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Below is a complimentary research note written earlier this week by National Security analyst General Dan Christman. To access our Macro Policy research email sales@hedgeye.com.

Geopolitics and COVID-19 - MadMadWorld 2020 NEW 

The COVID-19 pandemic is wreaking havoc on the American economy and on our political system; that's obvious by now. But the worries apply as much to U.S. relations overseas as they do to domestic politics and business. What does the pandemic suggest regarding U.S. strategic relationships worldwide? Recognizing that this is all changing very fast, I've outlined below a limited list of geostrategic implications:

U.S. / China 

It's hard to overstate the extent of the downturn, and the downsides. Extreme nationalism continues to escalate, accompanied by unbounded propagation of conspiracy theories abetted by official Chinese media.

In one of the many ironies of this pandemic nightmare, China is now pushing its narrative of "humanitarian outreach" (to Italy, Spain, France, Iraq), even as its mishandling and obfuscating from January contributed to the nightmare. Presidential advisor Peter Navarro's quips on returning manufacturing to U.S. shores in the middle of the crisis surely aren't helping to deescalate the tensions.  

Of the dozens of geo-political implications flowing from COVID-19, this relationship is "Danger #1."  Washington-Beijing are accelerating quickly toward the inevitable security crisis down the road.  

U.S. / EU

The relationship has never been worse; the surprise blocking of air travel with no prior outreach was infuriating to the presidents of the European Council and Commission.  Naturally, the benefactors are Vladimir Putin and Xi Jinping, who relish this transatlantic division. 

Further, "decoupling" tightly integrated supply chains with the EU is growing as a crisis-induced reality, extending well beyond U.S.-China divisions.

Japan / South Korea

Two vital U.S. strategic allies are at each others' throats, squabbling over generation-long northeast Asia issues aggravated by coronavirus finger-pointing; in normal times, with a professionally-staffed State Department, the U.S. would long ago have modulated the anger. Washington will need Tokyo and Seoul as we try to push back against the PRC's regional ambitions; northeast-Asia alliance unity won't happen unless we step in soon.     

Iran

The existential moment continues to draw closer, for a regime incapable of handling crises on multiple fronts. The mullahs and Supreme Leader may be waiting for Biden, even while Khamenei grows more paranoid; but if there is regime collapse, there's no guarantee that what replaces it will be any more stable or accommodating.  

And while respected analysts like Vali Nasr of the Brookings Institute are tweeting that this may be a "diplomatic opportunity," the reality is that the Trump White House has no intention, despite humanitarian arguments, to ease the pressure.   

Some positive notes? North America.

Even though border controls have been instituted with both Canada and Mexico, this came after several days of inter-capital discussions, a process of course missing between Brussels and Washington. Further, the Trump-Lopez Obrador-Trudeau discourse has largely remained free of interpersonal bile. 

But a growing concern is Mexico president Lopez Obrador's unwillingness to embrace even the most modest social distancing recommendations; the worry, of course, is that supply chain risk south of our border can escalate very quickly with a Mexican COVID-19 breakout. 

Bottom Line: While the global economy will recover, and likely recover quickly once the virus passes, some key developing nations may not: Lebanon, Turkey, even Argentina lead a list of long-standing American friends and allies who, as Ian Bremmer of the Eurasia Group recently noted, could face "full-blown financial crises."  

But in the end, the timing and pace of business recovery will depend on a degree of multinational cooperation of the type that President Trump has eschewed since day one. Discussions in the G-7 (where the U.S. is this year's chair) so far have been meaningless; and the G20 (led in 2020 by a Saudi Arabia consumed by its foolish oil price war with Russia), has done even less, despite a leaders' video conference last week.  

Not since the end of the Cold War has the need for U.S. global leadership been more paramount. The longer we wait to assert that leadership, the deeper and more catastrophic will be the damage. 

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ABOUT LIEUTENANT GENERAL DAN CHRISTMAN

LTG Dan Christman, USA, Ret. serves as Hedgeye Potomac Research’s Senior National Security Analyst, providing deep insight into international affairs and national security.  Most recently, Dan provided strategic leadership on international issues affecting the business community for organizations such as the US Chamber of Commerce.  Dan’s long history of leadership includes his service as a United States Army lieutenant general and former Superintendent of the United States Military Academy.  He served in highly visible and strategically important positions and four times was awarded the Defense Distinguished Service Medal, the nation's highest peacetime service award.

He also served for two years as assistant to the chairman of the Joint Chiefs of Staff, during which time he traveled with and advised Secretary of State Warren Christopher.  He was centrally involved during this period with negotiations between Israel and Syria as a member of the Secretary's Middle East Peace Team. Further, Christman represented the United States as a member of NATO's Military Committee in Brussels, Belgium.

Graduating first in his class from West Point, Christman also received MPA and MSE degrees in public affairs and civil engineering from Princeton University and graduated with honors from The George Washington University Law School. He is a decorated combat veteran of Southeast Asia, where he commanded a company in the 101st Airborne Division in 1969.