President Donald Trump is redefining the United States’ global engagements. He envisions a scenario where the U.S. decreases its role in global security while still maintaining peace. Since taking office, Trump has urged allies to increase their defense spending, claimed to have mediated conflicts in Africa and the Middle East, and promised to help end the war in Europe.
Upon entering office, Trump faced multiple ongoing conflicts, including wars in Gaza and Ukraine. The U.S. share of global GDP, which underpins its geopolitical influence, has been in a long-term decline. The critical question remains whether his vision will restore stability or further exacerbate chaos. Eight months into his second term, a fragile peace deal has been established in Gaza, yet violent clashes have intensified in various regions, and the war in Ukraine remains unresolved.
Analysts suggest that U.S. retrenchment might eliminate protective barriers against conflict, increasing the risk of regional wars. In a worst-case scenario, this could lead to a major power confrontation.
Trump has expressed a strong aversion to foreign entanglements, arguing that wars abroad have overstretched the U.S. military. His approach includes urging European and Asian allies to take on more defense responsibilities, reducing U.S. support for Ukraine, and avoiding direct military involvement in international conflicts.
However, there are exceptions. Trump views Latin America as the U.S.’s sphere of influence, resulting in heightened military activity there, and he has also ordered strikes on Iranian nuclear facilities earlier this year.
He has advocated for de-escalation in international disputes, including pushing for an end to Russia’s war in Ukraine, but has not leveraged the full weight of U.S. power to enforce this. When hostilities arise, he often suggests using tariffs as a deterrent.
Trump’s strategy hinges on the belief that a streamlined U.S. military, with allies enhancing their own defense spending, will strengthen deterrence. This argument is supported by the idea that prolonged wars and allies’ dependence on U.S. security have strained military resources and diverted attention from more pressing priorities, like the rising threat from China. However, the underinvestment in collective defense among allies has left these systems vulnerable.
If Trump’s strategy succeeds, positive implications for the global economy could emerge, with reduced conflict leading to greater market stability and fewer disruptions to supply chains. Increased defense spending could also provide a boost to GDP, albeit at the cost of increased public debt and borrowing expenses. The U.S. could benefit from a more cost-effective form of Pax Americana, where the financial burden of global security is more evenly distributed.
Nevertheless, this approach carries significant risks and is viewed with skepticism regarding its likelihood of success.
Analysts warn that U.S. retrenchment may lead to increased conflicts. The U.S. is vital in addressing transnational threats, such as terrorism and piracy, and its withdrawal could create vacuums other nations may be ill-equipped to fill. It also takes years—not months—to translate defense budget increases into actual capabilities, complicating efforts to deter aggressors. In this context, Trump’s reliance on tariffs may not dissuade countries less dependent on the U.S. market.
The likely scenario could result in a world with reduced constraints on warfare. Nations like India and Pakistan, or Israel and Iran, may find themselves in more frequent confrontations. Smaller nations might become targets for larger states, while powers like China, Russia, and the U.S. may intensify efforts to dominate their respective areas.
This trend appears to be manifesting, as evidenced by significant clashes between Thailand and Cambodia, India and Pakistan, and Israel and Iran in the early months of Trump’s second term, alongside the ongoing war in Ukraine.
Increased violence can yield greater economic shocks, affecting financial markets, trade networks, and defense stocks while damaging equities tied to conflict-prone regions. Vulnerable supply chains are particularly at risk in contested areas, such as semiconductor production in Asia and oil extraction in the Middle East. Escalating military expenditures might also lead to increased national debt and borrowing costs, with Europe requiring an estimated $2.3 trillion over the next decade to meet NATO defense spending targets.
While these shocks will have global repercussions, the most intense effects will likely be felt in regions characterized by intense rivalries, in fragile states susceptible to exploitation, and in neighborhoods where regional powers seek to solidify their dominance.
The most perilous consequence could be a confrontation between major world powers. History suggests that significant conflicts often arise during periods of geopolitical transition, as seen in Napoleonic Europe and both World Wars.
Such U.S. retrenchment could encourage adversaries to test the limits of previously guaranteed protection, making NATO’s eastern flank potentially vulnerable to Russian aggression. In the Pacific, China could seek to test U.S. resolve regarding Taiwan.
The economic ramifications of a great-power conflict would be profound: chaotic financial markets, fractured supply chains, disrupted trade routes, and extensive destruction of capital.
A Russian invasion of the Baltic states could result in a $1.5 trillion contraction in world GDP within the first year. A conflict involving North and South Korea might incur over $4 trillion in global GDP losses, while a war regarding Taiwan could cost the global economy upwards of $10 trillion, significantly disrupting the supply of advanced semiconductors.
Despite this unsettling landscape, a large-scale war between major powers remains unlikely, as the severe costs associated with such conflicts—including economic devastation and potential nuclear threats—have historically acted as a strong deterrent against escalation.
Trump’s vision relies on the assumption that greater ally spending will prevent future conflicts. This ambitious approach represents a gamble that assumes burden-sharing will avert bloodshed. If it fails, however, the repercussions could be dire.
