Assessing the Geopolitical Risks and Opportunities of a Shifting Global Power Balance

The global power balance is shifting faster than most investors realize, and the implications for defense, technology, and commodity markets are profound. Donald Trump’s 2025 rhetoric accusing China, Russia, and North Korea of “conspiring” against the U.S. has only accelerated a realignment of global alliances, creating both risks and opportunities for investors. Let’s break it down.

Defense Spending: A New Cold War?

The U.S. military’s “unparalleled” superiority, as Trump insists, is being tested by a growing Sino-Russian-North Korean axis. According to a report by the Brookings Institution, the U.S. defense budget hit $997 billion in 2024, outspending the next nine countries combined [5]. However, the share of GDP allocated to defense is projected to drop from 2.9% in 2025 to 2.4% by 2035, raising questions about long-term sustainability [5]. Meanwhile, China and Russia are deepening military collaboration, with North Korea now officially codifying its nuclear status and sending troops to support Russia’s war in Ukraine [4]. This trilateral alignment is pushing countries like South Korea and Japan to boost their defense budgets by 12-15%, creating a regional arms race [1].

For investors, this means defense contractors (e.g., Lockheed Martin, Raytheon) and missile defense systems are poised for growth. However, the risk lies in overestimating U.S. military dominance. As the Guardian notes, Trump’s policies have inadvertently encouraged China to emerge as a dominant force in global realignment [5].

Technology: The Great Semiconductor and Rare Earths War

Trump’s “tough on China” approach has intensified restrictions on semiconductor exports and rare earths, but the results are mixed. A 2025 trade truce with China allowed U.S. companies to access rare earths in exchange for a 55% tariff on Chinese imports [1]. Yet, China’s control over 98% of gallium production and its export restrictions continue to disrupt global supply chains [5]. The Trump administration’s Section 232 investigation into critical minerals aims to reduce U.S. dependence, but domestic production remains years away from scaling [3].

The strategic implications are clear: semiconductor manufacturers (e.g., Intel, TSMC) and rare earths miners (e.g., MP Materials) are key plays. However, investors must watch for volatility. As Foreign Policy highlights, China’s rare earths have become a “trade weapon,” with export controls targeting electric vehicles and defense tech [6].

Commodities: The New Oil and Gas of the 21st Century

The China-Russia-North Korea alignment is reshaping commodity flows, particularly in oil, rare earths, and semiconductors. Smuggling networks like North Korea’s Khasan-Rajin corridor are enabling Russia to bypass sanctions while advancing its military capabilities [1]. China’s export restrictions on gallium and other critical minerals have exposed global supply chain vulnerabilities, prompting the U.S. to partner with allies like Australia and the Philippines to diversify sources [1].

Investors should focus on commodity ETFs (e.g., XLB) and gold, as de-dollarization efforts (e.g., yuan-ruble transactions) add volatility to emerging markets [2]. The Critical Minerals Report notes that price floors and espionage risks are intensifying competition for resources like lithium and cobalt [7].

The Bottom Line: Hedge, Diversify, and Stay Informed

The shifting power balance is a double-edged sword. While U.S. defense spending and tech restrictions offer short-term opportunities, the long-term risks of overreliance on unstable alliances and supply chains cannot be ignored. Investors should:
1. Hedge against geopolitical shocks with gold, U.S. Treasuries, and sector ETFs.
2. Diversify supply chains by investing in rare earths miners and semiconductor firms with global manufacturing.
3. Monitor Trump’s rhetoric—his erratic policies could either escalate tensions or broker unexpected truces.

As the New York Times reported, the U.S. has paused exports of jet engines and semiconductor machinery to China, signaling a hardening stance [5]. But history shows that Trump’s “America First” approach often backfires, incentivizing rivals to consolidate power. The key is to stay nimble and prioritize resilience over short-term gains.

**Source:[1] Assessing the Strategic Implications of North Korea's China-Russia Axis [https://www.ainvest.com/news/assessing-strategic-implications-north-korea-china-russia-axis-emerging-market-geopolitical-risk-commodity-exposure-2509/][2] Assessing the Strategic and Economic Implications of Russia-China-North Korea Alignment [https://www.ainvest.com/news/assessing-strategic-economic-implications-russia-china-north-korea-alignment-post-hegemony-world-2508/][3] Fact Sheet: President Donald J. Trump Ensures National Security and Economic Resilience [https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-ensures-national-security-and-economic-resilience-through-section-232-actions-on-processed-critical-minerals-and-derivative-products/][4] The Countdown to a Trump-Xi Summit [https://www.brookings.edu/articles/the-countdown-to-a-trump-xi-summit/][5] The United States Spends More on Defense than the Next 9 Countries Combined [https://www.pgpf.org/article/the-united-states-spends-more-on-defense-than-the-next-9-countries-combined/][6] How Rare Earths Became China's Top Trade Weapon [https://foreignpolicy.com/2025/07/01/rare-earths-us-china-trade-mineral-supply-chain/][7] Critical Minerals Report (08.01.2025): The Race Intensifies... [https://investornews.com/critical-minerals-rare-earths/critical-minerals-report-08-01-2025-the-critical-minerals-race-intensifies-amid-price-floors-espionage-and-new-alliances/]