China wants the US to ‘oppose’ Taiwan’s independence and to endorse Beijing’s goal of unification. Such a shift in US policy might appear symbolic, but it would be disastrous not only for the self-governing island, but also for America’s posture in the Indo-Pacific and the region’s security.In the end, such a shift did not materialize. US Secretary of State Marco Rubio even asserted that America’s position remains unchanged. But the momentary respite has merely deferred the underlying anxiety.Endangering Taiwan’s securityA better insight into Trump’s thinking on Taiwan comes from an interview with Fox News, that aired soon after he departed Beijing. Three things stood out. First, Trump said that he will use a $14bn weapons sales package to Taiwan that requires his approval as a ‘very good negotiating chip’ to deal with China. Earlier this year, the president deferred the multi-billion-dollar sale of missiles, anti-drone equipment and air-defence systems until after the summit to avoid derailing it. Trump also said he has consulted with Xi on the matter and seems willing to negotiate a future arms sale to Taiwan with Beijing. This runs against one of the 1982 US Six Assurances to Taiwan, which states that the United States will not consult with China on its arms transfers to Taiwan. The assurances serve to reassure Taipei to restrain it from provocations and bolster its defensive capabilities to deter Beijing. Further delaying arms deliveries could operationally weaken Taiwan’s defensive capabilities, upend the military deterrent – and make Taiwan more jittery. Related work The Trump-Xi summit: What does the US want from China and will Trump get it? Independent Thinking podcast With Trump and Xi reportedly set to meet at least three more times this year, the temptation to hold back US arms transfers in order to preserve the summit cadence will only grow. It could also tempt Beijing into asking for more concessions that weaken US security guarantees, such as restrictions on cabinet visits to Taiwan or curtailing US transits by the Taiwanese president.Second, when asked about whether the United States would come to Taiwan’s aid in case of a conflict, Trump maintained the US line of strategic ambiguity. But he also said that the US was not looking to fight a war 9,500 miles away. Ambiguity only works as deterrence when underwritten by credible resolve – and Trump’s comments cast doubt over that. The statements also come as US military resources have been diverted from the Indo-Pacific to the Middle East and its munitions stockpiles are depleted. Beijing could read this as an opportunity to test American credibility, and slowly chip away at Taiwan’s resolve by ramping up its intimidation tactics.Third, during the interview Trump parroted Beijing’s view of who is to blame for tensions in the Taiwan Strait. ‘We are not looking to have somebody say let’s go independent because the United States is backing us’, he said. Beijing has framed Taiwan’s desire for independence as the main reason for the deterioration of relations. Trump also failed to mention Beijing’s relentless coercive pressure on Taiwan and actions in the Taiwan Strait. His tacit endorsement could serve to legitimize Beijing’s narrative and tactics.Taken together, Trump’s comments undercut the precarious balance that has characterized US policy on Taiwan for decades. It would sow doubt among the Taiwanese public about the credibility of the US security guarantee and their own ability to defend the island. They could also embolden Xi, who seeks a fourth term next year and has vowed to not let the Taiwan issue pass onto the next generation.Implications of US–China ‘strategic stability’Another concern arising from the summit is Beijing’s new framing of the US-China bilateral relationship as pursuing ‘constructive strategic stability’. Marco Rubio also echoed this phrase in his interview with NBC News during the summit, implying Washington has endorsed this idea, at least rhetorically. What it actually means is unclear. Beijing has long preferred vague formulations because it can change their substance based on its interest. This could have implications for Taiwan. Any US action contrary to Beijing’s core interests on the issue could be framed as a violation of this strategic stability, with Washington cast as the disruptive party. How much the Trump administration cares about the framing is unclear. But if it does, the pattern of withholding assistance to Taiwan as leverage could harden into the new baseline.
Chatham House
Little is known about how firms think about rare macroeconomic disasters and how these beliefs shape their decisions. This column uses survey evidence from a large panel of German firms to show that higher perceived macroeconomic tail risk leads firms to cut investment substantially. At least half of this effect operates beyond standard channels related to the mean outlook and uncertainty around it. Deep uncertainty about firm-specific exposure to macro disasters rationalises the findings and implies that credible, rule-based fiscal stabilisers are particularly effective when tail risk is elevated.
Center for Economic Policy Research
Als OpenAI 2015 gegründet wurde, konnte niemand dessen rasante Entwicklung vorhersehen. Aus einer gemeinnützigen Organisation zur Erforschung Künstlicher Intelligenz wurde dank des Chatbots ChatGPT die wertvollste nicht-börsennotierte Firma der Welt.
Deutschlandfunk
Former Pulitzer-winning Post dance critic explains how to level up writing in new book
Harvard University
Tariffs have returned as instruments of economic and geopolitical policy, but their short- and medium-run macroeconomic effects are still not fully understood. This column introduces a new framework that integrates global production networks into a standard open-economy model. It shows that tariffs act simultaneously as demand and supply shocks, and their macroeconomic effects depend critically on production networks, price rigidities, and monetary policy responses at home and abroad. Once these features are incorporated, even transitory tariffs can generate persistent inflation, large output losses, and global spillovers absent retaliation.
Center for Economic Policy Research
Hormuz crisis could lead to constructive dialogue between ASEAN and China in the South China Sea Expert comment LToremark 15 May 2026 Oil shortages as a result of the Iran war present a unique opportunity for ASEAN chair the Philippines to make progress on a South China Sea Code of Conduct with China. And for Trump to strike a deal. The crisis in the Middle East is being felt deeply in Southeast Asia. Perhaps most of all in the Philippines, which imports 98 per cent of its oil from the Gulf. The choking of global oil trade has led to acute fuel shortages, causing the Philippine government to declare a national emergency. The situation has forced President Ferdinand Marcos Jr to consider all options, even with the most unlikely of partners – China. Chaos opens door to dialogueRelations between the two countries have been under significant strain over territorial disputes in the South China Sea. But faced with an angry population, a spiralling economy, and inflation at 7.2 per cent in April, President Marcos stated he was looking to ‘reset’ relations with China and reopen conversations on joint oil and gas exploration in the South China Sea. Despite their fraught history, this was welcomed by Beijing and talks were held immediately thereafter. While nothing concrete was agreed, the dialogue alone was a significant change. The Philippines is open to further talks but has made it clear that any agreement would only come after tangible commitments to the United Nations Convention on the Law of the Sea (UNCLOS) and signing a South China Sea Code of Conduct (CoC). Related work What lessons will China, India and other Asian nations draw from the Iran war? Independent Thinking Podcast While analysts have rightly urged caution in creating such an entanglement of interests in disputed waters, if played correctly, this could be a unique opportunity for Marcos to move closer to one of his biggest and most ambitious goals – a South China Sea CoC. The maritime security puzzle at the heart of the Strait of Hormuz is a stark reminder for Manila of the urgent need for order in their waters and the enforcement of international law. A blockade in the Strait of Hormuz threw global markets into chaos because 20 per cent of the world’s oil supply passes through its waters. By contrast, 60 per cent of all global trade runs through the South China Sea. The consequences of disruption in the region are difficult even to imagine. The Philippines is well-placed to lead on efforts to secure agreement. It has been carving out a space as more than just a pawn in the great power competition dominating the Pacific, while its alliance with the US continues to grow stronger. The Philippines is also the current chair of ASEAN so able to build regional consensus. Last week the Philippines hosted the 48th ASEAN summit in Cebu, a shortened and ‘bare-bones’ affair as a result of the regional energy crisis. Iran was top of the agenda, with all 11 ASEAN nations focused on shoring up energy and food security through greater regional integration. But discussions of security did not fall by the wayside. Rather, there was a renewed commitment to peace and international law in the South China Sea. The Asean Leaders’ Declaration on Maritime Cooperation was adopted during the summit, announcing the founding of a maritime centre in the Philippines to act as a repository for issues relating to maritime security in the South China Sea. Marcos further clarified that its purpose would be to ensure freedom of navigation and enforcement of UNCLOS. Appetite for a CoC agreement also seems high in Beijing after the summit, with a Chinese foreign ministry spokesperson encouraging ASEAN to resist disruption to a deal, stating that it would allow all parties to ‘better manage differences, advance cooperation, and keep the South China Sea peaceful and stable’.Conditions are favourable but caution is key Joint oil exploration in the South China Sea is a valuable incentive to encourage a favourable outcome in CoC negotiations, not least because it aligns with Chinese policy values laid out under former leader Deng Xiaoping. As a route to peaceful settlement of territorial disputes, he encouraged the pursuit of joint development and shared economic interests. In this case, China would have access to South China Sea oil and natural gas reserves to the tune of billions, without violating international law and drawing ire from the US and other allies. Additionally, encroaching on disputed waters is taking significant resources on China’s part. Related work A Taiwan crisis would cause far more global economic damage than Strait of Hormuz disruption But although conditions for dialogue are growing more favourable, Manila must be cautious, ensuring it secures its own interests and has the support of neighbours and allies. Indeed, the Philippine’s largest and strongest ally, the US, might just approve of plans to use joint oil exploration projects to secure a CoC. Over the past four years, the US has made significant investments in miliary infrastructure on the Philippine islands, and just last month successfully ran their largest joint military drill. Washington has reaffirmed its commitment to the Philippines in securing its territorial sovereignty, and is well-placed to help ensure the implementation of and adherence to a CoC in the region. With President Trump’s self-proclaimed talent for brokering peace, facilitating a South China Sea CoC between China and ASEAN would be a jewel in his cap. President Marcos has also indicated there is regional buy-in and support. Last week, when asked if ASEAN economic cooperation in the face of the Iran war would extend to China, Marcos made clear that a CoC would have to come before any other conversations. The art of the deal This channel of dialogue between the Philippines and China would have been inconceivable only months ago, but the Iran war has changed things – and may have handed Marcos the key to securing a CoC.The perennial stumbling block will be follow-through. While there is reason for optimism, the devil will be in the details.
Chatham House
While some observers argue that artificial intelligence may lead to large productivity gains, there are also concerns that it may lead to technological unemployment and rising inequality by triggering a wave of automation. This column uses a macroeconomic framework to study monetary and fiscal policies for AI. The authors argue that coupling advances in AI with an appropriate macroeconomic policy mix is crucial to ensure that it benefits workers and leads to shared prosperity. Indeed, macroeconomic policies may determine whether the spread of AI will cause an economic boom or a slump.
Center for Economic Policy Research
