WORLD ECONOMIC FORUM
Every January, the Swiss resort of Davos becomes the centre of global policy and economic discussions. The annual meeting has traditionally been a bastion of technocrats who talk about global cooperation and dialogue. In recent years, however, the ideal of international cooperation feels like an outdated utopia: the rise of America First and states pursuing individual self-interest, particularly since the election of President Trump, has marginalised globalism that the WEF is supposed to represent. With major differences between Western allies this year, the meeting could become a flashpoint, and both policymakers and the markets are watching closely.
- WHAT IS THE WORLD ECONOMIC FORUM / DAVOS – WHO ATTENDS?
The WEF has held this annual meeting since 1971. It has grown to become a gathering of political leaders and business leaders with some 3,000 participants from around 130 countries. The event will be held from January 20 to January 24. The theme this year is “A Spirit of Dialogue”. Many attendees will hope this becomes an accurate description of how the event unfolds. Heads of state, finance ministers, central bank governors, and CEOs of tech giants such as NVIDIA and Microsoft will all be in attendance. At the event, ideas are floated, forecasts are made, and policy is discussed. It’s a ‘talking shop’, but it can have a real impact beyond the polite applause. The key speech will be President Trump’s, taking place on January 21st at 13:30 GMT.
- GREENLAND, TENSIONS, AND TARIFFS
There is no hiding from the fact that US-European relations are strained. President Trump has renewed a push to acquire Greenland, which many had previously dismissed as loose talk or a negotiating position. Greenland is part of Denmark, which, alongside its European allies, completely rejects the idea. In recent days, Trump increased the pressure by outlining 10% tariff on imports from a number of top European countries, including Denmark, from February 1st. The tariff could rise to 25% from June 1st if Europe doesn’t reach an agreement with the US. To make matters worse, all the tariffed countries are NATO members, and the subject of Greenland has many questioning whether the European-US military alliance has any future. The EU has threatened to respond with tariffs on US goods and services worth over $100 billion.
In his speech, Trump might talk about Greenland, or he might expand on his “Board of Peace” for the Middle East. Places on this board have been offered to Russia and China, while France reportedly rejected taking part. Some see the board as an attempt to marginalise or challenge the UN. Meanwhile, the USS Abraham Lincoln is moving towards the Middle East, with some observers expecting it will spearhead a US-led attack on Iran in the coming days. These issues, including that of Venezuela, could be spoken of by Trump and be discussed at Davos.
- MARKET IMPACTS: WHAT DAVOS MEANS FOR MARKETS
In normal times, Davos is more about networking or big ideas, but when geopolitical tensions, conflict, and tariff threats are at the centre of discussions, markets watch closely. Ahead of this year’s Davos, European and US stock prices turned sharply lower and gold prices surged to record highs in response to a potential return to trade conflict and a breakdown in transatlantic relations. Historically, announcements on issues such as the regulation of big tech or climate have had a limited but real impact on stocks and gold, but this year is expected to be more significant.
As the meeting concludes, potential US military strikes on Iran could send oil prices spiking, and safe-haven gold prices could rise, as traders worry about oil supply disruptions. If a trade conflict between the US and Europe goes ahead, this could pressure equity prices lower, but could also support gold and silver prices. This is why behind-the-scenes meetings at Davos will be so important and why the event could have a more dramatic impact than usual.
Conclusion
This year’s Davos is unfolding against a tense backdrop of what appears to be fractured alliances, Middle East tensions, conflict, and disunity within many of the countries. Global cooperation is less a reality and more a fantasy. Davos could be a spectacle. President Trump himself stated his speech would be “worth watching”, creating awkward moments and areas of serious disagreement in equal measure. Optimists say this could be just the opportunity needed to reassure people that diplomacy works when leaders meet. It remains to be seen if Davos could deliver that.