What you need to know

Nato summit 2025: A turning point

The NATO summit held this week in The Hague potentially marks a pivotal moment in the evolution of the transatlantic alliance. Amid a rapidly deteriorating geopolitical situation and deep tensions with the U.S. over its role in the organization, leaders from across the bloc gathered to discuss the challenges facing the alliance.

On Wednesday, NATO leaders endorsed a substantial increase in defense spending, aligning with demands long made by President Donald Trump, and reaffirmed their commitment to mutual defense. Trump achieved much of what he sought at the annual meeting, and allies were reassured by his public embrace of the core principle of collective defense, following more ambiguous remarks earlier in the week.

Among the summit’s most consequential developments was the endorsement of a new defense-spending benchmark: 5% of GDP. The prior target of 2% is now widely seen as inadequate in the face of escalating threats from both state and non-state actors. Though the 5% target is set for 2035, several leaders (especially from the Baltic states and Poland) urged faster implementation. Members pledged to spend 3.5% of GDP on core defense activities, including personnel and hardware, with an additional 1.5% allocated to broader measures such as cybersecurity, infrastructure adaptation, and energy protection.

Trump, who attended the summit, was both praised and critiqued. Dutch Prime Minister Mark Rutte commended his “decisive action” in the Middle East, particularly the role his administration played in brokering a temporary ceasefire between Israel and Iran. Nonetheless, several European leaders still expressed concern over Washington’s long-term reliability as a security guarantor, citing Trump’s transactional posture and his insistence on increased European contributions as conditions for sustained U.S. involvement.

In a five-point statement, NATO formally adopted the new defense-spending goal—an acknowledgment not only of Trump’s influence but of growing alarm over Russia’s intentions following its 2022 invasion of Ukraine. The 32 allies jointly declared: “We reaffirm our ironclad commitment to collective defense as enshrined in Article 5 of the Washington Treaty—that an attack on one is an attack on all.”

Asked to clarify his own stance following prior ambiguity on the mutual defense clause, Trump replied, “I stand with it. That’s why I’m here. If I didn’t stand with it, I wouldn’t be here.”

Trump’s interactions with Ukrainian President Volodymyr Zelenskyy drew particular scrutiny. While Trump reiterated support for Ukraine’s sovereignty and commended its resilience, Zelenskyy is still pressing for firmer commitments.

There were some tense moments, however.

The tone at The Hague diverged sharply from that of Vice President J.D. Vance’s speech at the Munich Security Conference earlier in the year. In Munich, Vance articulated a more limited vision of America’s role in global security and cautioned European allies not to assume open-ended U.S. backing.

By contrast, this year’s NATO summit projected renewed unity. Leaders sought to reassure one another of the alliance’s continued relevance amid growing instability. The decision to raise defense spending and expand strategic capabilities signaled an intent to move beyond rhetoric. Munich sowed doubts, The Hague offered reassurance.

The summit reaffirmed NATO’s mission as the central plank of the trans-Atlantic alliance, and may come to be seen as a watershed moment. As China, Russia, and other regional actors assert themselves, the alliance is repositioning from a narrowly Euro-Atlantic focus to one of broader geopolitical agility. The promised increase in defense spending represents not just an investment in conventional military power but also in cyber defense, intelligence, and space capabilities. The true test will be in the implementation of these commitments in coming years.

America First

Trump’s trade pause nears deadline as fentanyl and tariffs reshape diplomacy

When the administration of President Donald Trump suspended sweeping tariffs in early April, it pledged to secure 90 trade deals in 90 days. This was an ambitious bid to reshape the global economic order in a short period of time. With just two weeks remaining, only one agreement has materialized, alongside a tenuous détente and growing uncertainty over the rest.

The tariff pause is scheduled to expire on 8 July. Trump has warned that, absent new deals, tariffs of 50% on European goods will be reinstated the following day, along with renewed duties on dozens of other countries.

Financial markets, however, appear less anxious than they were three months ago. Equity markets are up roughly 20% since the pause was introduced, brushing aside the trade war, military conflict in the Middle East and doubts over the U.S. economy’s global standing. The relative stability in the oil price (with only small gains that have now been erased) around the time of the Israel-Iran conflict, is remarkable.

So far, the U.S. has reached a partial agreement with the United Kingdom and secured a temporary truce with China lasting through part of August. On 16 May, Trump announced that his administration would begin unilaterally setting tariff rates within two or three weeks. That has yet to occur. On 11 June, Treasury Secretary Scott Bessent said that deadlines would “highly likely” be extended for countries negotiating in good faith. Hours later, Trump said extensions were unnecessary.

Last Friday, Trump claimed the U.S. was on the verge of signing a trade deal with India (a refrain repeated by administration officials for the past two months) with no visible progress. Meanwhile, Canada threatened new countermeasures, Japan expressed unease and Mexico maintained silence.

The 8 July deadline is still looming.

China has recently taken several steps to address U.S. demands on synthetic opioids. These actions follow Trump’s imposition of 20% tariffs on Chinese imports, citing Beijing’s failure to stem the flow of precursor chemicals used in fentanyl, which has contributed to nearly 450,000 overdose deaths in the U.S. These tariffs remain in force, despite a fragile trade truce reached in Geneva in May.

Beijing has defended its anti-drug efforts and accused Washington of using the fentanyl issue as leverage. Talks have stalled for months, even after China sent its vice minister of public security to Geneva.

The restrictions on fentanyl precursors followed a meeting in Beijing between U.S. Ambassador David Perdue and China’s Minister of Public Security, Wang Xiaohong. According to Chinese sources, Wang expressed readiness to work with Washington on drug control. China’s Ministry of Foreign Affairs described the action as an independent step aligned with the UN Drug Convention and said it “demonstrates China’s attitude of actively participating in global drug governance.” Trump and Chinese President Xi Jinping had discussed the issue by phone on 5 June.

U.S. sanctions Mexican banks linked to fentanyl flows

On Wednesday, the U.S. Treasury imposed sanctions on three Mexican financial institutions, CIBanco, Intercam Banco and Vector Casa de Bolsa, under new fentanyl-related legislation. The Financial Crimes Enforcement Network (FinCEN) declared the firms “primary money laundering concerns,” marking the first actions taken under both the Fentanyl Sanctions Act and the FEND Off Fentanyl Act.

Though the institutions are modest in size, experts say the sanctions could ripple across Mexico’s financial system, given its close ties to the U.S. While sanctions targeting individuals or companies linked to criminal groups are not uncommon, action against financial institutions is rare.

The sanctions introduce new friction in U.S.–Mexico trade relations, which are already strained by Trump’s imposition of 25% tariffs on many Mexican imports as part of his broader fentanyl crackdown.

Mexico’s Ministry of Finance said it had requested evidence from the Treasury on the alleged links to illicit activity, but received no conclusive information. While the FinCEN sanctions do not block assets outright or cut off global dollar-based transactions (unlike more severe Treasury measures) they still prohibit U.S. entities from transacting with the banks' Mexican offices. A Treasury official noted that the effect would be functionally equivalent to severing the banks from the U.S. financial system.

Vector denied the accusations and affirmed its willingness to cooperate with both Mexican and U.S. authorities. Intercam issued a similar denial. CIBanco stated that it complies fully with regulatory obligations and is not involved in any illegal activity.

Birth pangs in the birthplace of civilization

Iran’s defense minister visits China as crackdown intensifies at home

Iran’s Defense Minister Aziz Nasirzadeh has arrived in China for his first overseas trip since the war with Israel began.

Nasirzadeh is attending a meeting of defense ministers from Shanghai Cooperation Organization (SCO) member states in the eastern Chinese city of Qingdao, according to a social media account affiliated with China Central Television. The summit, held on Wednesday and Thursday, is being hosted by China’s Defense Minister Dong Jun.

Dong met with Nasirzadeh on the sidelines of the summit on Wednesday. According to state-run Xinhua News Agency, he called on all parties to strengthen cooperation and uphold global stability.

Meanwhile, attention is turning to a fortified underground facility under construction in central Iran. Dubbed “Pickaxe Mountain”, it is believed by some analysts to be a potential storage site for uranium stockpiles that Tehran may have relocated prior to U.S. strikes on its nuclear facilities.

Rafael Grossi, director general of the United Nations' International Atomic Energy Agency, said in April that he had asked Tehran for clarification. “Since it is obvious it is in a place where numerous and important activities related to the program are taking place, we’re asking them, what is this for? They are telling us, it’s none of your business,” Grossi said at the time.

Following the fragile ceasefire with Israel, Iranian authorities appear to be shifting focus to a domestic security clampdown. According to officials and human rights groups, the government has launched a campaign of mass arrests, public executions and military deployments, particularly in Kurdish areas of the northwest.

Security checkpoints have reportedly been established throughout Iranian Kurdistan, with individuals subjected to physical searches and inspections of their phones and documents. During the twelve-day war, social media posts showed Kurdish fighters operating openly in towns across northwestern Iran. Iran’s three main Kurdish separatist factions (based across the border in Iraqi Kurdistan) said some of their fighters and activists had been arrested. They also reported extensive movements by Iranian military and security units in the region.

Iran’s Kurdish and Baluch minorities, both predominantly Sunni Muslim, have long opposed rule from the Persian-speaking Shi‘ite government in Tehran. The province of Sistan and Baluchistan remains the site of a persistent and violent insurgency, with groups maintaining links to militants across the border in Pakistan.

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