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Chinese President Xi Jinping will arrive in Rome tomorrow ready to plant a flag in the heart of Europe. 

What to watch: Italy is expected to break with most other advanced economies by formally signing onto Beijing's $1.3 trillion global Belt and Road (BRI) infrastructure initiative.

The big picture: Announced in 2013, BRI aims to boost China's trade and international clout through massive new investments in roads, railways and ports across the world. Italy's decision to sign onto the initiative — the centerpiece of Beijing's plans to overtake the U.S. as the dominant global economic power of the 21st century — is controversial.

Brussels and Washington don't like it at all, because they fear that if Italy takes loans from China, it could end up in a dangerous web of debt that exposes it to pressure from Beijing. 

After all, Italy is already Europe's second-most indebted country, and unlike much smaller economies like Greece, a systemic crisis there could unravel the entire Eurozone.

Within Rome, too, there is some disagreement: Deputy Prime Minister Luigi Di Maio, of the centrist Five Star Movement, is all for closer relations with Beijing, but far-right Interior Minister Matteo Salvini is more skeptical.

Still, Chinese cash solves a pressing problem for their populist governing coalition. 

Clashes with Brussels over budget parameters have forced Di Maio and Salvini to backtrack on their campaign promises to cut taxes and boost social spending. 

Delivering new infrastructure with Chinese money could be a big political winner, especially after a high-profile bridge collapse last year.

More broadly, Europe is already having trouble finding consensus on how to approach China's tech investments, 5G equipment suppliers and infrastructure investments. 

The smaller economies of Central and Eastern Europe welcome the cash, while most of the larger economies are concerned about the financial and security implications of Chinese capital. 

EU members are scheduled to meet on Friday to discuss a common approach to Chinese investment into the bloc.

The bottom line: The decision of the bloc's fourth largest economy to embrace Beijing has just opened up a major new fault line within Europe.

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China traces a new line through Europe as Italy backs Belt and Road

Chinese President Xi Jinping at the National People's Congress in Beijing. Photo: Andrea Verdelli/Getty Images

World

China

Chinese President Xi Jinping will arrive in Rome tomorrow ready to plant a flag in the heart of Europe. What to watch: Italy is expected to break with most other advanced economies by formally signing onto Beijing&#x27;s $1.3 trillion global Belt and Road (BRI) infrastructure initiative.

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

The U.S. and China may be on the verge of resolving — or at least cooling — a heavyweight trade fight that's already seen them slap tariffs on $360 billion worth of each other's goods. If all goes according to plan, a deal will be in place ahead of a summit later this month between President Trump and Chinese President Xi Jinping.

The big picture: That won't spell the end of the Trump administration's aggressive bid to remake the global trading order. Emboldened by their apparent successes in renegotiating NAFTA as well as the China trade relationship, Mr. Trump and his hardline trade czar Robert Lighthizer are now going to train their sights on a whole slew of other countries where they think they can win terms more favorable to U.S. industry.

Japan: The U.S. announced this week an investigation into Japanese titanium exports on national security grounds. 

The Trump administration wants to cajole Japan into accepting quotas on its auto exports and lowering its import tariffs on U.S. beef and agricultural goods. 

But with upcoming local and parliamentary elections, the Japanese government will be reluctant to offer quick concessions. That means the U.S. could be heading for long and acrimonious negotiations with its closest Asian ally.

European Union: President Trump wants the EU to remove its massive industrial and agricultural subsidies, and has threatened import tariffs on EU cars if he doesn't get his way. 

European politicians are loathe to scrap support to hugely influential voting blocs, but Mr. Trump can inflict real pain on EU automakers, who are the largest exporters of vehicles to the U.S.

In July of last year, the U.S. and EU agreed to a temporary trade truce while Trump focused on China, but with a Beijing deal in the bag, the U.S. president will be spoiling for a fresh fight. Trump must make a final decision on auto tariffs before May 17.

Emerging economies: The U.S. isn't just taking aim at rich countries. This week the White House announced it would end preferential treatment for India and Turkey under a decades-old trade regime intended to promote growth and prosperity in poorer economies.

The Trump administration's beef is that India hasn't opened up its industries to U.S. firms and that Turkey is wealthy enough to no longer be coddled with special treatment. 

Note that India and Turkey are just two of 121 countries currently given such benefits, so Trump and Lighthizer may soon go after other targets.

The bottom line: As the dust begins to settle between the U.S. and China, the Trump administration's appetite for trade fights is as strong as ever.

Trump's next battles on trade

China is the focus for now. Europe and Japan are next

Trump (R) announces a trade truce last July with European Commission President Jean-Claude Juncker. Photo: Win McNamee/Getty Images

International trade

Business

Politics

The U.S. and China may be on the verge of resolving — or at least cooling — a heavyweight trade fight that&#x27;s already seen them slap tariffs on $360 billion worth of each other&#x27;s goods. If all goes according to plan, a deal will be in place ahead of a summit later this month between President Trump and Chinese President Xi Jinping.The big picture: That won&#x27;t spell the end of the Trump administration&#x27;s aggressive bid to remake the global trading order. Emboldened by their apparent successes in renegotiating NAFTA as well as the China trade relationship, Mr. Trump and his hardline trade czar Robert Lighthizer are now going to train their sights on a whole slew of other countries where they think they can win terms more favorable to U.S. industry.

India and Pakistan are caught in a dangerous cycle of escalatory violence. 

The latest: Pakistan claims to have shot down two Indian fighter aircraft and captured two pilots on Wednesday. This comes after Indian fighter jets screamed across the disputed border with Pakistan earlier in the week and dropped bombs there for the first time since the two countries were at war in 1971. That mission was a direct response to a Pakistan-based terrorist group's recent killing of 40 Indian police officers on the Indian side of the border.

Are we about to see a major confrontation between these two long-standing, nuclear-armed foes?

The last time we saw tit-for-tat skirmishes like this was back in 2016, and although that episode subsided, the domestic politics of each country this time around make things more dangerous. 

Driving the news: A big election looms in India and an untested leader now runs Pakistan.

In India, there were immediate calls for retaliation against Pakistan after the initial terror attack, and people took to the streets across the country this week to celebrate Prime Minster Narendra Modi's decisive action. 

Modi stands to benefit from resolutely handling a national security crisis that distracts from his so-so economic record.

After all, his BJP party faces a national election in the next few months and is still smarting from setbacks in state-level elections late last year. But using a national security crisis for electoral ends could also put the nationalistic Modi on a path towards escalation.

In Pakistan, the military sought to publicly downplay the extent of the Indian bombing, but also pledged to respond in time.

On Wednesday, it shelled a number of targets in Indian-controlled Kashmir, and it now has at least one Indian pilot in its possession. 

Pakistan's relatively new Prime Minister Imran Khan also called an emergency meeting of the body responsible for overseeing the nation's nuclear arsenal. The message to Delhi: I may be politically inexperienced, but I am keeping all options on the table. So don't mess around.

The bottom line: India/Pakistan has long been the most hair-raising nuclear standoff in the world. In the face of a real crisis, can two leaders who both have a strong incentive to act tough keep tensions in check?

India and Pakistan exchange strikes, raise fears of nuclear showdown

An election in India and an untested leader in Pakistan

India

India and Pakistan are caught in a dangerous cycle of escalatory violence. The latest: Pakistan claims to have shot down two Indian fighter aircraft and captured two pilots on Wednesday. This comes after Indian fighter jets screamed across the disputed border with Pakistan earlier in the week and dropped bombs there for the first time since the two countries were at war in 1971. That mission was a direct response to a Pakistan-based terrorist group&#x27;s recent killing of 40 Indian police officers on the Indian side of the border.

A political battle is brewing in India over a pledge from Rahul Gandhi, leader of the country’s opposition Congress Party, to deliver a guaranteed income to every poor citizen in India if his party wins a parliamentary election set for later this year.

Why it matters: The proposal, if implemented, would be by far the largest ever government attempt to guarantee citizens’ incomes. Around 50 million Indians, or 3.5% of the population, live in extreme poverty today, earning less than $1.90 per day. The scheme would likely extend beyond the poorest of the poor.

Guaranteed income has been gaining steady support in India for years, in part because it’s seen as a silver bullet for rampant corruption and government waste. 

Under India’s current byzantine welfare scheme, around 36% of all government assistance doesn’t make it into people’s pockets. Basic income proponents believe that number could be reduced by moving toward a simpler and more direct transfer system. 

Gandhi didn’t clarify who would receive the new benefit, and one of the biggest challenges will be determining which segments of the population qualify. 

Just this week, a former advisor to the current Modi government offered a similar proposal that would see 75% of rural households receive around $250 from the government each year. The scheme would cost a fairly manageable 1.3% of GDP, which could be balanced by cuts to other social welfare programs.  

But with a big election looming, the debate over guaranteed income in India is as much about political maneuvering as good governance. 

The opposition’s announcement was strategically timed to underscore its generosity ahead of the release of a government budget expected to be chock-full of popular handouts. The rural voters who would benefit most from the proposal turned out in big numbers for the Congress Party in a recent spate of state-level election victories that’s brought Congress back from the political wilderness.

The bottom line: The call for guaranteed income is now set to be a defining issue in India's upcoming election season. It will be an important test case for politicians around the world who see it as a possibly transformative policy solution. 

Guaranteed income pledge shakes up India's election

An important test case for politicians around the world

Gandhi speaks in New Delhi. Photo: Qamar Sibtain/India Today Group/Getty Images

A political battle is brewing in India over a pledge from Rahul Gandhi, leader of the country’s opposition Congress Party, <a class="gtmContentClick" data-vars-link-text="to deliver" data-vars-click-url="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=ae517e46a3&amp;e=51aaed0a65" data-vars-content-id="e028f428-e05c-4595-8fb3-17a402669edf" data-vars-headline="Guaranteed income pledge shakes up India&#x27;s election" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=ae517e46a3&amp;e=51aaed0a65" target="_blank">to deliver</a> a guaranteed income to every poor citizen in India if his party wins a parliamentary election set for later this year.Why it matters: The proposal, if implemented, would be by far the largest ever government attempt to guarantee citizens’ incomes. Around 50 million Indians, or 3.5% of the population, <a class="gtmContentClick" data-vars-link-text="live in extreme poverty" data-vars-click-url="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=c03fec09c1&amp;e=51aaed0a65" data-vars-content-id="e028f428-e05c-4595-8fb3-17a402669edf" data-vars-headline="Guaranteed income pledge shakes up India&#x27;s election" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=c03fec09c1&amp;e=51aaed0a65" target="_blank">live in extreme poverty</a> today, earning less than $1.90 per day. The scheme would likely extend beyond the poorest of the poor.

Despite facing growing internal strains and new external challenges, the NATO alliance has successfully prevented conflict in Europe since its creation in the aftermath of World War II. It's also celebrating its 7oth anniversary this month.

Reproduced from GZERO Media chart via Brookings; Chart: Axios Visuals

Consider this: In the past three centuries, only one similar collective defense agreement has lasted longer, according to a Brookings Institution study. The chart above puts NATO's longevity into historical context.

The world's longest-lasting military alliances

NATO has long outlasted major historical alliances

NATO

Despite facing growing internal strains and new external challenges, the NATO alliance has successfully prevented conflict in Europe since its creation in the aftermath of World War II. It&#x27;s also celebrating its 7oth anniversary this month.<div><figure><div id="av-2019-04-04-defense-treaties-TVESR" style="max-width:100%" data-vars-category="embed" data-vars-sub-category="axios-visual" data-vars-asset-id="av-2019-04-04-defense-treaties-TVESR" class="gtmView"><img alt="Reproduced from GZERO Media chart via Brookings; Chart: Axios Visuals" class="axios-visual-newsletter-fallback-image" src="https://graphics.axios.com/2019-04-04-defense-treaties/fallbacks/2019-04-04-defense-treaties-fallback.png" width="1725" height="1203"/><img alt="Reproduced from GZERO Media chart via Brookings; Chart: Axios Visuals" class="axios-visual-apple-fallback-image" src="https://graphics.axios.com/2019-04-04-defense-treaties/fallbacks/2019-04-04-defense-treaties-apple.png" width="1242" height="1995"/></div><figcaption>Reproduced from GZERO Media <a class="gtmContentClick" data-vars-link-text="chart" data-vars-click-url="https://www.gzeromedia.com/graphic-truth-nato-at-70" data-vars-content-id="f97754ee-0f1c-4392-af52-2e3eb3935dc8" data-vars-headline="The world&#x27;s longest-lasting military alliances" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.gzeromedia.com/graphic-truth-nato-at-70" target="_blank">chart</a> via <a class="gtmContentClick" data-vars-link-text="Brookings" data-vars-click-url="https://www.brookings.edu/wp-content/uploads/2016/06/0630_nato_alliance_warren.pdf" data-vars-content-id="f97754ee-0f1c-4392-af52-2e3eb3935dc8" data-vars-headline="The world&#x27;s longest-lasting military alliances" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.brookings.edu/wp-content/uploads/2016/06/0630_nato_alliance_warren.pdf" target="_blank">Brookings</a>; Chart: Axios Visuals</figcaption></figure></div>Consider this: In the past three centuries, only one similar collective defense agreement has lasted longer, according to a <a class="gtmContentClick" data-vars-link-text="Brookings Institution study" data-vars-click-url="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=83b727d8f7&amp;e=51aaed0a65" data-vars-content-id="f97754ee-0f1c-4392-af52-2e3eb3935dc8" data-vars-headline="The world&#x27;s longest-lasting military alliances" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://eurasiagroup.us12.list-manage.com/track/click?u=7404e6dcdc8018f49c82e941d&amp;id=83b727d8f7&amp;e=51aaed0a65" target="_blank">Brookings Institution study</a>. The chart above puts NATO&#x27;s longevity into historical context.<a class="gtmContentClick" data-vars-link-text="Sign up for Signal" data-vars-click-url="http://eurasiagroup.us12.list-manage.com/subscribe?u=7404e6dcdc8018f49c82e941d&amp;id=e605619869" data-vars-content-id="f97754ee-0f1c-4392-af52-2e3eb3935dc8" data-vars-headline="The world&#x27;s longest-lasting military alliances" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="http://eurasiagroup.us12.list-manage.com/subscribe?u=7404e6dcdc8018f49c82e941d&amp;id=e605619869" target="_blank">Sign up for Signal</a>, a thrice-weekly newsletter from <a class="gtmContentClick" data-vars-link-text="GZERO Media" data-vars-click-url="https://www.gzeromedia.com/" data-vars-content-id="f97754ee-0f1c-4392-af52-2e3eb3935dc8" data-vars-headline="The world&#x27;s longest-lasting military alliances" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.gzeromedia.com/" target="_blank">GZERO Media</a>, a Eurasia Group company.

Gabe Lipton of GZERO Media

Stories

The world's longest-lasting military alliances

China traces a new line through Europe as Italy backs Belt and Road

Trump's next battles on trade

India and Pakistan exchange strikes, raise fears of nuclear showdown

Guaranteed income pledge shakes up India's election