Buckle up for a volatile year of Trump-Xi, Taiwan and Kim

THIS is the season when columnists turn to prophecy, and then congratulate themselves a year later for getting some of it right. I’m about to join the club. 

As I predicted at the end of last year, Asia in 2025 revolved around three main forces: the blossoming bromance between US President Donald Trump and China’s Xi Jinping, rising pressure on Taiwan, and a newly emboldened Kim Jong Un drawing closer to both Moscow and Beijing.

These dynamics will only get more obvious in 2026. The region is heading into an increasingly precarious year, with deepening tensions that will have a cascading effect on all of us. 

The Trump-Xi bromance could sour 

On the surface, Trump and Xi appear to have found a new warmth – but it’s fragile. 

Xi was the winner of the trade war in 2025, which means Trump is going into this next year on the back foot. That won’t be lost in Washington, no matter how loud the bluster. 

While the rapprochement has been welcomed by markets, a lot could go wrong. They will have the opportunity to meet as many as four times in 2026, providing multiple occasions for relations to head south. 

Even if they don’t, they’ll likely remain tense, according to a 2026 forecast for US-China relations from the Berlin-based Mercator Institute for China Studies. Almost three-quarters of respondents, comprising China experts and observers, see relations deteriorating across the board, from military and trade ties to technology.

That’s despite Trump’s most recent decision to allow Nvidia to sell advanced chips to China, watering down years of national security safeguards. Washington says Nvidia’s top products will still be restricted, but the move gives Beijing access to semiconductors at least a generation ahead of its best technology.

Another front to watch: China-Japan ties

Tokyo has become more vocal about the link between its own security and stability in the Taiwan Strait, a position Beijing views as provocative. 

The Chinese leader will see how much he can push Trump on Taiwan, the self-governed democratic island Beijing claims as its own. That will make Taipei more vulnerable. 

Taiwan will feel the heat even more 

President Lai Ching-te has his work cut out for him. He’ll need to navigate a politically gridlocked legislature while trying to pass a US$40 billion supplementary defence budget aimed at modernising the military and strengthening deterrence to defend against the rising threat from China. 

The island has already pledged to lift defence spending to 5 per cent of gross domestic product by 2030, up from over 3 per cent. But more money alone may not be enough. 

Beijing, which has vowed to take control of Taiwan through peaceful means but has refused to rule out doing so by using force, has ramped up military and political pressure in recent years to assert its claims.

The People’s Liberation Army conducted a second day of live-fire military drills to Taiwan’s north on Tuesday (Dec 30), while China’s gray-zone tactics – warplanes crossing the median line, naval patrols circling the island, cyber and information warfare – are now near-daily events. These will almost certainly continue in 2026. 

Kim Jong Un getting more confident 

Kim has repeatedly rejected denuclearisation negotiations since the most recent talks in 2019 with Trump broke down.

The North Korean leader views nuclear weapons as a guarantor of his security and has no intention of renouncing them.

He’s also being emboldened by his deepening ties with Russia and steady support from China, which is changing the calculus on the peninsula.

South Korean officials have hinted at the chance of a summit with the North in 2026, something unimaginable over a year ago. This gives Kim leverage he’s been looking for to potentially get sanctions relief, or extract tacit approval from the US that denuclearisation has been a failure and that he can go ahead and continue with his nuclear weapons programme.

Expect more missile launches, diplomatic theatre and other attempts to hijack the geopolitical agenda. 

Asia in 2026 is not on the brink of war. But the region will be more volatile than it has been in recent memory. Buckle up. BLOOMBERG