Geopolitics Review - 26th May 2025
The Donald Diaries: Will Trump's Grand Strategy Work?
Contents
Introduction
Is This Strategy Working?
Financial Market Implications
Concluding Remarks
Other News In Geopolitics This Week
Bitesize Edition
Last week, I started collecting together everything we’ve been discussing in the last few months. The aim of this was to determine what Trump’s grand strategy approach has been in his first few months. Stephen Miran’s paper, “A User’s Guide to Restructuring The Global Trading System” and Zoltan Pozsar’s pitch for a cheaper dollar and a Mar-A-Lago Accord are two of the biggest influences for Trump’s long-term pursuits.
But when we collect these pursuits together, we can narrow them down even more. It all boils down to Trump’s pursuit of “America First”. A large tool in this pursuit has been Trump’s tariff policy.
When exploring the Trump policy on a grand scale, it can be easy to get bogged down in the noise, of which there is a lot. However, the most important question here is how much this strategy is working, if at all. With Trump’s pursuits also redrawing global trade and global finance, we can also assess the impacts on financial markets. I’ll cover this and much more today.
Introduction
I’m reaching the end of this series on Trump, and so it’s time to collect the many strands together. Of course, throughout the next few years, we will likely trek down paths that nobody could have anticipated. However, we can’t predict this far into the future. What we can do is see whether these strategies are working today, and what effects we could see in the near term as a result of Trump’s pursuits. Let’s dive in.
Is This Strategy Working?
To assess if this is working, let’s first add up how much Trump received in investment from his trip to the Middle East. Trump claims to have received over $2T from Saudi Arabia, Qatar, and the UAE. Firstly, some of the Saudi projects were announced in January, and so many will be counting them twice. Secondly, Qatar has heavily bailed out Boeing by undertaking the biggest order of Boeing planes that has ever been seen. With Boeing stagnating, this deal will give them a lifeline, but it doesn’t guarantee the future success of the Middle Eastern investment. He also made deals involving NVIDIA to send the Middle East semiconductor chips.
There have been some analysts reporting that the Middle East has massively played Trump. How could this be? Could this technology end up in the hands of China? This is why Biden imposed controls on the sale of most U.S. chips. Such issues will be seen with time, but the potential is there. One of Trump’s biggest talking points was that the times of nation-building projects and telling people “how to live” are over. This translates to no more exporting democracy to nations that don’t want it, and it will be received positively by many leaders around the world. But, it does open up risks such as the one seen here.
So, Trump is seeking to attract investment into physical assets. The full list of investments during his second term can be found at this link. If we focus on the tariffs purely as a negotiating tool, this as evidence alone would signal that they are working, based on the sheer number of deals negotiated. But we also have other effects as a result of the tariffs.
One such aim of tariffs is to restore U.S. manufacturing. There remain huge issues here. Services make up 70% of the global economy, and manufacturing 30%. But, if anything, with consumerism fuelling many global economies, we’re manufacturing more than ever. Surely, with us making more than ever, this means there is potential for a manufacturing boom in the United States? Not quite. This global manufacturing boom is possible because people no longer work on manufacturing lines; machines do.
We’ve existed in worlds before where trade, finance, and manufacturing have all shifted. In the 1930s and the 1970s, we especially saw this. Geopolitical tensions rose as a result of these shifts, but with global reform and innovation, we eventually recovered. These recoveries weren’t without pain, and they are inevitable. They will occur again, as many believe we are experiencing right now. If we are living through such a period, the current pursuit to restore U.S. manufacturing from the Trump Administration strikes me as one that will lengthen these recoveries, not improve things. The rise of global tension is another reason why Trump is heavily pursuing peace in conflicts around the world. If he doesn’t, his domestic policy could falter, and international tensions could continue to escalate.
As manufacturing jobs have declined over the years, the services sector will have to increase jobs, or the world of work will have to dramatically shift. If there aren’t enough jobs to go around, then economic inequality that already plagues many Western nations will see them collapse from within. We can’t know how the next few years will unfold, but over the next few decades, trends that are emerging today in the labour market likely won’t get any better, especially with artificial intelligence entering the picture. It’s not that we can just expect businesses to hire more people, because businesses are purely self-interested and hunt for profits. Especially in this macro environment where inflationary pressures are emerging once again from the Trump tariff policy, and where elevated interest rates risk slower growth and recession risk, these businesses will prioritise protecting their bottom lines.
To sum up how much manufacturing has changed in the last few decades, we can use data from the steel industry. In 1950, 6 million tonnes of steel were produced in the United States with 30,000 workers. By 2010, 7.5 million tonnes were produced with 5,000. If this isn’t a clear effect of automation, then we’ve got some rather productive steelworkers over in the United States.
I’m aware that this is quite a tangent from whether Trump’s current major policies are working or not, but I believe it highlights a key point. We need major labour market reform, or we risk major crises in the developing world. Whether new sectors emerge or universal basic income is introduced, it’s clear even today that these trends will one day need addressing. Trump’s strategy is a pivot to self-sufficiency and boosted manufacturing, which is needed. However, it will not help address the labour market issues, and the success or lack of success will heavily depend on the areas of boosted manufacturing that are focused on. If Trump focuses on the industries of tomorrow and the key materials required to grow them, this strategy could be more net positive than negative.
But with such a change comes unexpected consequences. Trump’s tariff policy has seen inflation brought back to the discussion. We need to assess how all this comes together and what financial and economic implications would be seen.
Financial Market Implications
Trump wants investment in the United States to rotate into harder assets, such as military deals, infrastructure investment, and manufacturing. Naturally, the stock market would suffer as a result of this. The always-rising nature of the United States stock market makes it an easy place to park capital and expect a return. However, Trump no longer wants this to be the case. He doesn’t want a complete market collapse, but investment in physical assets will aid Trump’s America First pivot, partly because it ensures even greater self-sufficiency. Some have also interpreted the latest stock market drop as an unravelling of the “Magnificent 7” trade. Regardless of the reasoning, which a Magnificent 7 unravelling is very possible, one thing is clear: stock market volatility is back, and it’s back with a bang.
We’ve already seen Gold rise and oil fall, as I discussed here.
But in general, Trump wants investments to pivot into harder assets, without a fall in the United States stock market. After stock market losses following the Liberation Day tariffs were completely reversed, Trump called for investors to “buy stocks”. However, Trump can’t have it all. If he pursues his America First policy successfully, it's natural that investment in the stock market or treasuries would be where capital is shifted from. We’ve also had falling treasury demand for years, which we’ve seen contribute to rising long-term bond yields. I’ll dive into more details on this next week. Ultimately, Trump can’t have it all, and so further negative impacts could be expected. With recessions and inflation clearly on the mind of Jerome Powell, we could find ourselves watching two beasts battle within the next year, and Trump can shout all he wants on Truth Social. Jerome Powell will play a huge part in the future direction of financial markets, especially when Trump’s changes call for cheaper borrowing, which Powell is heavily against.
It wouldn’t be fair to ignore where Trump’s plan has worked. He has hoped for a cheaper dollar, and he is certainly getting that. It’s questionable if this is from reduced demand or an effect of secret currency deals, but it is occurring nevertheless. Any potential boosts to exports as a result of a cheaper dollar would unfold over the years and would be largely affected by changes to manufacturing that Trump is in pursuit of.
Also, the investment deals are promising if they lead to greater self-sufficiency of supply chains in key industries. This is also supported by cheaper energy prices as OPEC has boosted supply. From this, he can ensure the future of U.S. energy security by refilling the strategic petroleum reserve. This also makes prices cheaper for consumers at the pump. But inflationary pressures lurk, and I’ve not even started to discuss the biggest elephant in the room: Rising U.S. debt.
In this past week, we’ve seen developing stories on the subject of U.S. national debt. We’ve seen Trump’s spending bill and stablecoin bill pass through the U.S. political system. If we couple this with the Moody’s downgrade of U.S. debt, the effect has been that long-term bond yields have risen sharply. Why is this happening? And what will be the after-effects of such moves? Will this be the biggest issue that potentially upends Trump’s grand strategy pursuits? I’ll discuss this next week.
Concluding Remarks
There is a lot changing in the world currently, with Trump stealing headlines that continue to be the defining factors that are driving financial markets. A question I ask is whether Trump is benefitting from this noise and confusion, or if he’ll become a victim of the situation of his own creation?
On Thursday, I’ll return to the Global Questions Series, where I’ll explore the ideology of Constructivism. Next Monday, I’ll dive into the biggest issue that Donald has on his hands, the sharply rising, unaddressed U.S. national debt. Does he have a plan for this, or like countless presidents before him, will he attempt to leave the problem for somebody else? Come back over the next week if these discussions sound interesting to you.
Other News In Geopolitics This Week:
Africa
Asia
Europe
Doctors and Teachers In UK To Receive Above-Inflation 4% Pay Rise
Energy Bills In UK Set To Fall As Price Cap Set To Be Lowered
Home Secretary In The UK Pledges New Powers To Target Foreign Intelligence Agencies
Kremlin Agrees To Work With Kyiv On Possible Future Peace Accord
Macron Orders New Measures To Counter The Muslim Brotherhood In France
Russia Alleges Ukraine Tried To Attack Putin’s Helicopter In Mid-Flight
Russia's Strike on Ukrainian Training Ground Results In Casualties
Russia’s New Ballistic Missiles Are Difficult For Patriot To Intercept
UK Asks Kosovo To Take Migrants As Part of “Return Hubs” Plan
UK Government Delays Ban For TV Adverts On High Fat, Salt, and Sugar
UK Investigates Possible Russian Involvement In Starmer Arson Attacks
UK Suspends Trade Talks With Israel, Summons Ambassador Over Gaza Aid
UK Warns Of Cyber Activity By Russia Targeting Delivery of Support to Ukraine
Middle East
Houthis Add Northern Israeli Port To List of Targets For Ballistic Missiles
IDF Fired Warning Shots At British Diplomats In The West Bank
Iran Talks Hit Crossroads: Zero Nuclear Weapons or Zero Enrichment?
Ireland’s Deputy Premier Accuses Israel of “Genocidal Activity” In Gaza
Israel Preparing Possible Preemptive Attack On Iranian Nuclear Facilities
Netanyahu Says Canada, UK, France Offering Hamas “Huge Prize” To Hamas With Gaza Letter
UN Says No Aid Has Reached Palestinians, Two Days After Supplies Began Entering Gaza
North America
22 More People and Entities Charged In Arizona Medicaid Fraud
A Third of Russell 3000 Energy Companies Trade Below Book Value
EPA Looking To Remove Biden-Era Limits on Emissions From Coal and Gas-Fired Power Plants
FBI Identifies Suspect In Palm Springs Fertility Clinic Bombing
FDA No Longer Recommends COVID-19 Vaccine For Healthy Babies
House Republicans Press Harvard For Transparency Over Alleged Ties To Chinese Military
Nuclear Stocks Soar As Trump Signs Order To Streamline Reactor Approvals
Oracle To Spend $40B On NVIDIA Chips For Texas AI Data Centre
Pro-Palestine Protestors Burn Diplomas and Clash With Police At Columbia Graduation
Rubio Says Syria Could Be Weeks Away From State Collapse Once Again
Solar Stocks Plunge After House GOP Budget Is Bad For Clean Energy
Supreme Court Removes Protected Status From 300,000 Venezuelan Migrants
Supreme Court Signals Support For An Independent Federal Reserve
Surgeons In California Perform First Ever Human Bladder Transplant
Trump Allows New York Offshore Wind Project To Restart After Natural Gas Compromise
Trump Shows Video Claiming “White Genocide” To South African President
Trump-Putin Call Fails To Make Progress Despite Trump’s Rhetoric
U.S. Existing Home Sales Experience Weakest April Since The GFC
US Veteran Freed From Venezuelan Prison In Latest US-Venezuela Diplomacy
USDA Approves Nebraska Banning Soda and Energy Drinks From Food Stamps
South America
Other
Klarna’s Losses Double After Consumers Fall Behind on Repayments
Moderna Withdraws Application For Joint COVID-Influenza Vaccine
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