Latest from Asia Times
Asia Times
16 hours ago
- Politics
- Asia Times
Trump's path to Tehran: the making of a global bargaining chip
The second Trump administration no longer needs to prove its foreign policy instincts. They are clear, unmistakable and anchored in brute transactionalism. If the world learned anything from the former—and now resurgent—President Donald Trump, it is that he views diplomacy not as a delicate art of engagement but as a zero-sum game of power projection. His latest rhetoric and posturing over Iran, especially in the wake of Israeli operations and heightened regional tensions, suggest a dangerous and deliberate strategy: to reduce Iran to rubble, not only for the sake of containment but to bolster American dominance in trade negotiations with China and recalibrate all relationships—friends and foes alike—on Washington's terms. At the heart of this approach is Trump's insistence that Tehran must surrender unconditionally. This is not just hyperbole; it is a method. Trump thrives on spectacle and brinkmanship. His entire worldview is predicated on the belief that America is losing because it has been too nice, too generous and too forgiving. Therefore, for Trump to extract what he perceives as 'better deals' from China, Europe, ASEAN, Mexico and Canada, he must first demonstrate that the United States is willing and able to destroy one of its most intransigent adversaries—publicly, unmistakably and with overwhelming force. Trump's obsession with bunker-buster bombs is not new. During his first term, he repeatedly floated the idea of using high-yield ordnance to obliterate Iran's underground nuclear sites. While the Pentagon and international allies balked at the prospect, Trump's inner circle entertained such military options as ways to force diplomatic capitulation. In Trump's view, diplomacy begins only when the enemy lies broken or at least battered enough to come to the table begging. A full-fledged strike on Tehran, targeting its military-industrial infrastructure, would mark not only a significant escalation in the Middle East but a cornerstone of Trump's new foreign policy doctrine: militarized deal-making. The point is not merely to neutralize Iran but to demonstrate to Beijing, Brussels and beyond that Trump's America is prepared to shatter international norms to reassert dominance. By pulverizing Iran's defenses and forcing a surrender, Trump can create a shockwave that ripples through multiple geopolitical theaters. First and foremost is China. Beijing, already embroiled in a tit-for-tat tariff war with Washington, is being forced to reconsider its risk calculus. A United States that can unilaterally take down a major regional power signals a willingness to escalate beyond traditional economic warfare. Trump clearly wants China's leadership to understand that their negotiation counterpart is not a rational actor bound by global rules—but a strongman driven by prestige, leverage and personal victory. Second, Washington's allies would be caught in the moral and strategic dilemma of either backing Trump's new militarist campaign or risking their ties to the US economy and defense umbrella. Members of the European Union—especially France—may voice concern, but ultimately, many of them remain economically and strategically tied to the United States. The same dynamic plays out in Asia, where regional powers depend on US security guarantees while also being wary of American unpredictability. Third, Trump can use the devastation in Iran to undermine Russia's remaining influence in the region. With Iran weakened, Moscow's capacity to counterbalance US interests in Syria, Lebanon and Iraq will be significantly diminished. In this sense, Iran becomes both a target and a message: defiance will be punished, and accommodation will be rewarded—on American terms. Of course, bombing Iran is not without consequences. Trump's team understands the potential for a regional conflagration. Hezbollah in Lebanon, Shia militias in Iraq and the remnants of the Houthis in Yemen may launch retaliatory attacks on American interests and allies. But Trump, emboldened by a Republican-controlled Congress and the politics of spectacle, is likely to argue that such blowback is manageable—collateral damage in a global campaign to reassert American primacy. Israel, already engaged in shadow wars with Iran, would likely welcome such US involvement, seeing it as a decisive moment to dismantle the Islamic Republic's regional ambitions. For Israeli Prime Minister Benjamin Netanyahu, this could be the culmination of a decades-long security doctrine centered on preventing Iran from becoming a nuclear power or a hegemon. For Trump, Israel's support is not just strategic—it is deeply political. It energizes his evangelical base and signals to Washington's hawkish establishment that he is not just a deal-maker but a wartime president. In many ways, this is a return to a form of Nixonian 'madman theory'—showing unpredictability to coerce adversaries into submission. But Trump takes it one step further: unpredictability is no longer a tactic but a brand. From tariffs to trade deals, embassy relocations to drone strikes, Trump has shown that chaos is not a byproduct—it is the plan. Once Iran is bombed and coerced into surrender—should that scenario come to pass—Trump will likely position the act as proof that America is back, that it no longer tolerates deadbeat allies, hostile regimes or trade cheats. He will then pivot to Beijing, pressuring China to remove barriers to US exports, agree to more stringent intellectual property protections and halt its support for Iran and Russia. 'Look what happened to Tehran,' Trump might warn. 'Don't be next.' In Southeast Asia, where countries are watching this dynamic closely, the message is equally stark. Malaysia, Indonesia, and Thailand—economies with strong trade linkages to both China and the US—will face renewed pressure to pick sides. Trump's version of 'with us or against us' will come cloaked in tariffs, sanctions and security demands. Even countries that enjoy exemptions today—such as Malaysia's semiconductor sector—could find those favors withdrawn if they do not align with America's broader geopolitical stance. Trump's strategic calculus rests on one core principle: raw power, not persuasion. His demands for Iran's unconditional surrender are not driven by fear of a nuclear Iran—there is little concrete evidence Tehran is on the brink of weaponization but by a need to demonstrate overwhelming power. In other words, Iran is not the final goal—it is the opening move. In this worldview, multilateralism is obsolete, diplomacy is for the weak, and war—so long as it is winnable—serves a purpose beyond the battlefield. It is the ultimate bargaining chip. What the world must understand is this: Trump's warnings are not rhetorical flourishes. They are statements of intent. The drive to bomb Iran is neither about containment nor about peace. It is about leverage. It is about rebalancing global power by unbalancing the world. And in this dangerous recalibration, Tehran is just the first domino. Phar Kim Beng, PhD, is professor of ASEAN Studies, International Islamic University Malaysia, former head teaching fellow, Harvard University, and Cambridge Commonwealth Scholar Luthfy Hamzah is senior research fellow , Strategic Pan Indo Pacific Arena , Kuala Lumpur
Asia Times
17 hours ago
- Business
- Asia Times
How China got the US over a rare earth barrel
Who's gonna tell you when it's too late? Who's gonna tell you things aren't so great? You can't go on, thinking nothing's wrong, but now Who's gonna drive you home tonight? – The Cars 'Just when I thought I was out,' Michael Corleone lamented, 'They pull me back in.' This column was originally intended to be about the lamentable state of America's rare earths dependency and how decades of delusional thinking – 'Rare earths are not rare!', 'We taught China rare earth processing!' – led to the current predicament. But who cares about rare earths now; the Middle East is once again a conflagration likely to ruin all of US Under Secretary of Defense for Policy Elbridge Colby's best-laid pivot to Asia plans whether President Donald Trump drops that 30,000-pound bomb on Iran or not. The Persian Gulf and Eastern Mediterranean will tie down US naval assets for another decade. Michael Corleone's fatal flaw was that he did not understand what business he was in. He was a gangster, and there is no escape from murder, death and ruin in that line of work. Karma came for Philip Tattaglia, Barzini, Cuneo, Stracci, Moe Green and Hyman Roth. Why would it be any different for Michael and the Corleone family? Since the end of World War II, the United States has run a maritime empire and there is no escape from entanglement, overstretch and ruin in that line of work. Karma came for the Minoans, Phoenicians, Italian merchant states, Portuguese, Spanish, Dutch, British and Japanese empires. Why would it be any different for America? The reason the US is dependent on China for rare earth elements is that ores with extractable concentrations are, in fact, rare and processing these ores into usable concentrates is, in fact, incredibly difficult. The purpose of maritime empires is to harvest wealth from far-flung imperial possessions – or, more palatably, a rules-based international order. This need not be as self-serving as it sounds. Japan was allowed to have a very nice four-decade-long run between 1945 and 1985. Europe got the Marshall Plan and eight decades of security, allowing the old country (literally) to fund generous pension and welfare programs. Nixon's rapprochement with Mao removed the US Seventh Fleet as a Pacific threat, paving the way for China's coastal industrialization. In return, the US got decades of Middle Eastern oil arguably for free (crude oil paid for in dollars recycled into US investments). America also got manufactured goods from Asia and Europe on the same trade and creamed off the best and brightest from all corners of the world to become the empire's minions. All of the above should be grounds for celebration. It's all America could have asked for as a maritime empire. And yet, we are all familiar with the downsides. Maritime empires contain the seeds of their own destruction, magnifying capitalism's iniquities as wealth concentrates in ever fewer hands. Karl Marx wrote 'Das Kapital'at the height of the British Empire, showcasing brutal exploitation in Britain's own factories. The Trump presidency (both terms) is a reaction to America's neglected working class. The reason the US is dependent on China for rare earth elements is because processing technology has advanced multiple generations in the past two decades. The majority of the world's rare earths are now processed in Baotou Inner Mongolia, largely using third-generation sulfuric acid roasting technology, having long ago abandoned polluting in-situ leaching. Because of unavoidable foreign entanglements, maritime empires are not able to enjoy what should be a major perk of hegemony – to not have to expend resources on the military. The spoils of maritime empires can only be collected with expensive navies and far-flung bases if not occasional (perhaps continual) spillage of blood. And America's collected spoils have, of late, not been well distributed among the citizenry, particularly among those asked to do the bleeding. Mischief is irresistible for empires with forward-deployed militaries. The US has conducted about 200 military interventions since the end of WWII, 50 since the end of the Cold War. The most significant of these have been abject disasters – Vietnam, Iraq and Afghanistan – draining the empire of blood, treasure, domestic vitality and international goodwill. Mischief is once again at work, enticing America back into the Middle East just a few short years after humiliatingly crashing out of Afghanistan. America's pivot to Asia will never happen, just like Michael Corleone could never extricate the family business from its criminal past. The empire has collected too many barnacles. This is the exact opposite of the domino theory. It does not get easier. At some point, foreign entanglements stop benefiting the empire and become, at best, leeches and, at worst, ruinous distractions. The US, bled dry by two decades of never-ending wars, can only pivot to Asia by abandoning the Middle East and Ukraine. But like bickering concubines, manipulative allies conspire for the emperor's favor. In every stable of concubines, there is always a favorite who outmaneuvers the rest and imposes her will on a besotted emperor. America's Wu Zetian just unleashed a surprise attack on Iran demanding the emperor's total attention, leaving beautiful, faithful, innocent and delicate Taiwan to twist in the wind. The US is dependent on China for rare earth elements because rare earth chemistry programs are offered at dozens of Chinese universities versus none in the US. China has produced over 50,000 rare earth patents in the past two decades versus a de minimis number anywhere else. Cutting-edge science in the field is published in a handful of dedicated Chinese rare earth journals. China does not do foreign entanglements. Historically, China expanded organically by incorporating different polities into the Chinese state. That is what makes China China. Unlike maritime empires, the entire purpose of the Chinese state is to harness the major perk of hegemony– not having to waste resources on the military and, instead, deploy them on public works projects, from Yellow River dykes to high-speed rail. In the early 15th century, after commissioning seven magnificent imperial treasure voyages over three decades, reaching as far west as the east coast of Africa and establishing China as the world's pre-eminent seafaring nation, the Ming Dynasty court suddenly turned its back on maritime power. Historians have asked why ever since. Whether it was economics, Confucian conservatism or banal power struggles, abandoning maritime power set China up for European and Japanese predation in the 19th and 20th centuries. In a full accounting of history, maritime empires have not fared much better. Competition for overseas assets led to the slaughter of two World Wars, immolating much of Europe's accumulated wealth. Imperial possessions, acquired over a span of four centuries, evaporated in the blink of a few decades. The reason the US is dependent on China for rare earth elements is because of a maddening inability to concentrate. The US has known of its risky reliance on China for rare earths for two decades. In 2010, China weaponized its rare earth stranglehold on Japan during an East China Sea border dispute. In 2019, after President Trump launched a trade and tech war, China State Television not so subtly broadcast President Xi Jinping's visit to a rare earth processing plant. And somehow, in 2025, China has become an even more dominant supplier of rare earth elements. In all these instances, the exact same narratives were parroted by the English media – rare earths are not actually rare, China dominates rare earth processing because it is polluting, the US transferred rare earth processing technology to China. These shibboleths, which fall apart on close scrutiny, have tied America's hands for two decades. Halfhearted efforts to resolve the problem fell by the wayside when China refrained from pulling the rare earth trigger – until now, in 2025, when China is putting the squeeze on rare earth exports for military use just as strategic competition with the US is entering its most intense phase and right when conflicts in Israel and Ukraine are consuming an inordinate amount of military hardware. Like Michael Corleone, the US tried to convince itself that it was in a different business. 'The Godfather' is a tragedy worthy of – and rhyming with – both 'Macbeth' and 'King Lear.' Michael was blinded by ambition, thought of himself as more than a gangster and ultimately brought ruin onto himself and the Corleone family. The US consciously chose to be a maritime empire, stationing troops in 800 bases across the world, and then convinced itself that it was more than just an extractive empire, above the nitty-gritty, dirty work of resource extraction and immune from manipulation by vassals. Let us hope that this does not end in a Godfather-esque tragedy.
Asia Times
20 hours ago
- Politics
- Asia Times
The Israeli logic of assassinating Iran's nuclear scientists
At least 14 nuclear scientists are believed to be among those killed in Israel's Operation Rising Lion, launched on June 13, 2025, ostensibly to destroy or degrade Iran's nuclear program and military capabilities. Deliberately targeting scientists in this way aims to disrupt Iran's knowledge base and continuity in nuclear expertise. Among those assassinated were Mohammad Mehdi Tehranchi, a theoretical physicist and head of Iran's Islamic Azad University, and Fereydoun Abbasi-Davani, a nuclear engineer who led Iran's Atomic Energy Organization. Collectively, these experts in physics and engineering were potential successors to Mohsen Fakhrizadeh, widely regarded as the architect of the Iranian nuclear program, who was assassinated in a November 2020 attack many blame on Israel. As two political scientists writing a book about state targeting of scientists as a counterproliferation tool, we understand well that nuclear scientists have been targeted since the nuclear age began. We have gathered data on nearly 100 instances of what we call 'scientist targeting' from 1944 through 2025. The most recent assassination campaign against Iranian scientists is different from many of the earlier episodes in a few key ways. Israel's recent attack targeted multiple nuclear experts and took place simultaneously with military force to destroy Iran's nuclear facilities, air defenses and energy infrastructure. Also, unlike previous covert operations, Israel immediately claimed responsibility for the assassinations. But our research indicates that targeting scientists may not be effective for counterproliferation. While removing individual expertise may delay nuclear acquisition, targeting alone is unlikely to destroy a program outright and could even increase a country's desire for nuclear weapons. Further, targeting scientists may trigger blowback given concerns regarding legality and morality. Targeting nuclear scientists began during World War II when Allied and Soviet forces raced to capture Nazi scientists, degrade Adolf Hitler's ability to build a nuclear bomb and use their expertise to advance the U.S. and Soviet nuclear programs. In our data set, we classified 'targeting' as cases in which scientists were captured, threatened, injured or killed as nations tried to prevent adversaries from acquiring weapons of mass destruction. Over time, at least four countries have targeted scientists working on nine national nuclear programs. The United States and Israel have allegedly carried out the most attacks on nuclear scientists. But the United Kingdom and Soviet Union have also been behind such attacks. Meanwhile, scientists working for the Egyptian, Iranian and Iraqi nuclear programs have been the most frequent targets since 1950. Since 2007 and prior to the current Israeli operation, 10 scientists involved in the Iranian nuclear program were killed in attacks. Other countries' nationals have also been targeted: In 1980, Mossad, Israel's intelligence service, allegedly bombed Italian engineer Mario Fiorelli's home and his firm, SNIA Techint, as a warning to Europeans involved in the Iraqi nuclear project. Given this history, the fact that Israel attacked Iran's nuclear program is not itself surprising. Indeed, it has been a strategic goal of successive Israeli prime ministers to prevent Iran from acquiring nuclear weapons, and experts had been warning of the increased likelihood of an Israeli military operation since mid-2024, due to regional dynamics and Iranian nuclear development. The wrecked cars in which four of Iran's nuclear scientists were assassinated in recent years are displayed on the grounds of a museum in Tehran in 2014. Photo: Scott Peterson / Getty Images via The Conversation By then, the balance of power in the Middle East had changed dramatically. Israel systematically degraded the leadership and infrastructure of Iranian proxies Hamas and Hezbollah. It later destroyed Iranian air defenses around Tehran and near key nuclear installations. The subsequent fall of Syria's Assad regime cost Tehran another long-standing ally. Together, these developments have significantly weakened Iran, leaving it vulnerable to external attack and stripped of its once-feared proxy network, which had been expected to retaliate on its behalf in the event of hostilities. With its proxy 'axis of resistance' defanged and conventional military capacity degraded, Iranian leadership may have thought that expanding its enrichment capability was its best bet going forward. And in the months leading up to Israel's recent attack, Iran expanded its nuclear production capacity, moving beyond 60% uranium enrichment, a technical step just short of weapons-grade material. During Donald Trump's first term, the president withdrew the US from a multilateral nonproliferation agreement aimed at curbing Iran's nuclear program. After being reelected, Trump appeared to change tack by pursuing new diplomacy with Iran, but those talks have so far failed to deliver an agreement and may be put on hold for the foreseeable future amid the war. Most recently, the International Atomic Energy Agency board of governors declared Iran in non-compliance with its nuclear nonproliferation obligations. In response, Iran announced it was further expanding its enrichment capacity by adding advanced centrifuge technology and a third enrichment site. Even if the international community anticipated the broader attack on Iran, characteristics of the targeting itself are surprising. Historically, states have covertly targeted individual scientists. But the recent multiple-scientist attack occurred openly, with Israel taking responsibility, publicly indicating the attacks' purpose. Further, while it is not new for a country to use multiple counter-proliferation tools against an adversary over time, that Israel is using both preventive military force against infrastructure and targeting scientists at once is atypical. Additionally, such attacks against scientists are historically lower tech and low cost, with death or injury stemming from gunmen, car bombs or accidents. In fact, Abbasi – who was killed in the most recent attacks – survived a 2010 car bombing in Tehran. There are outliers, however, including the Fakhrizadeh assassination, which featured a remotely operated machine gun smuggled into Iranian territory. Why target nuclear scientists? In foreign policy, there are numerous tools available if one state aims to prevent another state from acquiring nuclear weapons. Alongside targeting scientists, there are sanctions, diplomacy, cyberattacks and military force. Targeting scientists may remove critical scientific expertise and impose costs that increase the difficulty of building nuclear weapons. Proponents argue that targeting these experts may undermine a state's efforts, deter it from continuing nuclear developments and signal to others the perils of supporting nuclear proliferation. Countries that target scientists, therefore, believe that doing so is an effective way to degrade an adversary's nuclear program. Indeed, the Israel Defense Forces described the most recent attacks as 'a significant blow to the regime's ability to acquire weapons of mass destruction.' Posters featuring images of Iranian nuclear scientists are displayed in Tehran, Iran, on June 14, 2025. Photo: Fatemeh Bahrami/Anadolu via Getty Images / The Conversation Despite Israel's focus on scientists as sources of critical knowledge, there may be thousands more working inside Iran, calling into question the efficacy of targeting them. Further, there are legal, ethical and moral concerns over targeting scientists. Moreover, it is a risky option that may fail to disrupt an enemy nuclear program while sparking public outrage and calls for retaliation. This is especially the case if scientists, often regarded as civilians, are elevated as martyrs. Targeting campaigns may, as a result, reinforce domestic support for a government, which could then redouble efforts toward nuclear development. Regardless of whether targeting scientists is an effective counter-proliferation tool, it has been around since the start of the nuclear age – and will likely persist as part of the foreign policy toolkit for states aiming to prevent proliferation. In the case of the current Israeli conflict with Iran and its targeting of nuclear scientists, we expect the tactic to continue for the duration of the war and beyond. Jenna Jordan is associate professor of international affairs, Georgia Institute of Technology and Rachel Whitlark is associate professor of international affairs, Georgia Institute of Technology This article is republished from The Conversation under a Creative Commons license. Read the original article.
Asia Times
21 hours ago
- Business
- Asia Times
Hong Kong's stablecoin moment eclipses dollar peg debate
As global markets obsess over Hong Kong's 42-year-old currency peg to the US dollar, Financial Secretary Paul Chan seems more intrigued by the next four decades for the city's economy. The currency speculators testing the Hong Kong monetary authority have a point, of course. The Hong Kong dollar is experiencing extreme volatility as the US exchange rate gyrates amid questions about Donald Trump's tariffs and the direction of US Federal Reserve policy. To be sure, there is no serious discussion about Hong Kong abandoning its current 7.75–7.85 fixed rate band to the US dollar anytime soon. But the Trump 2.0 era financial chaos is straining the peg as rarely before. That has Hong Kong policymakers and markets alike wondering if there is a better currency framework for the city. But the real intrigue in Chan's office lies in implementing Hong Kong's new stablecoin legislation. By expanding its cryptocurrency licensing regime and embracing an 'open model' system for digital assets, Chan's administration hopes to morph Hong Kong into a crypto hub. The plan is to encourage overseas institutions to issue such cryptocurrencies in Hong Kong. Not only might it boost competitiveness, but it also offers the city a first-mover advantage over the US and Singapore in global payments. Chan puts the global market value of stablecoins at about US$240 billion, with trading volume topping $20 trillion in 2024. As the Hong Kong Monetary Authority puts it, the bill will 'enhance Hong Kong's existing regulatory framework on virtual-asset activities, thereby fostering financial stability and encouraging financial innovation.' Hong Kong was early to the space. In 2023, regulators launched a virtual asset licensing regime. It requires crypto firms that officially operate in Hong Kong to obtain licenses and meet certain standards to ensure the protection of retail investors. 'Hong Kong's new stablecoin policy sets a global benchmark by mandating full reserve backing, strict redemption guarantees and HKMA oversight,' YeFeng Gong, risk and strategy director of HashKey OTC, tells CNBC. The idea is that once there are global payments systems on blockchain for companies and consumers, the impacts of sanctions, tariffs and other kinds of trade curbs will be mitigated. In theory, average citizens may be able to use HK dollar stablecoins to settle overseas purchases through apps like Alibaba Group's Alipay as early as next year, with the exchange rate difference dropping to zero. It's the nightmare moment many banks have been dreading. The US, too, presumably. In March, US Treasury Secretary Scott Bessent said the US would use stablecoins to ensure the US dollar hegemony in payments and protect its reserve-currency status. 'As President Trump has directed,' Bessent said, 'we are going to keep the US dollar the dominant reserve currency in the world, and we will use stablecoins to do that.' Of course, the US is having enough trouble with 'fiat' money. A 'lackluster' auction of US Treasury securities fueled worries about disappearing demand while the supply of new debt increases. This came amid Moody's Investors Service's downgrading of the US's AAA credit rating as national debt heads toward $37 trillion. Ray Dalio, founder of Bridgewater Associates, says Washington's fiscal trajectory is a bigger-than-acknowledged. Mark Haefele, chief investment officer at UBS Global Wealth Management, says that 'while the selling of US Treasuries in the immediate aftermath of the Moody's downgrade was relatively modest, Treasury yields have climbed steadily since the end of April as budget negotiations have come to the fore.' Could stablecoins help address the problem? In a May 2025 study, Sang Rae Kim, economist at Kyung Hee University, looked at how reserve-backed stablecoins affect the Treasury markets and credit intermediation. Kim found that large stablecoin 'issuance events induce statistically significant increases in Treasury prices.' Yet as Chan's team plans for the future, current economic dislocations are creating challenges. Not least of which is being caught between a brawling US and China. Even so, it's worth remembering that Hong Kong's currency peg is the ultimate 'widow maker' trade. For more than two decades, hedge fund managers, George Soros most famously, have tested the HKMA. The peg endured years later, even as speculative investors like Kyle Bass, founder of Hayman Capital Management, and Bill Ackman, chairman of hedge fund Pershing Square Capital Management, bet against it. Through assertive market intervention and fancy footwork, the HKMA has preserved the roughly 7.8 exchange rate established in 1983. For generations, Hong Kong's iron-clad link to the world's reserve currency served the economy well. Stability affords investment banks, exporters and entrepreneurs confidence to headquarter Asian operations in the city. It has long been touted as Hong Kong's secret weapon. The most famous such assault came in 1997 and 1998 from Soros, who 'broke' the British pound. After attacking the Malaysian ringgit and Thai baht, Soros targeted Hong Kong's peg and stocks. He lost. The HKMA overwhelmed Soros and his acolytes with a $15 billion show of force. In targeting Hong Kong in recent years, hedge fund players like Bass tested Chinese leader Xi Jinping's mettle. One big worry is control. Hence, economist Zhou Luohua of Renmin University of China calls the peg the economy's 'Achilles' heel.' 'If property and stock prices start to fall, the Hong Kong Monetary Authority can't provide sufficient liquidity like the Federal Reserve or other central banks as its money supply capacity is determined by the size of its US dollar reserves,' Zhou explains. 'If asset prices are plunging, it would trigger an exodus of funds at the same time, translating into a 'double hit' for the Hong Kong economy.' In April 2018, former HKMA head Joseph Yam argued it's time to scrap the peg so that Hong Kong can protect itself in times of turmoil. As China reduces capital controls, Yam worried 'small' Hong Kong risks getting swamped by 'huge' mainland money flows. There are some options, of course. The most obvious: soften the peg by establishing a Singapore-style basket of currencies. If the HKMA has greater flexibility, it could more easily vanquish the Soros's and Bass's of the world as well as property hoarders. Maintaining the status quo, Yam cautions, means even less affordable housing. It also makes Hong Kong more of an arbitrage vehicle between US and Chinese investors than a place that shares its fruits with middle-class households. Still, odds are that the peg is not going anywhere anytime soon. The protests in recent years challenging China's influence came as Trump's tariffs – both from 2017 to 2021 and now – throw Xi's economy off balance. China might decide that now isn't the time for experimentation with the dollar peg. Yet there is experimentation in the digital asset space that could render these 'old economy' concerns moot. And help Hong Kong get its financial groove back in short order. Follow William Pesek on X at @WilliamPesek
Asia Times
a day ago
- Politics
- Asia Times
US-India partnership key to re-establish Indo-Pacific deterrence
Originally published by Pacific Forum, this article is republished with permission. The advent of the second Trump administration has had a defining impact on Washington's engagement with the rest of the world. The US-India partnership – often called a 'defining relationship of the 21st century' – stands at a critical phase with opportunities to scale amid the rapid shifts in global geopolitics, geo-economics, and the exponential growth in dual-use technologies. In the last two decades, US-India relations, particularly defense ties, have seen greater military-to-military interoperability and bigger turnover in terms of defense trade. The last one-to-one meeting between President Donald Trump and Prime Minister Narendra Modi in February produced a forward-looking joint statement that, among many other initiatives, aimed to forge a stronger defense partnership in tune with the demands of the dynamic balance of power in the Indo-Pacific region. As President Donald Trump, in his second term, recalibrates the US national security and defense strategies amid new terms of engagement with allies and partners, we argue that the US-India defense partnership has a new opportunity to scale cooperation in interoperability and defense industrial synergy to forge stronger deterrent capabilities in the Indo-Pacific region. In his remarks at the Shangri-La Dialogue in May, US Secretary of Defense Pete Hegseth announced that the United States' priority on foreign policy matters would be the reestablishment of deterrence, especially in (but not limited to) the Indo-Pacific region. It comes as no surprise that the purpose of this deterrence is countering the influence and the threat of the People's Republic of China (PRC). Hegseth stressed this administration's determination, like that of its predecessors, to remain engaged abroad, noting that the prosperity and security of Americans is linked to that of the rest of the Indo-Pacific. The 2025 Annual Threat Assessment of the US Intelligence Community also contends that 'Russia, China, Iran and North Korea – individually and collectively – are challenging US interests in the world by attacking or threatening others in their regions, with both asymmetric and conventional hard power tactics.' In response to this threat, the US will not, in Hegseth's telling, 'preach' to other countries about how they govern themselves, nor does it seek to encircle China or execute regime change. It instead seeks to prevent war and prevent the PRC from carrying out its plans to annex Taiwan – and to do so via 'peace through strength': President Trump has also said that Communist China will not invade Taiwan on his watch. So, our goal is to prevent war, to make the costs too high, and peace the only option. And we will do this with a strong shield of deterrence, forged together with you—America's great allies and defense partners. Together, we will show what it means to execute peace through strength. While framed as a break from a previous administration that, in his telling, allowed deterrence to lapse, in at least one respect Hegseth built on the momentum of Trump 2.0's predecessor: developing bilateral ties with India. Hegseth had his first call with Indian Minister of Defense Rajnath Singh in February, in which they stressed accelerating 'our operational cooperation and defense industrial and technology collaboration to deter aggression in the Indo-Pacific,' along with continuing the 2+2 Ministerial Dialogue and concluding the next 10-year US-India Defense Framework later in 2025. The US-India relationship has seen a number of ups and downs, and the last two decades have been crucial in shaping the current contours. The relationship has the overall support of the major political parties on both sides, and the broader strategic convergence of counteracting China's assertive rise remains broadly intact, which is the mainstay of 're-establishing deterrence.' More than any domain in which the bilateral relationship has grown, the defense sector stands out, through habits of cooperation developed at the tri-service level and the growing defense trade. Moreover, the two defense industrial conclaves envision greater synergy, with a stronger role from the private sector, by following through on initiatives such as the US-India Roadmap for Defense Industrial Cooperation. Private sector partnerships include those between: Those are examples of how Indian and American firms are coming together to co-produce the necessary goods for meeting the security challenges ahead. Recognizing the disruptive impact of new technologies like artificial intelligence and quantum computing, both sides have also announced the Autonomous Systems Industry Alliance (ASIA) aimed at scaling 'industry partnerships and production in the Indo-Pacific.' During the last one-to-one meeting between President Trump and Prime Minister Modi, both sides showed intent to push ahead comprehensive cooperation through the US-India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st century. From the Biden-era iCET (Initiative on Critical and Emerging Technologies) to the US-India TRUST (Transforming the Relationship Utilizing Strategic Technology), a whole-of-government and whole-of-nation approach is envisioned to leverage technologies for partnership in multiple sectors. The integration of US-origin defense items into India's inventory in the last two decades appears significant, despite bureaucratic processes of defense sales and purchases that need fixing from both ends. From heavy-duty transport aircraft and high-end attack helicopters to complex combat vehicles, missile systems and long-endurance unmanned systems, the partnership is growing in sea, land and air-based military assets. The partnership will remain especially important for developing India's anti-submarine warfare capabilities in the Indian Ocean, along with other surveillance and reconnaissance systems for a more robust maritime domain awareness. Follow-up will becrucially required to realize the benefits of the announcements made to 'to streamline defense trade, technology exchange and maintenance, spare supplies and in-country repair and overhaul of US-provided defense systems' and to open negotiations on a reciprocal defense procurement. The Trump administration sounds bullish on the prospects of improving 'accountability and transparency through the foreign defense sales systems to ensure predictable and reliable delivery of American products to foreign partners and allies in support of US foreign policy objectives.' Therefore, it is imperative for Washington and Delhi to work harder on a better alignment of their strategic objectives in the Indo-Pacific region that would, in turn, help streamline their vision of co-development and co-production in defense products and heightened cooperation in 'overseas deployments of the US and Indian militaries in the Indo-Pacific, including enhanced logistics and intelligence sharing.' The US Congress-mandated Commission on the National Defense Strategy last year proposed, among other things, a US 'multi-force theater construct' to enable warfighting in simultaneous conflicts with multiple adversaries, and a pitch for an augmented use of the private sector in the US defense industrial base. Therefore, for a critical stakeholder and major defense partner like India, how Washington's 're-establishing deterrence' pans out in the next few years will be crucial, for scaling the growing bilateral defense cooperation, and in minilateral groupings, such as the Quadrilateral Security Dialogue. India and the United States likely will never be fully aligned on matters of security cooperation, as their differing responses toward Ukraine and Islamic terrorism originating from Pakistan illustrate. However, these differences of opinion should not distract them, as both face a long-term challenge from a PRC that seeks to rewrite the rules of the Indo-Pacific region so crucial to both Delhi and Washington. Furthermore, as major Indo-Pacific powers with large populations and resources, both countries are well-situated to complement one another's efforts to deter Beijing's revisionism. The early signs from the Trump administration's interactions with the Modi government are promising, and it is imperative that the momentum between them continues. Monish Tourangbam ( is a senior research consultant at the Chintan Research Foundation (CRF), New Delhi. Rob York (rob@ is director for regional affairs at Pacific Forum.
