The Administration’s Authoritarian Ambitions May Affect Global Investments
Money is Green. Not Red or Blue. I am always writing from the standpoint of a money manager as we are privileged to manage their assets and their trust. I see and say things the way they are. This article is not a political debate. Rather an attempt to decipher the current state of the union.
The economic future in the United States is marked by significant uncertainty, a situation that could ripple across global markets. Stock markets, historically sensitive to instability, tend to react negatively to such uncertainty. For those involved in global investments, monitoring developments in the US to understand the direction of its economic policies under the current administration is critical, and time consuming.
Unclear Economic Plans in the US
The current administration’s economic policy appears to lack a well-structured, coherent strategy, raising concerns about its long-term stability. There has been widespread speculation and over-interpretation about the intentions behind current US policies. While some may argue that there’s a larger, undisclosed plan, there’s little concrete evidence to suggest a comprehensive strategy is at play.
The administration has proposed several bold economic measures that could reshape US policy dramatically. These include:
- Trade War: The US has already imposed tariffs on steel and aluminum from various countries, with additional tariffs threatened on goods from China, Canada, Mexico, and potentially the European Union. If these tariffs escalate, it could trigger a global trade war. [i]
- Currency Manipulation: Economic advisors within the administration have floated the idea of leveraging US military power to force both allies and adversaries into a currency agreement that would weaken the US dollar, thereby making American exports more competitive. [ii]
- Debt Restructuring: Discussions are also circulating around restructuring US debt, particularly by forcing foreign investors who hold short-term US government bonds to convert them into long-term bonds, potentially lasting 50 or 100 years. This would allow the government to delay repayments, shifting the debt burden further into the future.[iii]
- Unfunded Tax Cuts: The administration’s tax cuts, intended to boost US competitiveness, could add an estimated $4.6 trillion to the national debt over the next decade, according to Senate budget experts. [iv]
- Uncertainty About the Rule of Law: Growing concerns exist regarding the administration’s respect for judicial decisions, which could erode legal certainty and affect international investors’ confidence in US government bonds. [v]
The potential consequences of these proposed changes could be far-reaching, affecting not only the US economy but the global economic landscape as well.
The State of US Economic Policy
Economists agree that there is no clear or well-thought-out economic plan emerging from the current administration. Instead, what is unfolding appears to be a protectionist approach, often described as “mercantilism.” This philosophy hinges on the belief that international trade is a zero-sum game, where one country’s gain is another’s loss. This perspective significantly influences the administration’s stance on trade negotiations, where the goal seems to be to create economic advantages for the US at the expense of other nations.[vi]
Risk to Global Competitiveness
A central concern regarding the US’s current economic approach is the potential for a global trade war. The administration has imposed tariffs, believing that these measures will force companies to move production to the US, thereby creating domestic jobs. However, economists warn that this strategy could backfire, making US industries less competitive rather than more. [vii]
The disruption of global supply chains—vital to modern manufacturing—could lead to higher production costs in the US, which would, in turn, make American products less competitive on the global market. In this scenario, tariffs could ultimately harm US industries rather than benefit them.
Impact on Global Investments
While the policies of the current administration primarily affect the US economy, the US is such a dominant economic player that its decisions have significant repercussions for global markets. As a result, concerns have been raised about the risks associated with continued investment in the US, particularly under the current leadership.
The US has traditionally been seen as a safe-haven for investors, thanks to its stable financial system and trusted currency. However, recent shifts in policy and rhetoric have raised questions about the long-term stability of US financial markets. The risk of destabilizing moves, such as those outlined in the Mar-a-Lago Accord, could undermine investor confidence in the US economy.[viii]
The Mar-a-Lago Plan
A particularly concerning proposal is the Mar-a-Lago Accord, a controversial economic plan that could involve forcing major global economies into a currency agreement that weakens the US dollar. While this would make American exports more competitive, it could also lead to significant financial instability and disrupt global economic relations.
The plan also includes restructuring US government debt, potentially converting short-term bonds into long-term ones. This would delay repayment to foreign bondholders, pushing the debt burden into the distant future. The strategy could create instability in the global financial system if it were implemented.
Moreover, the administration has suggested using US military power to enforce these economic and currency policies, intertwining global security concerns with economic interests. This could strain relations with key economic players, such as China and the European Union, and raise the likelihood of geopolitical tensions. [ix]
If such measures were enacted, the US could lose its standing as a reliable financial haven. Investors who hold US government bonds could face substantial losses if the US were to default or fail to honor its debt obligations.
Positive Shifts in Europe Signal Potential Economic Growth
Recent political developments in Europe have raised optimism among investors, marking a shift in the region’s economic outlook. Germany’s decision to abandon its long-standing fiscal restraint, often referred to as the “debt brake,” in favor of increased investments in defense and infrastructure comes as a surprise to many. For years, such a policy change seemed highly unlikely, yet it was recently endorsed in a referendum passed within a matter of weeks.
If European leaders follow through on their commitment to enhance the business environment and ramp up public investment, it could pave the way for significant economic growth across the continent in the coming years. However, despite this positive momentum, it remains too early to definitively predict the direction of the global economy. Strong statements from both the U.S. and Europe provide hope, but the real test will come in the implementation of these policies.
U.S. Economic Uncertainty Poses Risks
While the U.S. has not yet reached a full-blown economic crisis, the current political climate introduces significant uncertainty. Proposed policies and ongoing discussions raise questions about the stability of the global economy. Investors worldwide are exercising caution, as the outcome of these debates could have far-reaching effects on international financial markets. As the situation unfolds, global markets will need to adapt, and the potential for long-term volatility remains high, shaping future investment strategies.
[ii] New York Post – March 26, 2025
[iii] Leviticus 25 Plan – October 2024
[v] The Guardian – March 29, 2025
[vii] Business Insider – March 2025
[viii] Financial Times – March 2025
[ix] https://nypost.com/2025/03/26/us-news/trump-announces-25-tariffs-on-all-foreign-made-cars/
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