What We're Watching Today is 1,794 words and an 11-minute read.
Global
Future US tariffs risks to emerging markets currency values
If incoming President Trump imposes larger tariffs, the renminbi and emerging market currencies will come under pressure.
Our Take: Economists are focusing in on how markets will respond to incoming President Trump's trade policies and his campaign promises to impose steep, new tariffs on China and broad tariffs of 10-to-20 percent on imports from all other countries. While there is uncertainty over how campaign rhetoric will be translated to policy, currency markets are already responding, with the US dollar soaring to an eight year high in its biggest gain, the day after the election. Among the many uncertainties is the duration of this rally. This could be the start of a new cycle of dollar strengthening, which would put downward pressure on emerging market currencies. For China and emerging markets more broadly, with steep tariffs and dollar denominated trade for exports to the US, market dynamics risk significantly pushing down the renminbi's value to compensate for the new imbalance, leading to a depreciation cycle and capital flight. The strong dollar poses risks to US businesses as well, making US exports more expensive. Volatility in the currency market would likely have a material impact on global trade and economic recovery for economies still trying to manage post-pandemic, dollar-denominated debt and sluggish growth.
Read More: Financial Times [paywall], Reuters [paywall], Econofact Network
Europe
Unrest over Russian investment law in Georgian breakaway region of Abkhazia
The leader of the Russian-backed Abkhazia, a separatist region of Georgia, called an emergency security council meeting on Tuesday to respond to large-scale opposition protests that have blocked bridges and highways in the capital Sukhumi.
Our Take: The unrest in Abkhazia is another worrisome sign for Georgia and the greater Caucasus region. Russia has backed the separatist region since its 2008 invasion in a bid to deny Georgia access to NATO and the EU, as well as maintaining a foothold in the country's politics. While fears of a renewed armed conflict between the separatist regions and Georgia have not come to pass, Abkhazia and its fellow breakaway state South Ossetia remain thoroughly intertwined with Russia. If the law passes, it will further entrench Russian interests in Abkhazia and reduce the region's economic independence. Protests are rare in Abkhazia, showing the salience of anti-Russian sentiment and fears of a total loss of autonomy, but neither the Abkhazian government nor Moscow is likely to agree to any significant changes. Combined with the victory of the Moscow-aligned Georgian Dream party in Tbilisi in last month's likely manipulated elections, any hopes of dislodging Russian influence in Georgia seem unattainable in the short-term, thus complicating Georgia's path to EU membership.
Read More: Reuters [paywall], Euronews
Middle East
Iran considering seeking a deal with Trump administration
Members of Iran's government are privately considering whether the country can make a deal with the incoming President Trump, unnamed officials told The New York Times.
Our Take: While Iran has been a longtime target of President Trump's hawkish foreign policy, insiders in Iran's moderate administration are reportedly weighing whether Tehran can take advantage of Trump's desire to be a “dealmaker.” Details of a desired deal were not disclosed, but Iran may hope for a break on sanctions in exchange for letting up on nuclear development or regional proxy activity. In September, President Trump made a surprise indication that he may be open to talks. However, Tehran's prospects are dim: President Trump's hardline stance on Iran is a tent pole of his foreign policy, and his first administration was populated by Iran hawks. In Iran, the Ayatollah ultimately controls relations with other states, and had banned negotiations with President Trump in his first term (a symbolic move at the time). Powerful conservatives would oppose discussions as well.
Read More: New York Times [paywall], Politico
Americas
New Haitian PM takes office amid spreading gang violence and constitutional crisis
New Haitian interim leader Alix Didier Fils-Aime took power in Port-au-Prince after the country's ruling council ousted UN-appointed Prime Minister Garry Conille over the weekend, citing an inability to dent spiraling gang violence in the country.
Our Take: Fils-Aime faces two impossible tasks, both barely touched by Conille: curbing the extreme gang violence rampant in most of the country, and preparing for long-delated elections. While Fils-Aime may enjoy more personal legitimacy than Conille – Conille, a Haitian businessman, was a UN appointee, while Fils-Aime is the son of well-known Haitian activist Alix Fils-Aime – the reality on the ground in the country remains dire, and the country wades further into a constitutional crisis. Haiti has not had an elected leader since the 2021 assassination of Jovenel Moïse, and Conille has strongly protested his ouster as unlawful (technically only the parliament, empty since 2023, can remove a prime minister – Haiti's ruling council is appointed by the country's Cabinet).
Read More: Reuters [paywall], New York Times [paywall], The Economist [paywall]
Asia-Pacific
New Zealand PM apologizes for abuse in state care
New Zealand Prime Minister Christopher Luxon formally apologized on Tuesday to survivors of abuse by state, foster, and faith-based care facilities, following an inquiry into one of the country's most scrutinized abuse scandals.
Our Take: Luxon's apology comes as a report revealed that 200,000 children and vulnerable adults had suffered abuse in care facilities between 1950 and 2019. Many of them included people from the Māori and other Pacific Islander communities, as well as disabled individuals. Accompanied by proposed legislative changes and a pledge of NZ $32 million (USD $19 million) in interim support, Luxon's act aims to address the immediate needs of survivors while a new redress system is established. However, the long-term impact will depend on the government's commitment to implementing the inquiry's recommendations fully and transparency, as survivors and advocates have emphasized that meaningful change must follow the wording laid out.
Africa
Russia expands influence in Africa with Equatorial Guinea mission
Reuters reports that Russia has deployed as many as 200 military instructors to Equatorial Guinea in recent weeks to support the presidency, following the holding of the Russia-Africa Partnership Forum in Sochi over the weekend.
Our Take: Russia's growing influence in West and Central Africa, where its security presence increasingly serves as a counterpoint to waning Western engagement, factors into Moscow's broader strategy to disengage from the West and strengthen ties with the Global South. By strengthening security for President Obiang and his regime, Russia reinforces its role as a stabilizing force for fragile or isolated governments in exchange for diplomatic leverage and potential economic access, particularly in energy. While differing from the Soviet Union's engagement with Africa during the Cold War, Russia's growing power in the continent increasingly risks the ability for Western countries to project influence and gain economic access to key sectors.
Read More: Reuters [paywall], BBC, RAND
Trade & Compliance
WTO may seek to reappoint chief ahead of Trump presidency
The World Trade Organization plans a special meeting of its top decision-making body later this month when a call could be made on the reappointment of its director-general Ngozi Okonjo-Iweala, a document showed on Tuesday.
Our Take: Okonjo-Iweala's candidacy is officially uncontested, as no opposing candidates filed by last Friday's deadline. Still, her appointment faces an uphill battle in should she remain unconfirmed by the time incoming President Donald Trump is inaugurated in January. Trump has repeatedly been hostile to Okonjo-Iweala, criticizing her focus on climate, indigenous rights, and development over strict trade concerns. The confirmation process has been moved up this year in a bid to preempt the Trump administration's concerns, given that the WTO works on a consensus basis and any member could object to her confirmation and delay the appointment. However, even if she is confirmed, there is a risk of retaliation by the Trump administration. Trump, already hostile to the WTO's trade rules, will likely continue the U.S. policies that have led to paralysis in the Organization's Appellate Body, used for resolving global trade disputes. With fragmentation of global trade likely if Trump's tariff plans are enacted, the WTO's move may risk overplaying their hand and weakening their already strained influence in Washington.
Read More: Reuters [paywall], Politico E&E [paywall], Politico
Disruptive Technology
German interior minister issues warning about cyber threats before upcoming election
Germany's interior ministry emphasized the need to protect against cybersecurity threats, especially with an upcoming snap election on February 23, amid high risk levels due to the Russian invasion of Ukraine.
Our Take: Given ongoing geopolitical tensions with Russia and the increase in cyber attacks by Kremlin-sponsored groups on countries supporting Ukraine, there is heightened vigilance regarding cybersecurity in Germany as the nation approaches its snap election. Authorities are particularly concerned about hacking, disinformation, and other forms of digital manipulation. While Germany's recent IT security legislation, which expands required protections for key sectors, may mitigate some risks, sustained vigilance and coordinated cybersecurity efforts are likely to prove essential in ensuring election integrity and maintaining public trust in the democratic process.
Read More: Euronews, Digital Watch Observatory
Energy Transition
UK approves new undersea energy links to harness North Sea wind
UK energy regulator Ofgem approved five new undersea energy links to further harness the vast potential of North Sea wind and power millions of homes.
Our Take: The UK is moving forward at speed as a climate leader. At the ongoing COP 29 climate summit, Prime Minister Starmer announced new commitments to cut greenhouse gas emissions, committing to a more ambitious climate goal, targeting to reduce all greenhouse gas emissions by at least 81% on 1990 levels by 2025. The new undersea interconnectors projects will feed energy generated by offshore wind farms to UK and European grids. The UK has set an ambition for 40GW of offshore wind power generation by 2030, which is enough to power over 120 million homes.
Read More: UK Office of Gas and Electricity Markets, Reuters [paywall], POWER Magazine
ESG
COP29 makes progress on carbon credit platform
World leaders ratified a key framework for a UN-backed platform for trading carbon credits, a significant win for Baku's COP29 this week.
Our Take: Carbon credit trading has needed an update for years, as the last UN-backed trading framework was deactivated in the last decade and several NGOs in the carbon trading space cast doubt on the quality of credits in the current marketplace in the last several months. Carbon trading is seen as a crucial, if imperfect, element of the global carbon emissions goal, and business and government leaders have long called for an independent, transparent, and high-quality platform. While negotiations still have a way to go to fully ratify Article 6 and unlock the global carbon credit market, this progress is heartening after years of stalled talks.
Read More: Wall Street Journal [paywall], UNFCC, COP29
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