1. Europe and the U.S. Elections (Consensus)
Trans-Atlantic Trump trepidation. As we wrote in a longer piece of analysis this week, recent developments which have buoyed former president Donald Trump’s electoral prospects — such as his decisive victory in the Iowa caucuses, President Biden’s poor debate performance in June, and the subsequent assassination attempt on Trump — have coincided with sharp drops in net favorability of the United States among Western Europeans. In contrast, Biden’s withdrawal from the presidential race preceded a sharp uptick in Europeans’ views of America coinciding with Vice President Harris’ rise to the top of the Democratic ticket.
This alignment highlights the degree to which Western European populations are watching the U.S. presidential contest as a bellwether of how the trans-Atlantic relationship will play out come January 2025. Trump has signaled a willingness to impose tariffs on European allies once again, doubling down on his NATO skepticism and vowing to rapidly end the war in Ukraine by cutting a deal with Russian President Vladimir Putin. In contrast to jittery views of the United States, Europeans’ views of NATO remain high and steady, supporting the idea that the anxiety is specifically related to the relationship with the United States.
But NATO is only part of the trans-Atlantic security equation. As the U.S. government increasingly uses tools like export controls and investment screening to try to reign in China, it will need to work with allies and partners to both make its measures effective, and to prevent those measures from disproportionately hurting U.S. businesses. European partners are likely to drag their heels on helping to constrain China, especially if they seek to tie their cooperation to concessions on U.S. tariffs or subsidies. On balance, the shakiness in the trans-Atlantic relationship should Trump 2.0 materialize in November will be bad for U.S. interests, both political and economic.
2. Argentina (Counter)
Defying gravity? Much has been made of the fact that the Argentine public continues to stand behind anarcho-capitalist Javier Milei roughly 8 months into his tenure, which has been marked by dramatic and (as perceived in the halls of the National Congress) controversial economic reforms. Our data bears this out in the aggregate: Net approval of Milei among Argentine adults has remained relatively stable on a 30-day rolling basis over most of 2024/YTD (first chart below), as has the net share of Argentines who say their country is headed in the right direction (second chart below), with a noteworthy boost in each metric following the Senate’s approval of a major reform package.
A devalued currency is not usually a hallmark of policymaking favored by the public. And yet, even on that front, Argentines are increasingly satisfied: Following a short-lived slump in the share of Argentine adults who trust the peso just after Milei’s December 2023 devaluation, trust has trended upwards over 2024/YTD.
While these are all positive signs of ongoing public buy-in for Milei’s reform agenda, we nevertheless highlight several cracks appearing at the margins. Milei’s approval rating, while holding steady overall, has been marked by a gradual decline in the share of adults who “strongly approve” of him alongside a modest uptick in the share who “strongly disapprove.” While both trends have largely stabilized prior to the passage of the reform package, it suggests there is underlying discontent among Milei’s most ardent supporters (who may dislike the necessary watering down of certain reforms) and detractors (who may chafe at seeing the core elements of his policy agenda enacted despite a fractious congress). In parallel, Argentines’ trust in the peso may be heading toward a new plateau after a spring boost, which was marked by a more pronounced upswing in trust.
While Milei continues to fare better than many political leaders, we advise keeping these nuances in mind as potential constraints on future policy reform efforts, and as potential signposts of the likelihood for ongoing protests around such reforms, even as they have not substantially stymied progress to date.
3. Italy-China Relations (Consensus)
That’s amore? Italy’s relationship with China appears to be on the mend. After more than 6 months of doldrums following Prime Minister Giorgia Meloni’s December 2023 announcement that Italy would withdraw from China’s Belt and Road Initiative, her visit to Beijing on July 29 is giving renewed impetus to bilateral economic relations. Italians’ views of China have rebounded in turn, following a net downtrend roughly bookending the above time period.
Whether the rebounds in bilateral relations and sentiment are durable remains to be seen. But we think such an outcome is unlikely. E.U.-wide tensions with Beijing remain pronounced amid growing talk of a trade war over electric vehicles, and Meloni’s government — which has supported the E.U.’s recent EV tariffs on China — risks getting caught in the crossfire, as do Italian companies like Fiat, which is working with Chinese companies in the EV space.
Given these complicated dynamics, our most charitable read on Meloni’s visit is that it may help to preserve near-term breathing room for Italian companies doing business in China relative to other European firms, at a time when China is pulling no punches in wielding its economic coercion toolkit. But we see a longer-term reconciliation as unlikely so long as E.U.-wide policymaking continues to lean in the direction of de-risking economic ties with China and adopts more aggressive anti-coercion efforts of its own.
4. India-China Relations (Consensus)
Summer glow-up? India-China relations are poised for a late summer glow-up. Following years of bilateral tensions over disputed territory bordering on outright war, relations are now trending in a rosier direction following positive overtures from both sides. As was the case with Italian sentiment (see above), Indians’ views of Beijing are trending positively amid the news, such that net favorability toward China among Indian adults is hovering near a tracking high. Chinese views of India are similarly near a tracking high verging on net-positive territory and have improved markedly since Q4 2023.
On the Chinese side of the ledger, we view several recent developments as contributing to the upswing in sentiment, including most recently Beijing’s appointment of an ambassador to New Delhi after an 18-month gap in May 2024, which followed closely on the heels of statements by Indian Prime Minister Narendra Modi the month prior that it was time to put the border dispute to rest. Earlier developments coinciding with improving sentiment include the 20th round of bilateral border talks in October 2023 and, in January 2024, India’s indication that bilateral progress on the dispute could be met with an easing of Indian curbs on inbound Chinese investment (a point of tension for the past several years). On the Indian side of the ledger, the ambassadorial appointment has had the clearest positive impact on relations relative to the other developments highlighted here.
India has since cast doubt on its openness to revisiting investment policies targeting Chinese firms — specifically in non-critical sectors of the economy — in the context of a recent annual economic survey advocating for greater foreign investment. But with the prospects of an expanded U.S.-China trade war linked to a second Trump presidency on the horizon, we see easing investment restrictions as a particularly meaningful carrot to dangle in front of Beijing in exchange for progress on the border.
India too stands to benefit economically: Amid the current incarnation of the U.S.-China trade war, India has gained less from trade diversion than other regional players (e.g. Malaysia, Vietnam) and still others further afield (e.g. Chile, Mexico). Expanding access for Chinese firms could help nudge things in a more positive direction. Given both sides’ stated interests in resolving the territorial dispute and broadly propitious trends in public sentiment, we view near-term policy action on this front as a no-brainer and expect the bilateral glow-up to persist into the fall.
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