When I spoke at the Conexus Financial Chair Forum earlier this year, US President Donald Trump had been in office for all of 11 days and the task of making sense of that week-and-a-half’s worth of executive orders, personnel appointments, head-spinning headlines and Truth Social musings was daunting.
Now, 133 days* into Trump 2.0, I find myself humbled, a bit harried, and pining for much simpler times, as I’m sure many of you are, too.
My role is to analyse events and draw out their commercial implications, to provide investors and corporate executives with clarity and privileged insight as they deploy capital and look to protect their reputations, surmount risks, and gain an edge in challenging jurisdictions and uncertain times.
And these are certainly uncertain times, confusing times, and in many respects troubling times.
But despite all the noise and frenetic activity and daily changes to trivial things like, for example, the global trading regime or the trans-Atlantic alliance, there are a few themes that are becoming increasingly pronounced and, as I speak to business leaders and policymakers around the world, a set of emerging questions that, I believe, should be front and center for institutional investors and asset owners.
The four themes, or the frames that I am going to focus on are as follows:
- Everything is national security
- Everything is money
- Everything is personal
- … and everything is normal.
The national securitisation of everything
The first frame – “the national securitization of everything” – is a phenomenon that I first started discussing with investors about two years ago, as we were watching governments the world over designate an ever widening array of assets, industries, and activities as strategic, central to national security, and critical in their competition with geopolitical, military, and economic rivals.
This involved a raft of inducements for domestic production and friendshoring, and a host of trade curbs aimed protecting critical and strategic industries.
Think restrictions on the export of chips. Subsidies to build battery factories. And prohibitions against Chinese investment in sectors deemed vital to national security.
The Biden administration pursed these measures vigorously. President Trump has pursued these measures with gusto.
At the very start of his second term, President Trump declared an America First Trade Policy, and directed his administration to examine export controls and, with “relevant national security and other global considerations” in mind, put in place measures to compete with “strategic adversaries and geopolitical rivals”.
His April Liberation Day tariffs were imposed to, among other things, “strengthen our national and economic security”. The same argument was used for steel and aluminum tariffs, including the latest move to double those tariffs from 25 to 50 percent, to investigate pharmaceutical supply chains, and to curtail the sale of advanced chips to China.
Lest you think this is unique in the West to the Trump administration, European policymakers are on the same bandwagon: the EU Chips Act, the EU AI Act, and other measures aimed at bolstering tech self-sufficiency, are all being done on the grounds of national security.
‘China’s moves to restrict the export of rare earths, and India’s moves on data localisation are all done with a similar rationale’
China’s moves to restrict the export of rare earths, and India’s moves on data localisation are all done with a similar rationale.
With the national securitisation of everything we’ve also seen a blending of defense and commercial interests, unusual in recent memory in the West – although for those of you who are China watchers, this would all look very familiar: so-called civil-military fusion.
As I noted on a previous occasion, a few years ago, a Florida congressman named Mike Waltz backed legislation to secure critical minerals using funding from the US Department of Defense. Waltz was, until last month, Trump’s national security advisor, and he brought this thinking with him to the White House, and it has survived Waltz’s brief, Signal-gate-truncated tenure.
As one of my colleagues recently wrote, on 20 March, President Trump signed an executive order (EO) directing federal agencies to accelerate domestic mineral production. The Department of Defense was tasked with identifying priority industrial capabilities. The order also instructed multiple agencies, including the Defense Department, to identify federal lands suitable for leasing or development by private critical mineral producers. And the EO invoked the Defense Production Act, allowing the Pentagon to treat dependence on rival nations for minerals as a security threat.
I sit on the national security and defense advisory committee of the Australia Japan Business Cooperation Council. Many of my fellow committee members hail from technology companies, who now see themselves as – and truly are – defense players.
These dynamics are prompting business leaders to ask:
- What happens when commercial imperatives take a backseat to strategic ones, and how do we assess business cases and investment propositions when the targets are not purely commercial endeavors?
- Where are new investment opportunities, where assets previously seemed inviable on pure commercial grounds but with government backing now look more enticing?
- As the lines between commercial technologies and services and defense blur, are we comfortable and equipped to be investing in defense?
- When everything is about security, which of our existing investments create political risks that we hadn’t previously considered?
- And how would the Chinese government feel about this prospective acquisition, and is there a risk of backlash against it or other assets we own? I’m thinking here about BlackRock’s attempted acquisition of Hong Kong-based C.K. Hutchison’s port assets, which looked like a dream deal for Donald Trump – less so for Xi Jinping.
The commercialisation of everything
Much is made of Donald Trump’s transactional nature. This is well known, and it’s not at all surprising if we’re dealing with him as if with a real estate executive. But what does it mean when someone with this MO is the head of state?
Now, as I said, this is not a fresh observation about the president’s approach to business or the business of governing. I recall well way back in December 2015, when then-candidate Donald Trump delivered a controversial speech to the Republican Jewish Coalition, in which looked out over a room fall of prospective Jewish donors and said: “I’m a negotiator, like you folks. This room negotiates… perhaps more than any other room I’ve spoken to.”
In saying so, he offered a clear glimpse into – among other things – his view that virtually everything is up for negotiation, and a dynamic that would infuse his approach to world affairs as president: an overarching instinct that financial arrangements and horse trading can solve virtually every problem.
In some cases, this is plainly true: we’ve witnessed apparent quid pro quo dealings from this White House on a scale few could have imagined. Much has been written about the gifted plane, the crypto exchange owned by a Trump family entity buffeted by a healthy injection of Middle Eastern cash. And then there’s the luxury Trump Organization real estate development on the outskirts of Hanoi, publicised literally hours after the president slapped 46 per cent tariffs on Vietnam.
All of this, of course, after the Supreme Court ruled that the president cannot be found guilty for any official acts, and after the administration paused enforcement of the Foreign Corrupt Practices Act, the FCPA, to let his DOJ study the matter.
In the above cases, dealmaking appears, from a certain vantage point, to be working, prompting pledges of billions of dollars of investment in the United States and opportunities for US businesses abroad, a sizable chunk of which may actually come to fruition.
But in the geopolitical world, everything isn’t commercial. The president’s aim to lure Russia to the negotiating table with the prospect of US investment is a case in point: while the US would like to stake a claim to Ukraine’s mineral wealth, that’s not what’s driving Vladimir Putin’s war.
As the journalist and Russia analyst Julia Ioffe recently put it: “What I think this administration does not understand is that this isn’t about the money for Putin and continuing to make it about money just reinforces Putin’s ideas about Americans as hollow, soft cowards who place material well-being above spiritual values.”
‘Continuing to make it about money just reinforces Putin’s ideas about Americans as hollow, soft cowards who place material well-being above spiritual values’
One might say the same about Iran and its drive for a nuclear weapons capability.
So, some important questions for investors to consider:
- As the US takes a more transactional approach to its traditional allies, governments the world over are recalibrating. Which companies are poised to benefit from Europe’s efforts to rebuild its defense capabilities? And how do internal EU dynamics affect individual companies’ or countries’ prospects in this domain?
- What new international trade relationships are emerging – we know Emanuel Macron was in Asia over the past few days, pitching France as a trusted defense and economic partner to countries in the region – and what investment opportunities will emerge?
- The State Department announced last week that US ambassadors in Africa will now be evaluated largely based on the number of deals they are able to secure on the continent. What financing opportunities are available for institutional backers?
- What are the non-financial factors that could impact a particular asset or the broader investment environment in particular markets?
- What’s in the details? The administration has announced trade deals coming with many nations, but those already announced are mainly heads of agreement negotiated by the Secretaries of Treasury and Commerce, and may not yet include the typical minutiae of trade agreements.
- And finally, what of the future of multilateral agreements? We are now in territory where arrangements are negotiated on a 1:1 basis: that’s the case with trade, it’s the case with the scrapping of the AI Diffusion Rules. What investments in your portfolios are built on global, multilateral trade architecture, and which ones stand to rise or fall as bilateral arrangements take precedence?
The personalisation of everything
The next frame through which investors can assess the US administration’s actions and implications for their portfolios is the “personalization of everything”.
I’m mainly speaking here about loyalty – not to make a political point, but to examine the consequences of the way in which this manner of governing shifts the calculus for those with assets and portfolio exposure in the United States.
It is without doubt that a bloated US bureaucracy required attention. Yet efforts to reshape various branches of the public service under the banner of efficiency are widely perceived to be driven instead by ideological, partisan, and loyalty concerns. These moves have been well publicised: generals fired; National Security Council staff dismissed; an entire cohort of CIA recruits terminated; USAID disbanded. A host of other regulatory agencies with agendas perceived to be at odds of those of the president have seen layoffs and budget cuts, curtailing their ability to operate.
The Supreme Court ruled just a few weeks ago that the president can remove independent agency heads – except for the Federal Reserve chair – at his discretion.
Appointments appear to be similarly motivated: at the State Department, for example, the president has so far appointed 52 ambassadors. All 52 are political appointees. 0 are career foreign service officers.
Regardless of the possible merits of any of these maneuvers, they’ve had, and will have, a material impact on state capacity, and, in turn, implications for the United States as an investment destination and for investment opportunities further afield.
Among a host of potential questions for investors, here are two that come readily to mind:
- With state capacity arguably being undermined, what will approval regimes, timelines, and conditions come to look like in the United States? And how might this affect the prospects and anticipated value of long-term investments in energy, infrastructure, renewables, digital infrastructure, and mining projects?
- What opportunities are emerging as a result of these moves outside the United States? As the US closes itself off to foreign students – by imposing time-consuming and arduous conditions on student visa approvals, and by creating a climate of fear on campuses – what opportunities might that present for other countries with attractive education systems, like Australia?
The normalisation of everything
I’ll be very brief here: what I’ve laid out above is not normal.
The market reaction (rally) to Trump’s 90-day pause of tariffs was effectively a collective sigh of relief, that we are back to normal, that President Trump may have said some controversial things but will, ultimately, as the phrase du jour goes: Chicken Out.
I’m not here to comment on whether or not that will be, but instead to argue that damage is and is being done.
Jamie Dimon is warning of an impending crisis in bond markets. The historian Timothy Snyder is warning of conditions that remind him of those that preceded the Second World War.
This is not to be alarmist. The US has been through extraordinary upheaval before: a Great Depression, a Civil War, to name but a few examples.
And I have a feeling that if Conexus’ geopolitics guru, Stephen Kotkin, were here, wearing his historian’s hat, he’d be shaking his head and telling me to take a deep breath. History is a story of change. Things change. We’ll make it through!
And I agree. We will.
But in what form? The risk for all of us is that we become inured to the headlines, settle into this new normal, and rely once again on the tools, and the mindsets, and the frames that have worked so well for us as businesspeople, as analysts, and as investors for so many years.
Here in this Lucky Country, the risk of resting on our laurels is particularly pronounced.
This new normal…requires new frames.
Ben Weiss is chief executive officer of Veracity Worldwide.
* This is an adapted version of a presentation to the Investment Magazine Fiduciary Investors Symposium in the NSW Blue Mountains on June 3.
