‘Nobody will trust a US treaty again,’ and Japan’s yen is now the new safe haven currency, strategist says #JapanFinance

• Quantum Strategy’s David Roche said “NATO is dead” as the US distances itself from European allies and warms up to Russia. That makes Vladimir Putin and Xi Jinping the big winners and the US the “big loser,” he added, with Japan’s yen displacing the dollar as the world’s safe haven currency.

An American promise is looking more doubtful as the US upends traditional geopolitics, with repercussions in global financial markets, according to Quantum Strategy’s David Roche.

In an interview with CNBC on Tuesday, he declared that “NATO is dead,” with President Donald Trump distancing the US from long-time European allies and warming up to the Kremlin, which was underscored by his recent shouting match with Ukrainian President Volodymr Zelensky.

That makes Russia’s Vladimir Putin and China’s Xi Jinping the big winners, as they see confirmation of their views that democratic powers are on the decline, Roche explained.

“The big loser is actually the US, because nobody will trust a US treaty again,” he added, noting that a lot of so-called Global South countries will fall into China’s orbit as a result.

Trump has long been skeptical of NATO and complained that member countries aren’t spending enough on defense.

But since his first term, they have stepped up their outlays, with three-fourths now spending 2% of their GDP or more on their militaries after just the US, UK and Greece met that benchmark in 2015, according to a tally by the Associated Press.

Still, Trump has demanded allies continue boosting expenditures and warned on Thursday that the US won’t come their aid if they don’t.

“If they don’t pay, I’m not going to defend them. No, I’m not going to defend them,” he told reporters in the Oval Office.

While some European leaders have publicly maintained that they still see the US as an ally, they are also preparing for a world without a US security shield.

The European Union recently announced plans to increase defense spending by more than $800 billion, as it seeks to step up support for Ukraine while the US pulls back.

Roche predicted Europe will need five to six years, or perhaps even more, to reinvigorate its military capabilities. Meanwhile, the geopolitical turmoil has implications for global financial markets.

“So you want to buy defense,” he told CNBC. “You want to keep out of the euro and own the yen, which is now the new safe haven as the US is getting to look very dangerous and US exceptionalism will suffer from the costs of Trump’s commercial tariffs.”