Geopolitical Risk Outlook for 2026

December 26, 2025
John

The Changing Global Order and Geopolitics

The year 2025 marked the end of the old global order as President Donald Trump upended long‑standing norms, institutions and alliances with tariffs, funding cuts, and aggressive domestic use of executive power. His style produced some diplomatic wins and a strong stock market fuelled by deregulation and AI enthusiasm, but also strategic missteps (isolating partners, failing with Putin, pushing some countries toward China) and risks to democratic institutions.

By 2026 the world’s future will become clearer across three areas: the health of Western liberal democracies (U.S. midterms, rise of European populists), a new transactional, often unpredictable geopolitics (Asia, Latin America, Middle East consequences), and an economy whose short‑term boom may hide longer‑term vulnerabilities (tariff damage, deficits, uncertain productivity gains). Key points

Trump’s disruptive presidency reshaped trade, diplomacy and domestic institutions—yielding some tactical successes but raising alarms about protectionism, politicisation and authoritarian tendencies.
Tariffs and brinkmanship pressured trade partners and pushed some countries closer to China; retaliation was limited and the global economy held up, aided by a U.S. market boom from deregulation and AI optimism.
By 2026 three fault lines matter most: democratic resilience in the West (U.S. midterms, European populists), a transactional and unpredictable geopolitics (Asia’s Taiwan stance, Latin American coercion, Middle East peace-making), and economic risks (tariff costs, deficits, uncertain AI productivity).
A softer U.S. economy might paradoxically restore checks on power and dampen revolutionary policies; outcomes will hinge on elections, central‑bank independence, and whether markets correct.

Rare Earths Focus

Rare earths — a group of 17 metallic elements used in products from electric vehicles to wind turbines — have become a central issue in the 2025 global fight over critical minerals. Although geologically common, they are hard to separate and refine, a stage currently dominated by China. That dominance has given Beijing leverage in trade negotiations with the US and has made rare earths a flashpoint in the US–China trade war. The US and EU are attempting to build their own mining and refining capacity, but progress may be too slow. China has temporarily eased export controls through a trade-war truce running until November 2026, but the measure could be reversed.

The US has investested billions in the rare earth industry and in early December signed the Pax Silica Declation with Singapore, Australia, Japan, South Korea and Isreal. The goal is to secure critical minerals and counter China in the tech area. Main points

Rare earths are essential for modern industry (permanent magnets, EVs, wind turbines) but difficult to process.
China dominates separation and refining, giving it strategic leverage in trade disputes.
The US and EU are accelerating efforts to develop alternative supply chains, but face delays.
A 2025 truce suspended most Chinese export controls on rare earths until Nov 2026, though the pause is provisional.

Western Hemisphere and Trump Policy

The biggest change has been the focus of Trump on the Western Hemisphere. This covers Greenland all the way down to Latin America. While we don’t think the US will invade Greenland. It already has acess to it militarily. Trump has used an agressive approach to get Denmark to increase military spending and put more military assets on the ground.

Denmark will spend $8.7bn to bolster defence: $4.5bn to add 16 F-35s (bringing its fleet to 43) and $4.2bn on Arctic security measures in Greenland. The Arctic package includes two military units, a joint Arctic command in Nuuk, two ships, maritime patrol aircraft, drones and radar. The moves respond to pressure from the US and concerns about Russian aggression and hybrid threats, and have drawn criticism in Greenland over lack of local consultation.

The total defence package: $8.7bn — $4.5bn for F-35s, $4.2bn for Arctic security upgrades. Greenland investments: joint Arctic command in Nuuk, two units, two ships, patrol aircraft, drones and eastern Greenland radar.

Motivations: counter Russian threats, respond to heightened US attention (including Trump’s remarks about Greenland) and strengthen NATO posture.

Political friction: Greenlandic leaders complain Denmark didn’t consult the island’s population about increased military activity.

In Latin America, most countries have turned to the right-wing through elections. Only the key country of Brazil is left-wing. Venezeula is under pressure from Trump and we see a fall of the Maduro regime sometime in 2026. Thus, Veneuzeula will probably be replaced by a right-wing leader closer to the US position. If Veneuzeula falls, Cuba will also fall. The other main country, Columbia, is currenly left-wing and will revert to a right-wing leadership in elections in 2026.

Thus, there is a huge political shift taking place in Latin America. The US under Trump is going after Chinese infuence in the region. Take a look at the Panama Canal pressure Trump used to force sale of the the two Chinese ports. This has not been finalized due to China holding up and slowing down the deal. However, the writing is on the wall and China will be forced out here.

In short, we see major changes happening in Latin America in 2026.

US Relationship with the EU

The US will downgrade its commitment to the EU in 2026. The reason is that it does not have enough resources to continue and support the EU militarily due to more resources needed to counter China in Asia.

Thus, we expect this to contine and pick up pace. For the US, the threat of Russia on Europe has been lessened thus the requirement for less commmitment. Expect this to take 5 to 10 years for Europe to fully be able to go on its own in its own defense.

The first step was to get the EU to spend more on its defence. This happened in the early part of Trump’s new term, with NATO countries committing to 3.5 to 5% of GDP on military spending. Intense pressure by Trump on NATO members finally pushed them to increase spending. Some of the laggards (Canada and Spain for example) were only spending about 1% of GDP. In short, the burden of covering for EU defense will go down for the US.

Ukraine Russian Deal: Possibilities

This is also related to US-EU relations. We see the back and forth approach of the Trump administration leading to a cautiously optimistic result – finally ending this war.

It is still too early, but we are hopeful that this war will end sometime in 2026. Even though the EU provided funds for Ukraine, the idea by the Europeans to seize frozen Russian assets did not succeed. It should be emphasized that the recent EU loan of about $90 Billion ight actually be less in reality, about $45 Billion. As it currently stands it is structured weakly as a loan with little in guarantees. We need to wait for the final details. The point is that support from the EU is also reaching its end and limits of the EU countries. The US has already downsized aid. In short, there is not enough funding anyways for Ukraine and it is starting to show.

On the Russian side, this presents an opportunity to solidify the gains made and come back to world community. Putin does not want to further depend on China and slide further as a junior partner. Thus, a peace plan would allow Russia to regain its strenght.

US Commitment to Taiwan

The US under Trump will continue support for Taiwan. Noise in the media to the contrary is just noise. Recently, Trump approved the largest military equipment sale to Taiwan.

US commitment to other allies like Japan, South Korea and the Phillipines in the regions depends on a strong US stance on Taiwan. We don’t see this changing and in fact, think US commitment here will increase in 2026.

Military Conflict Risks for 2026

The key military risks are outlined below:

Top Tier: concerns (high likelihood, high impact) include renewed Gaza fighting, West Bank confrontations, intensifying Russia–Ukraine war, North Korea escalation, and U.S. strikes on criminal groups in Venezuela.
Other Prominent Risks: AI-enabled cyberattacks on U.S. infrastructure, cross-strait crisis with China over Taiwan, clashes between Russia and NATO members, and renewed India–Pakistan fighting.
Regional emphasis: Middle East figures prominently; Africa has the largest number of contingencies (nine), with Sudan singled out for likely large-scale violence and mass atrocities.
Opportunities: U.S. influence could prevent or mitigate conflicts (e.g., Ukraine, Gaza, Taiwan tensions, Sudan, Syria, Haiti).