William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
As North Asia braces for a uniquely uncertain 2026, the region faces three specific risks that will require deft, nimble and creative policy responses: Trump, Trump, and Trump.
The trouble for China, Japan and South Korea is that no one can say which of U.S. President Donald Trump's alter egos they will confront. There is transactional Trump, domestic growth-focused Trump and burn-it-all-down Trump. Odds are, Trump himself does not yet know which set of teeth he will flash at Beijing, Tokyo and Seoul -- or how he might alternate approaches between the three countries.
A Trump obsessed with domestic growth dynamics, for example, could be dangerous for Asia. With his approval ratings staggering out of 2025 and U.S. unemployment at a four-year high of 4.6%, there are reasonable odds of a Trump trade war 3.0.
One reason would be to regain the economic narrative with Trump's base with a bit of mercantilist shock-and-awe. Trump World also might soon realize that Chinese leader Xi Jinping is stringing him along on the "grand bargain" trade deal he so desperately craves.
Given the one-year truce Trump gifted Xi in late October, a U.S.-China deal might materialize in early 2027, at the earliest. News in November that China's trade surplus reached $1 trillion for the first time, despite tariffs, must have caused quite a ruckus at Trump central.
Might Trump become impatient that Japan has yet to wire its $550 billion "signing bonus" his way? Or how Korea is dragging its feet on the $350 billion bonus Trump demanded. Or might Trump World grow impatient with Asian economies that still maintain large trade surpluses?
Beyond China, Japan and South Korea, potential targets of Trumpian ire include Taiwan, Thailand and Vietnam. Trump could go the sectoral approach and target semiconductors, steel, aluminum and pharmaceuticals. This could mean fresh supply-chain disruptions.
Even ostensibly good news could be detrimental to the region. Case in point: Trump reaching a landmark China trade deal. Though it might restore calm to the global economy, a big U.S.-China pact could leave Japan and South Korea on the outside looking in. Such a deal could see Trump throw Taiwan under the proverbial bus.
The year ahead could see Trump, desperate to juice growth at home ahead of midterm Congressional elections in November, move to weaken the dollar. After all, his inner circle has long advocated a "Mar-a-Lago" accord that weakens the dollar against other major currencies, particularly the Chinese yuan.
In May, meanwhile, Trump gets to replace Federal Reserve Chair Jerome Powell with a monetary yes-man charged with slashing rates despite U.S. inflation rising at a nearly 3% rate. Count the ways that could undermine trust in U.S. Treasury securities, of which Japan holds $1.19 trillion.
Let us not forget, either, that since 2016, Trump has hinted too often for comfort about defaulting on U.S. debt to make a point vis-a-vis adversaries. In April 2020, the Washington Post detailed how Trump 1.0 considered canceling portions of U.S. Treasuries owned by China.
The point here is not to draft a laundry list of worst-case Trump scenarios. It is to highlight actual landmines Asia could confront over the next 12 months. And at a moment when none of North Asia's top economies are in a state-of-the-art condition.
China leaves 2025 grappling with deflation thanks to a giant property crisis. Youth unemployment is near record highs, local governments are buckling under trillions of dollars of debt and average wages are, according to Goldman Sachs, the weakest since the COVID-19 era.
Xi has yet to create the large and robust social safety nets needed to prod consumers to spend more and save less. Getting the Chinese masses to deploy roughly $22 trillion of household savings is a key to ending deflation.
Japan enters 2026 in a decidedly odd place: stagflationary territory. Despite the economy shrinking 2.3% year on year in the third quarter, the Bank of Japan just hiked interest rates to a 30-year high. That, as newish Prime Minister Sanae Takaichi reopens the fiscal floodgates.
This disconnect helps explain why the yen fell, bond yields rose and Tokyo stocks roared after the BOJ's Dec. 19 tightening move. Markets clearly are not buying Gov. Kazuo Ueda's insistence that the central bank will tighten further. If the BOJ and Team Takaichi come to blows, the "yen-carry trade" could be in for a rough patch. Funds that borrowed cheaply in yen to bet on higher-yielding assets elsewhere could upend global markets as they scramble for cover.
South Korea steps toward 2026 in an infinitely better place than it was in January. President Lee Jae Myung has now had nearly seven months to restore calm to Asia's fourth-biggest economy following the impeachment and removal of predecessor Yoon Suk Yeol. That, along with the artificial intelligence trade boost valuations everywhere, has KOSPI index stocks on a record-breaking rally -- up 83% as of late December.
Yet South Korea's open, trade-reliant economy is also often on the frontlines of shifts in global trade. Any trade war escalation in Washington could very well hit Seoul first and hard.
There are myriad other risks to monitor. How the AI bubble unfolds will matter greatly. The same with diverging monetary policy regimes from Washington to Tokyo colliding with excessive government debt issuance and more geopolitical tensions than policymakers can count. Might, for example, the Trump administration launch a war against Venezuela? Could Trump abandon Ukraine, incentivizing Russia to target a NATO country and giving Xi greater confidence to move on Taiwan?
The year ahead could see the most fulsome debate about Japan possessing nuclear weapons in decades as China's military ambitions grow along with doubts about Washington's reliability in national security matters.
At every turn, the Trump, Trump, Trump of it all will keep the region on its toes. The only thing that seems certain about 2026 is that it will be a buckle-those-seatbelts kind of year.