Trump Aims To Change the World

The Trump Administration in its first 100 days is rapidly embarking on changes that could reset the economic and political environments in the United States and the world.

Even now, American and foreign capital markets are recalibrating as they assess the onslaught of presidential actions, from trade tariffs to the mass firing of federal workers, from sweeping regulatory rollbacks to the suspension of foreign aid, from peace talks in Ukraine and Gaza to military strikes in Yemen.

All of this creates uncertainty, which spooks financial markets into downside corrections. Generally, this loss of equity will continue until investors see a clear outcome.
In the geopolitical arena, the reset could create some positive outcomes. For instance, if the Ukraine-Russia war ends, Trump has made it clear that our European allies going forward are responsible for keeping the peace on their continent. That means they likely increase their defense budgets, which could result in more fiscal spending that stimulates their economies, resulting in stronger foreign markets and more investment opportunities.

More of a long shot is the White House’s peace efforts in the Middle East. While the benefits of stability in the oil-rich area after 75 years of hostility are evident, this could get messy, especially if the Gaza conflict escalates into a regional war between Iran and Israel. While past Mideast fighting has dramatically impacted energy prices, this might be less of an issue now because of today’s broad diversity of global energy sources, and U.S. energy independence clearly helps us.

But the most uncertainty lies around the broader international issue of tariffs and how Trump plans to use them.

First some background: In 2020, the global pandemic and subsequent economic shutdown exposed how dependent America is on international supply chains for pharmaceuticals, semiconductors, machinery and product parts, and raw materials for advanced technologies. We even import steel and aluminum, two commodities the nation once produced in vast quantities.

Part of Trump’s strategy is to use tariffs to encourage businesses now bringing essential goods into the United States to build factories, manufacturing plants, labs, and data centers in America. The plan is already working. Companies such as Apple, TSMC (Taiwanese maker of the world’s most sophisticated computer chips), Oracle, SoftBank, OpenAI, and Stargate (Data Centers) have committed over $440 billion to build new U.S. plants without any government subsidies.

This makes America closer to self-sufficiency in a geopolitically uncertain world. The disadvantage is that tariffs will likely spur prices higher.

More puzzling is Trump’s broader use of tariffs. It’s one thing to punish China for long-running unfair trade practices, but it’s another to slap tariffs on Canada, Mexico, and the European Union, which all share deep economic and political interests with America. Considering that 29% of S&P 500 companies’ revenues come from international sources, you begin to understand why financial markets are selling off.

Get ready for the roller-coaster ride to continue as the new administration lays out its priorities in its first 100 days. Also, prepare to pounce on investment opportunities that will likely accompany this uncertainty.