By hollowing out the rules-based order, the US president is pushing middle powers to hedge, and giving Beijing an opening it didn’t have before.
At the height of the pandemic in November 2021, seven people in surgical masks posed awkwardly next to a sign with lettering so small it was tough to read even in the photo that Taiwan triumphantly blasted around the world.
The humdrum opening of the Taiwanese Representative Office in Lithuania, one of the European Union’s smallest nations, belied the seismic impact it would have on two of the world’s biggest economic powers. As China restricted trade and investment flows to the former Soviet state for boosting ties with a territory claimed by Beijing, the European Union moved to pass a law that would allow a swift and forceful response to any economic coercion.
At the time, China was deemed the biggest bully in the room. The Biden White House had successfully rallied US allies to deny China advanced technology and hammer President Xi Jinping over economic coercion. Group of Seven leaders vowed in 2023 to stop any country from weaponizing economic dependencies to force others to “comply and conform.” Rahm Emanuel, then US envoy to Japan, even advocated for the “economic equivalent” of NATO.
“We can further isolate China by confronting Beijing’s economic tactics, the area in which its determination to dominate is most apparent,” Emanuel wrote in the Wall Street Journal in October 2024, just weeks before Donald Trump’s election victory. “It uses coercion, mercantilism and debt-trap diplomacy to crush competition and control countries.”
All of that now looks quaint, a time capsule of a bygone era. By even threatening to boost tariffs on allies to force Denmark to give up Greenland — on top of repeated strong-arm tactics against much of the world last year — Trump is swinging a sledgehammer at the rules-based order and alliance system that has underpinned American supremacy since World War II.
Instead of banding together against Xi’s Communist Party, leaders in Europe have been weighing the use of the EU’s new anti-coercion tools — for the first time — against the bloc’s main security ally. In the past week alone, Germany warned that Trump had reached a red line, French leader Emmanuel Macron lamented a “world without rules,” and Greenland’s prime minister called on residents to prepare for a military invasion.
In easily the most powerful speech at this week’s World Economic Forum, Canadian Prime Minister Mark Carney declared the death of the international rules-based order and outlined a new way forward. Middle powers, he said, must band together against stronger nations and “build something bigger, better, stronger, more just.”
“Great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited,” Carney said. “In a world of great power rivalry,” he added, “the countries in between have a choice: Compete with each other for favor, or to combine to create a third path with impact.”
As usual with the Trump administration, it’s hard to tell how much the Greenland threats are mere bombast and trolling. One minute, Trump is posting AI-generated photos on social media that depict US sovereignty extending to both Canada and Greenland; the next, Treasury Secretary Scott Bessent is telling everyone to “take a deep breath” and stop the “hysteria.”
In his own Davos speech on Wednesday, Trump assured the crowd that he wouldn’t use force against Greenland, while issuing a veiled threat if Denmark didn’t open negotiations on a sale. Soon afterward, he announced a framework deal on Greenland and withdrew his tariff threats. Confidential sources told my colleagues that the US wants to rewrite its defense agreement with Denmark to remove any limits on its military presence in Greenland. The debate over sovereignty, the New York Times reported, has been reduced to land for military bases.
Deal or no deal, Trump’s constant threats are having a bigger effect: American allies and partners everywhere have no choice but to hedge their bets, reduce exposure to the US and figure out how to survive in a new reality where the one-time leader of the free world cannot be trusted.
Just how the middle powers diversify is complicated. As China has done over the past few decades, Trump has been adept at dividing and conquering, rewarding his favorites and lashing out at anyone who crosses him. Each world leader answers to a different constituency and has unique political interests in any negotiation over trade and security.
The most striking manifestation of Carney’s new vision was evident on his trip to Beijing this month. He touted a new “strategic partnership” with Xi and signed a trade deal that welcomed Chinese electric vehicles into Canada — demonstrating a firm break on the issue with the US, which maintains prohibitive tariffs, citing national security and the need to bolster domestic automakers.
In Davos, Carney characterized Canada’s new strategy as “variable geometry” — forming different coalitions among like-minded partners on issues such as trade, Ukraine, the Arctic, NATO, critical minerals and artificial intelligence. That approach mirrors similar strategies in Asian countries, which have long needed to balance ties between the US, China and other powers. India’s top diplomat, Subrahmanyam Jaishankar, once described his nation’s foreign policy as “hedging.”
“The pursuit of apparently contradictory approaches and objectives may seem baffling,” he said in a 2019 lecture. “Think of it not just as arithmetic, but as calculus.”
For a long time, India sat in a geopolitical sweet spot. Prime Minister Narendra Modi hobnobbed with US allies in the Quad while also meeting with Xi and Russian leader Vladimir Putin in the BRICS grouping. Yet the perils became evident last year, when Modi’s refusal to credit Trump for a ceasefire with Pakistan outraged the US leader. First came the insults, then higher tariffs on Indian goods.
Modi’s initial response was to run over to Beijing for a chummy meeting with both Xi and Putin. But the limits of any rapprochement with China in particular quickly became clear. On a recent trip to New Delhi, officials expressed to me frustration about Trump’s demands. But they also acknowledged that India can’t trust China as a long-term partner, and that the US remained a vital source of capital and technology.
India epitomizes the incoherence of Trump’s foreign policy. The US National Security Strategy released last month, which outlined the administration’s plans to expand on the Monroe Doctrine, calls for improved relations with India on security and other issues — a policy the US pursued for more than two decades before Trump upended ties. The same paragraph calls for the US to work with treaty allies and partners to leverage their combined economic strength to “ensure that allied economies do not become subordinate to any competing power.”
While Carney called out this kind of hypocrisy, referring to it as “the gaps between rhetoric and reality,” it’s tough for American allies and security partners that sit close to China — particularly Japan and South Korea, which fall under the US nuclear umbrella — to openly criticize Trump. At the same time, an unreliable America raises the stakes for both countries, which face potentially existential threats from nuclear powers China and North Korea.
Ahead of an election next month, policymakers in Japan — the only nation to get hit with atomic bombs — are starting to broach the taboo topic of whether the nation should acquire nuclear weapons. And in South Korea, where public opinion tends to be more favorable to atomic bombs, a deal with the US for nuclear-powered submarines is cracking open the door to obtain them if needed.
The last time the US forced a country to sell a chunk of land was in 1917, when Denmark handed over the Danish West Indies for $25 million in gold coins (equivalent to roughly $600 million today). With World War I raging across Europe, Denmark initially didn’t want to sell. But then-Secretary of State Robert Lansing made it clear to his counterparts that the US would seize the islands if Denmark fell to the Germans.
Recalling the negotiations years later in the New York Times, Lansing said that “plain-spoken threat” worked. Denmark offered to sell the strategically located islands in the Caribbean Sea, but countered by asking the US to recognize its sovereignty over Greenland. Lansing agreed in part because of what he called “the impossibility of its occupation by a European nation ever becoming a menace to the national safety of the United States.”
“Possibly on academic and sentimental grounds the objection was valid,” Lansing wrote, “but compared with the advantage of overcoming Danish opposition to the cession of the West Indian possessions of Denmark, to have refused to recognize Danish sovereignty over Greenland would have been folly.”
More than a century later, Trump has argued that either China or Russia will occupy Greenland if the US doesn’t take it first — despite neither country expressing an interest in annexation. Perhaps more important for Xi and Putin is the extent to which Trump’s actions undermine faith in US security commitments to allies in Europe, where Russia has started a war in Ukraine, as well as Asia, where China is increasing military pressure on Taiwan.
At the end of World War II, US leaders saw the value of working with other nations to prevent a repeat of hostilities that killed as many as 75 million people across the globe. “Man has learned long ago that it is impossible to live unto himself,” President Harry Truman said in an address to the United Nations in 1945, at the session that produced the UN charter. “This same basic principle applies today to nations. We were not isolated during the war. We dare not now become isolated in peace.”
At the founding of NATO four years later, Truman said the group was bound by “a common heritage of democracy, individual liberty, and rule of law,” as well as a commitment to “refrain from the threat or use of force against the territory or independence of any country.”
During World War II, US forces occupied Greenland to protect it from Germany. Soon afterward, Truman sought to purchase the island for $100 million in gold bars ($1.4 billion today). While Denmark rejected the offer, the nations signed a treaty that effectively gave the US military access to the island.
At Davos, Trump said “you need the ownership to defend it.” Yet that notion has been met with incredulity even by Republicans, with Senator Mitch McConnell this month saying Denmark was already willing to give the US whatever it wants on the island.
“This is about more than Greenland,” he said. “It’s about whether the United States intends to face a constellation of strategic adversaries with capable friends, or commit an unprecedented act of strategic self-harm and go it alone.”
For Xi, the past few weeks represent a dizzying turn of events from four years ago. After Putin kicked off Europe’s biggest conflict since World War II, the Biden administration sought to cast Russia and China as rogues on the global stage.
The breach of Ukraine’s sovereignty posed a dilemma for Beijing: Russia is a crucial strategic partner aligned ideologically against the US, one that can provide food and fuel in the event that China ever finds itself in a war with America. At the same time, Xi wants to be viewed as a responsible stakeholder and goes to great lengths to show China adheres to the UN charter, even regarding its expansive claims over Taiwan and territory in the South China Sea.
Moreover, perhaps no country has benefited more from the current set of global rules than China, whose economy has expanded exponentially since it embraced a market-driven economy starting in the late 1970s. Xi has little interest in a total breakdown of the international system, which risks destabilizing Europe and putting new nuclear powers on his doorstep.
Trump, by contrast, doesn’t care about even the pretense of following any global rules. Asked by the New York Times this month what can restrain his powers, Trump said: “My own morality. My own mind. It’s the only thing that can stop me.”
The US president’s disregard for allies, immigrants, international law and other longstanding cornerstones of American democracy has alienated even America’s closest friends. Carney’s speech at Davos mentioned “values” about a dozen times, with repeated references to human rights and territorial integrity — all things Trump ignored.
Although China’s Communist system bears little resemblance to Western democracies on free speech or competitive elections, economically China remains the main alternative to the US. Xi showed last year that he could stand up to US tariffs by dominating the rare earths space, securing a truce set to last until later this year. And with growth in the world’s dominant manufacturing powerhouse increasingly dependent on exports, Trump-induced discord in the West is only helping Xi. Instead of erecting new barriers to block Chinese products flooding the world, many leaders are now seeking to expand economic ties with Beijing.
Carney’s trade deal with China could be just the start. UK Prime Minister Keir Starmer, whose government this week approved a new Chinese embassy in a historic London building, will meet with Xi in Beijing next week. German Chancellor Friedrich Merz is set to follow next month.
Call it the Donroe Paradox: As Trump looks to establish a sphere of influence to keep China out of the Western Hemisphere, he’s only bolstering the prestige of Xi across the globe. And even as Beijing pursues its own self-reliance — a trait many US allies are now seeking to emulate — more and more of the world is discovering that at least some dependence on China is necessary to hedge against America.
Daniel Ten Kate is an executive editor overseeing Bloomberg’s economic and government coverage in Asia.