About 18 months ago, I began discussing a phenomenon that I dubbed “The National Securitisation of Everything”. We were witnessing the US government and other governments referring to and designating an ever-wider array of issues, assets, industries and activities as “strategic”, or “central to national security”, and critical in the West’s competition with China.
With those designations, policy makers imposed a raft of trade restrictions and unprecedented inducements for domestic production and so called friend-shoring – think about things like tariffs on electric vehicles, restrictions on the export of chips, and curbs on providing maintenance to Chinese semiconductor businesses. There have been prohibitions on investment by Chinese players and industries deemed critical to national security; while China, on the other hand, restricts the export of key rare earths.
In the US, the Inflation Reduction Act and other legislation mobilised hundreds of billions of dollars for the development of key technologies and similar, if less ambitious, subsidy policies in the EU and Australia and other countries.
Globally, we’ve seen a raft of sanctions to levels previously unheard of – about a third of the world is under US sanctions now – and Government involvement in the market in a dramatic way. That’s what we’re seeing here, often under the banner of national security.
While much is uncertain about the new Trump administration, we know that the President is going to put these measures on steroids. I’ll leave aside for the moment the provocative tariff threats, the Greenland and Panama Canal provocations, and who’s going to get 10 per cent versus 25 per cent or 60 per cent tariffs on their imports.
On day one of President Trump’s second term, he issued a memo titled America-First Trade Policy, where, among other things, he directed his administration to “study and advise on export control systems and advise on modifications in light of developments involving strategic adversaries or geopolitical rivals, as well as other relevant national security and global, global considerations”. So, the national securitisation of trade.
The order also calls for the eliminating of loopholes, “especially those that enable the transfer of strategic goods, software, services and technology to countries that are strategic rivals and their proxies”.
Melding security and commercial interests
The other piece is an interesting melding of security interests and commercial interests. One data point: a few years ago, a Florida Congressman named Mike Waltz backed efforts to secure supplies of critical minerals—using funds from the US Department of Defense to do so. Waltz is now Trump’s National Security Advisor, so the President’s top aide is someone who’s championed this blending of defense and commercial aims, and will no doubt bring that thinking to other parts of the strategic economy.
(We’re now seeing this in negotiations to end the war in Ukraine, where historic military aid is being tied to demands to grant the US 50 pct of Ukraine’s mineral royalties. Or with the establishment of the president’s National Energy Dominance Council, explicitly aimed at enhancing American national security.)
“The National Securitisation of Everything” has implications for investors and poses a number of important questions that I think are relevant for all of you as your positions, as chairs:
- What happens when commercial imperatives take a back seat to strategic ones?
- How do we assess business cases and investment propositions when the targets are not purely commercial in nature?
- As the lines between commercial technologies and services and defence blur, are we comfortable and equipped to be investing in defence?
- What are we doing to understand the strategic political interests of individual markets in which we’re investing, and what happens if these interests are not aligned with our own?
- What does it mean to invest in sectors that are now considered strategic, whose value may be more heavily influenced by government programs and support?
- What are we doing to ensure that we’re on top of policy developments, so we’re not exposed to businesses or entire industries whose prospects rise and fall on whether or not they are eligible for subsidies or exposed to tariffs or export controls?
Protectionism and global trade
The second set of issues that I’d like to highlight are protectionism and a bifurcation of global trade, chiefly between the West and China, but also including Russia, Iran and the wider global south.
We are entering a trade environment where the location of a manufacturer is increasingly less important than the ultimate ownership and control that manufacturer.
Take an example: a Chinese tech company making batteries for electric vehicles that are assembled in Mexico. It is conceivable that those vehicles will no longer be able to enter the US under the same favourable terms of the USMCA Free Trade Agreement that they were previously able to. Nor will shifting solar panel manufacturing to Vietnam help, if it’s still Chinese-owned work or done with Chinese inputs. This is a new paradigm in how particularly the US administration is viewing who’s responsible for goods and services.
We’ve seen instances where Canadian and US regulators have scrutinized mining projects with links to Chinese parties – not assets in Canada or in the US, but in Latin America and Africa. And of automakers looking to insulate themselves against punitive measures by purging their supply chains of Chinese components, much to the chagrin of non-Chinese suppliers who rely on Chinese inputs.
Mapping supply chains
There are efforts underway by the US government to map full supply chains of critical inputs, and these may soon be used to inform trade policy: if cobalt or polysilicon is processed in China and goes into products made in yet another country, they may be blocked or taxed as if they’re coming from China directly. That’s new.
So, a few questions here:
- As the businesses you all look after are charting their strategies, how will these trends shake up the global trading system, and who stands to gain or lose from these shifts?
- With import substitution, which businesses are positioning themselves to take advantage of opportunities to shift manufacturing to the largest consumer markets?
- We’re aware of investment firms running China-exposure checks for every deal they’re doing—regardless of jurisdiction or asset—to make sure that the suppliers, customers, or the very sector they’re investing in doesn’t make them vulnerable to sanctions or censure at any point in the future, particularly as investment rules tighten. What are the businesses that each of you oversee doing to assess your China exposure and the China exposure in your portfolios to insulate against this potential fallout?
- And what are other attractive pools of capital, and what political risks might come with those, for example, from the Middle East?
Profound shifts underway
Finally, I want to say a few words about what’s happening within the Trump administration, itself, because there are some truly profound shifts underway in my home country, with major implications for business.
Donald Trump has been in office again for all of 10 days (note 1). As with the first Trump administration, the volume of news and headlines makes it feels far longer than that, but it is just under two weeks. What we’ve seen during those initial days is a concerted effort to concentrate unprecedented levels of power and decision-making in the Executive Branch.
Some of this has been methodical. As one prominent legal commentator pointed out, the precise language used in executive orders pertaining to the “emergency” at the southern border and directives for the US military to “assist” other agencies to address that emergency, are carefully calibrated to allow the President to use the armed forces on US soil in a dramatic and unprecedented manner and to lay the groundwork for more extreme and unusual moves.
We’ve seen other executive orders at odds with existing laws, meant to create confusion about what the law actually is.
And we have seen moves that are plainly illegal.
The President fired 17 Inspectors General from key agencies without providing the 30 days’ notice that, by law, is due to Congress to change personnel in those roles.
The President and his nominee for Director of Office and Management and Budget have moved to pause the dispersal of federal funds that were already appropriated by Congress, but that don’t align with the President’s vision.
In both cases, the president undermined some of the legislative branch’s key authorities and dramatically pushed the boundaries of executive power.
One might have expected pushback from the Legislative Branch to these moves, but instead legislators let the Inspector Generals’ dismissals slide – a few complaints here and there, but no serious effort to resist – and just this morning, they advanced the nomination of the OMB director to the next stage of approval.
Transactional approach
Much is made about President Trump’s transactional approach. And this is certainly true, though it’s verging on, or some might say has blown past, corrupt practices amid myriad reports of quid pro quos (note 2).
Within the administration itself, the bulwarks that were in place in Trump One are not there this time around. The administration arrived on day one with lists of officials to be purged, initiatives to be scrapped, and, of course, violent criminals to be pardoned; and with an intention to sow confusion about the law.
This is straight from the authoritarian playbook, and, for that matter, the Silicon Valley playbook: act as you’d like; deal with the consequences later; and in the process, create a new normal. Put plainly, let’s see what we can get away with. That is how they’re operating.
And I raise all of this because for many years, I’ve lived in, studied and been advising companies to navigate opaque, corrupt and otherwise fraught political environments. These companies came to us for advice because they often couldn’t count on the rule of law, and I’m concerned that my own country is starting to look eerily familiar.
So, this uncertain environment begs a final set of questions:
- Do you and the institutions that you work with have eyes and ears on the ground to assess and potentially influence what might be coming out of Washington, and to map the scenarios of how other countries might react to the Trump administration’s moves?
- And as truly world class financial institutions are the funds you chair, are the boards you sit on, and are the businesses you invest in, adequately attuned to policy shifts and their impacts?
As your funds look to invest and protect Australians’ hard-won savings, these are the challenges before you.
Notes
- This is an edited transcript of a presentation by Benjamin Weiss to the Investment Magazine Chair Forum on 30 January, 2025.
- On 10 February 2025, President Trump issued an Executive Order pausing investigations and enforcement of the Foreign Corrupt Practices Act, arguing that the law undermines American firms’ competitiveness.
Benjamin Weiss is chief executive officer of Veracity Worldwide
