As the Western world awaits United States President Trump’s speech in Davos amid an escalating conflict between the US and Europe over the status of Greenland, the prime minister of Canada has returned from China after announcing a “new world order” in which Canada will deepen its relationship with Beijing. This Canadian vision is part of a broader shift across the West: in 2025, Spain joined Hungary in welcoming Chinese producers of batteries and electric vehicles to the European continent, and in the coming weeks the leaders of both the United Kingdom and Germany will visit China in what will likely crystallize into a shared narrative.
As China is increasingly seen as a more reliable partner than the United States by many nations, it is also overtaking the US in technological innovation. In the latest update of the Australian Strategic Policy Institute’s (ASPI) tracker of 74 “critical technologies,” the US leads in just 8, while China leads in 66. Notably, China has recently surpassed the US in the global share of downloads for open-source artificial intelligence models, which are released for free and can run on local cloud providers rather than US- or China-based ones. China’s growing lead in AI is underpinned by its massive advantage in electricity generation: by 2030, its surplus power is projected to be three times larger than the entire world’s electricity demand for data centers. This is also giving rise to entire industries that remain largely unknown in the Western world, such as the “low-altitude economy” (Chinese food-delivery firm Meituan has completed more than 600,000 orders via drones in China).
In 2026, this global shift could shock US financial markets, much as the launch of an AI model by the Chinese firm DeepSeek triggered a panic in January 2025.
What is currently being underestimated is the likelihood that US president Trump, after several high-risk strategic successes (Iran, Venezuela), overplays his hand and makes a mistake similar to Putin’s invasion of Ukraine, which was intended as a quick operation but has turned into a four-year war. If the US were to force Denmark to relinquish control of Greenland, this could become the catalyst for what Europe is currently trying to talk into existence: a new European defense architecture that would effectively replace NATO. If the US were to target Canada, most likely by supporting a secessionist movement in provinces such as Alberta or Quebec, this could spark a nationalist movement to defend Canada, similar to Ukraine’s response to Russian aggression. Besides this, in both scenarios, pressure on the US dollar could intensify, as many Western investors would be incentivized to reduce their dollar holdings. Since 2020, the US dollar has already experienced declining exposure among central banks. If this trend were to accelerate, it could destabilize the US economy through upward pressure on interest rates.
The capture of Venezuelan president Nicolás Maduro by the United States military has shown that Washington is moving decisively to consolidate control over the Western Hemisphere. What remains underappreciated, however, is that by asserting control over these countries, the US would effectively control around 40% of global oil production capacity. This would give the US, for the first time in history, a high degree of influence on global oil prices. Whereas the 1973 oil crisis, driven by Arab producers, once destabilized the US economy, Washington could soon wield comparable leverage over others while keeping energy prices relatively low at home. This strategy thus functions as a structural counterweight to China, which imports roughly 75% of its oil needs but dominates global rare earth metals production capacity. In effect, the US and China are dividing control of the world’s key inputs of economic and military power.
