Changes Unseen in a Century: 2025
This article builds on our previous year-end retrospectives here and here. We continue to witness changes in the international system unseen in a century.
Honor, Fear, and Interest
For the first time in 35 years, we once again live in a world shaped primarily by the clashing interests of powerful nations rather than by liberal internationalism. Washington must again adjust its strategic approach.
If you were a 30-year-old median American when the Berlin Wall fell 35 years ago, you probably had some idea of the twilight struggle between the free world and communism. When you grew up, you practiced nuclear drills, talked about the space race, and harbored a distrust of the Soviet Union.
Since the wall fell, entire generations have lived under the unspoken axioms of liberal internationalism - unchallenged American primacy, free trade, international multilateralism, a taboo on the use of force, and unquestioned optimism about the future. We are all naive. And yet events have transpired to put our hands back on the rudder of our nation during a time of storms, just as our parents and grandparents did. And if you’re 20, your great-grandparents.
This change in the international order did not happen overnight. The PRC and the Russian Federation have worked diligently to undermine the World Trade Organization (WTO) for decades. Beijing never had any intention of following trade rules; it only sought to hollow out the economic activity of free nations.
Adding to the friction, US allies’ intransigence on non-tariff barriers has continued up to the current day. These factors have caused the US, the foundation of the global order, to also pull back from normal WTO procedure.
The United Nations is similarly deteriorating, with the Russian veto on the Ukraine War, the PRC veto on the Rohingya Crisis, and indecision on Syria. Current members of the UN Human Rights Council include China, Cuba, Vietnam, and the Democratic Republic of the Congo. The UN is fading into League of Nations-level irrelevance.
Dysfunction in the global order is only half the problem. The more important issue is that it will become increasingly clear in the coming years that Moscow and Beijing have unlimited aims. Russian and CCP strategies threaten the current political life of Washington and the political existence of America’s allies and partners.
If China and Russia were pursuing limited strategies, Xi would seek to assure the US, Japan, and South Korea that they could live securely with a CCP-dominated Taiwan. Putin would cut a deal, keep the Ukrainian territory he has conquered, rebuild his military, and prepare to nibble away more slices of territory at an opportune time.
But Putin is not satisfied with occupying a scant 20% of Ukraine. His goal, no matter how quixotic, is to become the arbiter of European politics, fundamentally altering the political existence of the nations in Russia’s near abroad.
Xi will not deem the party's historic march complete after occupying an island the size of Maryland. The CCP seeks to replace the US as the foundational power in the international order, preferably altering the US international political position forever and decoupling the US from Asia.
Attempting to negotiate a balance of power with nations that have unlimited aims is simply handing your enemies the rope they need to hang you. This is what the Lost Generation and the Greatest Generation discovered when they attempted to appease Germany, Italy, and Japan.
A new moment calls for new kinds of American leaders. Beginning with the Clinton Administration, American leaders have been soft. They have found it difficult, if not impossible, to formulate a coherent strategy.
These are generations of leaders who explicitly ran away from service in the Vietnam War, have scant experience in national security, and have been too weak to stop Russia and China from trampling on the international order that older generations of Americans forged in blood.
Our current environment is not one in which nations with limited aims negotiate agreements with the goal of eschewing violence. The world has passed into a new age dominated by honor, fear, and interest. The United States must adopt a more ambitious strategy of assuring Moscow and Beijing that they will face a Washington pursuing unlimited aims to counter aggression. The regimes in both nations must face certain consequences for further violations: economic depression, internal collapse, regime change, or unconditional surrender.
Cleansing of the Party Will Continue
Xi Jinping is grinding down the middle and top ranks of the party until his cadres form the hard core of the organization that is fit for wartime political service. Excessive corruption, laziness, and factionalism outside of Xi’s patronage network will continue to fill up the gulags before, during, and after any Taiwan campaign.
As Xi’s eradication campaign approaches the level of Mao Zedong, he will not pump the brakes. While Vermilion assesses that the constant purge of PLA officers will undermine readiness, Xi likely believes that these actions consolidate the party’s control of the military and clear away deadwood from the pre-2016 Xi Jinping military reform era.
The Phoenix of Asia Burns Hot
Japan’s military will continue to rise from the ashes of its post-war defeat. In its 14th consecutive year of defense budget increases, the 2026 budget is projected to be roughly $60 billion, around 2% of GDP.
While current acquisitions focus on domestically produced Type 12 surface-to-ship missiles, a next-generation fighter, and Tomahawks, we should expect Tokyo’s ambitions to expand.
Japan will likely seek to join the AUKUS nuclear submarine pact. Tokyo could make substantial cash investments, offer naval shipyard capacity, and contribute technology to the pact.
Tokyo will also furtively test the waters of becoming a nuclear weapons state. A senior security official recently floated a trial balloon on this subject, and we should expect much more of this probing from Japan going forward.
Prime Minister Takaichi is also looking to create a powerful new national intelligence agency to consolidate the command and control, as well as analysis of existing intelligence capabilities and organizations. This has been a long-standing LDP goal since the 1950s, and it seems Beijing’s bellicosity may give LDP leaders the demand signal they need to pursue significant reforms.
As Japan focuses on hard power, this will strike fear into the hearts of Beijing and Pyongyang, causing escalation. The CCP will feel compelled to go further and faster in its current nuclear breakout, creating a trilateral nuclear competition more complex, precarious, and difficult to manage than during the Cold War.
As the CCP’s 2025 white paper on nuclear arms control confirms, Beijing refuses any negotiations or frameworks that may limit its nuclear weapons while simultaneously calling for Russia and the US to limit their arsenals.
This is an impossible and unsophisticated position that will further add to the escalatory spiral in Asia. Hypersonics, AI-enabled operations, and modern air defense projects like the Golden Dome and T-Dome will add more layers to the nuclear weapons discussion.
Washington must consider how to prudently encourage and rein in Japan simultaneously. Tokyo plays the same offshore balancer role in Asia that the UK does in Europe, but Asia is now the main theater.
Japan and Taiwan are Joining Forces
In late 2025, the CCP’s diplomatic missteps and messaging unwisely telegraphed its unlimited aims by framing Japanese mobilization as an attack against the CCP, necessitating a military response under the PRC’s doctrine of active defense.
Instead of looking like a responsible Bismarckian rising power with limited goals, Beijing currently appears more to Asia like the Germany of Kaiser Wilhelm II, in an offensive crouch, looking for a pretext, and salivating at the first signs of mobilization. Tokyo’s fear of this version of China has become a motivating factor. Honor demands a response.
In addition to the rejuvenation of the Japanese military, Tokyo is working with Taipei. In March of 2025, Taiwan’s Cabinet appointed Shigeru Iwasaki as advisor to Taiwan’s Executive Yuan (similar to the United States Cabinet and the federal executive branch). Shigeru was the former Chief of Staff of the Japanese Self-Defense Force and the former head of Japan’s Air Self-Defense Force. It is known that during his current post, he has taken part in wargames with Taiwanese, American, and Japanese participants.
This will lead to the PLA increasing large-scale exercise activity near and inside Taiwanese and Japanese waters in the coming months and years. These developments will signal the initial whirls of a death spiral in the relationship between Tokyo and Beijing.
The increasing scope of PLA exercises will provoke large coalition exercises, limiting PLA freedom of movement around Taiwan's good weather windows. Beginning in 2027, expect massive PLA and coalition exercises throughout the first island chain akin to the Cold War Zapad-81, Okean, REFORGER, and Grand Slam.
If Washington is smart, Beijing’s ongoing diplomatic bluster and saber-rattling will be the falling domino that leads to greater recognition of Taiwan’s government, as well as something closer to a NATO in Asia.
Taiwan: The Powder Keg of Asia, its Pivot, and its Cold War Vienna
Beautiful flowers bloom in the most dangerous of soils. Taipei is the place to be during the last half of the 20s. We have already discussed the importance of Taiwan in this publication from a geographic perspective. Beginning in 2026, Taiwan will become a more important force in the military, cultural, and political domains.
The Taiwan Ministry of National Defense (MND) has made it clear that it is open for business, with a $40 billion budget adjustment. That is ⅘ of the total US Marine Corps military budget. There will be far more US companies and defense contractors establishing offices in Taiwan as MND expands business.
Expect AIT (the de facto US embassy) to grow, as well as the number of US servicemembers working with the Taiwan military establishment. Outside of the defense sector, more Americans will be living in Taiwan for language study, work, and the expat life. Expect Americans to be a growing and permanent fixture on the island.
With more focus on Taiwan from the US and Japan, expect more Taiwanese media, politics, and culture to seep into the public consciousness.
The CCP will counter this growing influence with operations of their own, placing people on the island and continuing to attempt to subvert Taiwanese politics. Taiwan has been surprisingly resilient to these approaches for the last 75 years, but do not expect Beijing to stop.
In 2026 and beyond, the Taiwan vibes will be both impeccable and dangerous.
The CCP Will Lose Strategic Depth While the US Gains It - Contributing to the Party’s Insecurity Spiral
CCP officials’ party line to US interlocutors since 2023 has been outrage (fear) that the US is “containing China.” Of course, US reactions to the CCP are just that: responses to Beijing’s irresponsible and aggressive moves.
Following this trend, in private meetings throughout the past year between CCP and US officials, the Beijing side has turned up the heat. Tantrums, screaming, bluster, and arrogance are doled out in excess. When your adversary is acting really weird, pay attention to them.
For PRC citizens under 45, who won’t clearly remember the Tiananmen Protests, these are trying times. These younger generations have known China’s meteoric economic and cultural rise, balanced by the daily friction of living under a totalitarian regime. What they have very little experience with is a serious international pushback against the idea of communist China.
While the CCP is feeling a full-court press from the US, Asia is turning more hostile. China’s traditional enemy, Japan, is on the rise. South Korea remains committed to a deep US alliance, Vietnam is pushing back hard in the South China Sea, and the Philippines has swung decisively towards Washington. Even if Vice President Sara Duterte wins in 2028, Beijing will almost certainly still be unable to modulate its territorial aggression against the Philippines.
As China’s neighborhood becomes more hostile to Beijing, America’s backyard will lean toward Washington.
Mexico has approved 50% tariffs on countries with which it has no trade agreement, a move that will affect China the most. Panama is in the process of cutting a deal to reduce the CCP’s influence in the canal zone (which the party is fighting). Members of Panama’s Parliament have conducted an unofficial visit to Taiwan. The US is considering designating Peru a Major Non-NATO Ally, and:
If President Trump sees his Western Hemisphere strategy through, Venezuela, Cuba, and Nicaragua will look much different in the future than they do today.
NATO is reinvigorated with purpose. EU member states spent €189 billion on defense in 2014. This figure has surged to a projected €381 billion in 2025, a more than two-fold increase.
Ultimately, these developments will make the CCP more insecure, driving the fear factor of honor, fear, and interest that will dominate the coming decades. Many CCP behaviors, including the constant revolution within the party, stem from this fear.
The Naval Arms Race Has Finally Begun
We’ve all been waiting for the US to respond to the largest naval buildup of the post-war period. The US Navy is finally getting executive attention with President Trump’s BBG and national security cutter concepts. Let’s hope the attention isn’t fleeting and lasts across administrations. Expect Beijing to announce grander plans for the PLA Navy as each great power gets more serious about putting hulls in the water.
Russia Will Go Big in 2026
We assess that Moscow has no intention of ending the war in Ukraine. The current negotiations are buying time for the Russians to rearm, retrain, reset, build their industrial base with Chinese aid, and transform the Russian Federation Army into a divisional structure better able to wage ground combat in the European theater.
Russia will continue to pursue an operational approach of victory through attrition. It is likely that Putin will increase Russia’s level of mobilization in 2026 in order to surge combat power into Ukraine, attempting to overwhelm the Ukrainian Ground Force’s ability to reconstitute ground combat units.
The CCP is heavily involved in the Ukraine War, the Gaza War, and potential conflicts between Venezuela and Guyana, Pakistan and India, Lebanon and Israel, Iran and anyone, the Koreas, and the United States and Venezuela for one primary reason.
Beijing understands that since the Obama Administration, the US military has been structured and funded to handle only a single major combat operation (MCO) or regional war. Therefore, if Beijing were to light the world on fire, the US military would, at a mechanical level, be unable to respond to a Taiwan invasion, giving the PLA the best chances of a short war and the opening for a negotiated settlement with Washington.
Europe Will Continue to Flounder
The 2022 invasion of Ukraine was one of the greatest unifying events for Europe since the Cold War, yet European nations, especially Germany and France, still struggle to take any meaningful action in their own backyard despite defense funding increases. Continental Europeans will continue to balk at US-led efforts to end the war in Ukraine that don’t prioritize European interests.
For the time being, the fate of Europe is increasingly in the hands of the US. Regarding China, many German business elites have been captured by the CCP, resulting in Berlin acting as the CCP’s standard bearer on the continent. This group will almost certainly continue to lobby against EU efforts to stem the flow of low cost subsidized Chinese goods flooding into Europe.
This will likely create more tension between Berlin and the EU, where European Commission President Ursula von der Leyen has pushed anti-subsidy investigations and tariffs on Chinese EVs over German objections. Ultimately, this will almost certainly lead European elites to question the value of ceding national sovereignty to a union that is slow to act and structurally incapable of protecting European interests. The institutions designed to give Europe weight in a multipolar world may instead accelerate its irrelevance.
Our Previous Predictions for 2025 Made in 2024
Xi is Running Out of Time on Taiwan
We continue to expect Xi Jinping to at least get a fourth term in 2027, the year he turns 74. In the last year of his potential fourth term, he will be 79, about the average age for a CCP leader to retire.
During Xi’s fourth term, Taiwan will hold its 2028 general election in January. If the DPP’s Lai Ching-te wins a second electoral victory and secures a majority in the Legislative Yuan, it will be clear that the CCP’s political work approach to subjugating Taiwan has failed under Xi’s leadership.
The results of this election will be known before the twice-yearly good-weather windows in March-April and October-November. March is somewhat early to reveal your cards based on a January election, which puts Vermilion’s highest-risk window for invasion at late ‘28 to ‘32.
The Credibility Deficit: Policy Makers’ Understanding of Nuclear and Conventional Coercion Has Atrophied
While the outlook here remains bleak, if President Trump can change the Maduro regime at low cost and avoid a large or medium-sized military conflict, it will at least provide a modern classic for teaching strategy, escalation, and coercion. On the nuclear front, President Trump also recently mentioned a nuclear cruise missile (likely the SLCM-N or a variant), which would be a welcome addition to the arsenal.
Washington & INDOPACOM Must Shift the Taiwan Status Quo or Risk Tactical Irrelevance
While there has been a slow improvement in this department, we still believe the US should openly base defensive US military forces on the island of Taiwan to ensure deterrence.
The US & PRC Must Adjust to a Unique International Arena
We assess that the US and CCP continue to think in the short term. Washington considers preventing or deterring a Taiwan invasion within a short window. Beijing is thinking about invading Taiwan quickly.
Our Previous Predictions for 2023 Made in 2022
The Global Economy is Devolving into Two Competing Trade Blocs
Trump is degrading the Beijing-led bloc through his actions in the Western Hemisphere. The second Venezuelan oil tanker recently seized by the US was destined for China.
Washington has nearly all the cards to play in the global economy, and it seems like President Trump and any successor will play them. This will radically increase pressure on Beijing and Moscow, present a closing window of opportunity, and pressure both totalitarian leaders into the horns of a dilemma.
China and Russia are Forming a Lasting Union
We continue to see Beijing and Moscow growing closer together.
Japan is Rearming
This trend is accelerating, as discussed above in this article.
Taiwan is Preparing to Repel a Future Invasion
This trend is accelerating, as discussed above.
The Primary Theater is now Asia, not Europe
We continue to assess that Asia has greater strategic importance than Europe, as confirmed by the recently published 2025 US National Security Strategy.
As of Early 2023, the Ukraine War is a Complete Toss-Up
This trend is accelerating, as discussed above.
The US Military is Not Even Close to Ready
The Pentagon is moving at the speed of crawling on glass, but making positive changes.