Global Risk Indexes (04-03-2025)

Asia-Pacific Faces Deepening Divides: U.S.-Taiwan Semiconductor Shift, India’s Political Crisis, and China’s Trade War Retaliation

The Asia-Pacific is undergoing a strategic realignment, driven by economic shifts, political instability, and escalating geopolitical rivalries. The U.S.-Taiwan semiconductor relationship is evolving, India’s internal divisions are deepening, and China’s economic strategy is shifting in response to global trade pressures.

U.S.-Taiwan Semiconductor Alliance: Strengthening Ties While Protecting Taiwan’s Edge

Taiwan Semiconductor Manufacturing Company (TSMC) has announced a $100 billion investment in the U.S., reinforcing its role in America’s semiconductor supply chain. However, Taiwan is ensuring that its most advanced chip technology remains at home, maintaining its strategic advantage and preventing potential dependency risks.

This strategy signals that Taiwan is positioning itself as an indispensable part of the global semiconductor ecosystem, reinforcing its leverage against China while securing deeper economic and military ties with Washington. If tensions with Beijing escalate, Taiwan’s chip dominance will remain a critical pillar of its deterrence strategy.

India’s Political Crisis: Modi Faces Resistance from Wealthy Southern States

India’s government is facing a major internal challenge as wealthier southern states oppose Prime Minister Narendra Modi’s redistricting plan, which would shift parliamentary power toward the poorer, more populous north. Southern leaders argue that the plan will diminish their economic influence while redistributing resources toward less developed regions.

If the crisis escalates, India risks deepening regional divides that could weaken its long-term political stability. A fractured domestic environment may also slow India’s economic reforms and affect foreign investment confidence.

South Korea’s Economic Slowdown: A Growing Concern

South Korea’s latest economic data indicates a downturn, with declines in factory output, exports, and private investment. These challenges are exacerbated by Washington’s new trade measures, which threaten Seoul’s access to key U.S. markets.

As global trade fragmentation intensifies, South Korea must decide whether to align more closely with the U.S. trade agenda or seek alternative export markets, a decision that will shape its long-term economic trajectory.

Pakistan-Afghanistan Border Clashes: Rising Security Threats

Pakistan and Afghanistan have engaged in renewed border clashes, raising fears of an escalation in cross-border insurgent activity. The violence is disrupting trade routes and security operations, further complicating Pakistan’s efforts to stabilize its economy.

If tensions persist, Islamabad may intensify military operations along the border, potentially triggering a broader security crisis that affects regional connectivity and economic stability.

China’s Economic Realignment: BYD’s Global Expansion and Trade War Retaliation

Chinese automaker BYD has raised $5.59 billion through a Hong Kong stock offering to fund its global expansion, signaling confidence in international growth despite China’s slowing domestic economy. At the same time, Beijing has imposed new tariffs on U.S. agricultural imports and restricted access to key industries for American firms in response to Washington’s latest trade measures.

This escalation marks a new phase in the U.S.-China economic rivalry, with both sides moving toward more protectionist policies. If the trade war intensifies, global supply chains could face further disruptions, with long-term consequences for Asian economies reliant on stable U.S.-China trade flows.

North Korea’s Nuclear Posturing: Kim Yo Jong Justifies Military Buildup

Kim Yo Jong has issued a statement condemning U.S. “provocations” and defending North Korea’s nuclear deterrence strategy. This rhetoric aligns with reports of continued military development and increased weapons cooperation with Russia.

As Pyongyang strengthens its strategic position, the likelihood of further missile tests or military provocations in response to U.S.-South Korea drills remains high.

Looking Ahead: A Region Defined by Economic Uncertainty and Geopolitical Tensions

The Asia-Pacific remains at a crossroads, with rising economic fragmentation, security confrontations, and political instability shaping the regional outlook. The coming weeks will determine whether these trends stabilize or escalate into broader strategic shifts.

Geopolitical Risk Assessment for the Asia Pacific
(04-03-2025)

The Asia-Pacific is experiencing a period of increasing geopolitical, economic, and security instability. The U.S.-Taiwan semiconductor alliance is strengthening, with Taiwan strategically ensuring that its most advanced chip technology remains at home, reinforcing its long-term security posture. India’s internal political crisis is escalating, as Modi’s redistricting plan faces resistance from the wealthier southern states, potentially destabilizing India’s domestic cohesion. South Korea is facing an economic slowdown, with industrial output, exports, and investment all declining, exacerbated by rising U.S. tariff concerns. Pakistan-Afghanistan border clashes are worsening, threatening trade routes and increasing security volatility. Meanwhile, China’s economic landscape is shifting, with BYD securing billions for global expansion while Beijing retaliates against new U.S. tariffs with countermeasures of its own. North Korea’s nuclear rhetoric is intensifying, justifying a growing military buildup. Australia and New Zealand face economic uncertainty, with the former delaying interest rate cuts and the latter witnessing record emigration levels. As these regional tensions escalate, the risk of long-term economic fragmentation, security crises, and political instability remains critically high.

Geopolitical Risk Index

Developments to Follow for the Asia Pacific (See All Global)

Previous Briefings

• Asia-Pacific Faces Deepening Divides: U.S.-Taiwan Semiconductor Shift, India’s Political Crisis, and China’s Trade War Retaliation - (04-03-2025)
• Asia-Pacific on Alert: U.S.-Philippines Military Expansion, North Korea Escalations, and China’s Economic Dilemmas - (03-03-2025)
• Asia-Pacific on the Brink: China-Russia Military Axis Strengthens, South China Sea Confrontations Rise, and Economic Fault Lines Deepen - (02-03-2025)
• Asia-Pacific at a Crossroads: China-Russia Alliance Strengthens, South China Sea Tensions Mount, and Economic Shifts Accelerate - (01-03-2025)
• Asia-Pacific at Breaking Point: China Escalates Threats Against Taiwan, North Korea Declares Nuclear Readiness, and Trade War Intensifies - (28-02-2025)
• Asia-Pacific Faces Intensified Military and Economic Pressures: Taiwan on High Alert, China-Philippines Standoff, and North Korea-Russia Military Ties Deepen - (27-02-2025)
• Asia-Pacific on Edge: China Pressures Philippines, Taiwan Faces Hybrid Threats, and North Korea Expands Military Buildup - (26-02-2025)
• Asia-Pacific Faces Heightened Geopolitical Risks: U.S.-China AI Battle, South China Sea Escalations, and Vietnam’s Economic Uncertainty - (25-02-2025)

See all previous briefings