Overview
The political environment is critical for an industry’s health and, in turn, for the success of sophisticated institutional investment and risk managers. Our premise is that the environment has changed significantly in ways that many have yet to appreciate. (Note: The aim of this installment is not to endorse one candidate or party over another, but rather to provide insight into developing conditions.)
Significant Contrast
The prior administration aimed to have minimal interaction with the press. In contrast, the current administration appears to be massively engaged, and the media appears to have difficulty keeping up. Below are some of the shifts we see developing:
Tariffs and the External Revenue Service
Although every credible economist discouraged the imposition of tariffs, the current administration instituted 25% tariffs on Canada and Mexico, and 10% tariffs on China¹. With equal alacrity, the tariffs on Mexico were placed on a 30 day hold, presumably in response to some Mexican concessions².
The purpose of creating the “External Revenue Service” appears to be three-fold. One is to encourage the shifting of manufacturing (and jobs) to American soil. Two is to generate additional revenue to reduce sovereign debt. Three is to force the adoption of policies that are more amenable to the current administration.
Monroe Doctrine Revisited
To refresh your American history, in 1823, President Monroe issued the “Monroe Doctrine” as a means of warning to many European nations to stay out of Western Hemisphere.
“By the beginning of the 20th century, … the United States itself was able to successfully enforce the doctrine, and it became seen as a defining moment in the foreign policy of the United States and one of its longest-standing tenets.” ³
It appears that the doctrine is being reinstated with the current administration via comments regarding the Panama Canal, Canada, and Greenland (yes, Greenland is in the Western Hemisphere per Google AI Overview).
Reconstitution of the Intelligence Agencies
For those who haven’t noticed, the current administration is planning to do what no other recent administration has done and that is releasing files connected to the assassination of JFK, RFK, and MLK. The files may contain information connecting the intelligence agencies to the events and provide support for the current administration for a reformulation of the agencies.
Capital Flows
The current administration appears to be focusing on encouraging significant investment in the America, such as the recent $500B infrastructure investment via OpenAI, Oracle and SoftBank⁴. Note, that these investments are under question given the massive advances made with paltry investment by Chinese firm DeepSeek.
We assume that the current administration realizes that jobs (and presumably future votes) will flow with the capital and that the country needs the capital to remain competitive.
Energy Markets
On multiple occasions, the current administration has reiterated its support for increased energy development with the refrain: “Drill, baby, drill.” While we are trying to confirm this, we believe the current administration is encouraging Saudi Arabia to follow suit to reduce inflation, lower interest rates, and stimulate the economy. Although unstated, the outcome of reduced energy prices would be a decrease in Russia’s revenues and increased pressure on the country to curtail the Ukraine war.
European Reset
The arrangement in which America provides defense support to Europe while European nations fall short on their military spending is likely to change. Given the varied conditions of countries in the NATO alliance, there might be a complete change in its constitution with countries such as Poland (which spends 3.9%) obtaining full support of America, while others such as Belgium (at 1.13%), face a withdrawal of support and potential trade restrictions.
China Reset
President Xi has often stated that he wants to assume control of Taiwan, an objective that is at odds with the current American administration and its supporters. Watch for various low risk/ high reward levers to be used to encourage a de-escalation of tensions. Stated examples are tariffs and trade restrictions. However, given that China imports a significant percentage of its energy and food and is heavily dependent on export revenue, the country is highly dependent on the openness of sea lanes. The disorganized Houthis were successful in attacking ships in the Red Sea,⁵ and therefore, a more organized force could do the same for any other traffic.
Conclusion
We hope this installment is helpful. Our sense is that we will revisit these topics as events and policies unfold.
Sources
[1] https://www.wsj.com/economy/trade/trump-says-tariffs-are-coming-on-computer-chips-steel-and-more-cef9974c
[2] https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-020-03-2025?mod=djemalertNEWS
[3] https://en.wikipedia.org/wiki/Monroe_Doctrine
[4] https://apnews.com/article/trump-ai-openai-oracle-softbank-son-altman-ellison-be261f8a8ee07a0623d4170397348c41
[5] https://www.washingtoninstitute.org/policy-analysis/houthi-shipping-attacks-patterns-and-expectations-2025