Munich in February

In February, we witnessed very eerie undertones of a history that is rhyming, if not actually repeating, much to Mark Twain’s chagrin.  At the center of this de ja vu moment, is Munich, Germany, which hosted the annual Munich Security Conference that proved to be a hotbed of geopolitical discussion and controversy.

Let’s take a step back in history to pre-war Europe to provide context.  The Munich Agreement of 1938, authored by British Prime Minister Neville Chamberlain, is often considered and even cited as a beacon of the dangers of appeasing and totally giving in to the asks of authoritarian regimes and autocratic despots.  In that agreement, Britain, France, Germany, and Italy permitted Nazi Germany’s annexation of a certain region of Czechoslovakia, in exchange for promises of no further territorial expansion/aggression.  Chamberlain hailed the agreement as a landmark success and a pivotal moment in history, proclaiming “peace for our time,” believing he had averted another world war. However, little did he realize that this concession awakened and emboldened Adolf Hitler, leading to several acts of further aggression, and ultimately ushering in World War II.  Quite ironically, appeasement in that historical context proved to be a catalyst for further aggression.

Fast forward to February, 2025, and the term “Munich” has re-emerged in political discussions about US foreign policy under President Donald Trump.  Trump’s administration, particularly through Vice President JD Vance, has taken a unique stance in its desire to negotiate directly with Russian President Vladimir Putin, completely bypassing European governments and Ukraine itself, raising concerns among European allies.

Even more bizarre, at the Munich Security Conference in February 2025, Vance delivered a speech criticizing European leaders for what he described as regressing on freedom of speech, civil liberties,  and democracy, citing the hampering of certain ultra right-wing parties.  He emphasized that under Trump’s leadership, the US may disagree with European views but would not impose its own values on the European continent.

This speech arguably may be the beginning of what we would consider a geopolitical game changer for decades to come for trans-Atlantic relations between the US and EU and NATO itself – one of world’s largest and most successful alliances.

In total shock, European officials have expressed concerns that the US could seek a peace deal with Russia that excludes the Ukrainian people’s wishes and undermines European security. The exclusion of European leaders from US-Russia peace negotiations and the suggestion that NATO membership for Ukraine has to be “off the table” have intensified these fears.

We would further add that, if NATO in fact is the “existential threat” that many realists believe was the cause for forcing Putin to invade Ukraine, how can we ignore Finland’s accession to NATO, and more importantly, not make Finland a central negotiating point to any peace talks between Europe and Russia. If realpolitik is to guide us in these geopolitical efforts, Finland is surely a much bigger existential threat that needs to be addressed simultaneously.

This appeasement to Putin and his anti-NATO demands made while in Munich masks the failures of Chamberlain almost ninety years ago.  Critics and geopolitical thinkers alike argue that Trump’s stance and actions are single-handedly dismantling the post-war liberal order and architecture laid out at Bretton Woods, and legitimizing authoritarian and autocratic regimes, like Putin and more pronounced Xi Jinping.  Arguably, Trump’s influence, supported by figures like Vance and Musk, has destabilized Europe, and even Canada, while emboldening a handful of contemporary authoritarian regimes, drawing eerie comparisons to Chamberlain, and his historical appeasement in Munich in 1938.

To summarize, the juxtaposition between Neville Chamberlain’s appeasement in 1938 and Donald Trump’s initial foreign policy forays emphasize the dangers of conceding to authoritarian demands without emphasizing long-term peace and broad-based regional stability.  While the differences between the macro landscape in 1938 is in stark contrast to that in 2025, we cannot ignore the potential ramifications of political missteps, especially when not involving local leaders.

While Chamberlain’s actions are now viewed as a major political miscalculation that in many ways emboldened Nazi Germany, Trump’s approach to peace talks raises similar concerns about the potential for empowering authoritarian regimes at the expense of core democratic norms and international security.  And by authoritarian regimes, we are not concerned so much with Russia and Putin as we are with our more pronounced Thucydidean rival, China and Xi Jinping.  Does Trump’s appeasement with Putin translate into a green light for a more territorially aggressive Xi Jinping with Taiwan and the South China Seas?

The one bright spot is that, if we let markets be our clarion guide, we note that for 2025 on the YTD, European equity markets are handily outpacing US equities by a wide margin – are the markets trying to tell us anything?

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