Trump's Grand Strategy

The common thread linking the deportations, tariffs, the shutdown of the US Agency For International Development, as well as Greenland and the Panama Canal.

What All This Has In Common

There’s a common thread between President Trump’s tariffs on Mexico, Canada, and China (and perhaps soon on the EU), his deportations of illegal aliens, his threat to take back the Panama Canal, and his aggressive overtures to buy Greenland.

They are all part of repositioning America for the reality of a multipolar world.

Acknowledging The Current Multipolarity

Secretary of State Marco Rubio acknowledged the current multipolar reality in his appearance on Megyn Kelly’s podcast last week. At about 9:16 he says,

It's not normal for the world to simply have a unipolar power... it was the product of the end of the Cold War, but eventually you were going to reach back to a point where you had a multipolar world—multiple great powers in different parts of the planet.

Rubio goes on to say that American policy should be to further America’s interests, suggesting we deviated from that at the end of the Cold War. When it comes to trade, we actually deviated from it at the beginning of the Cold War.

As economist Ian Fletcher pointed out (“America Was Founded As A Protectionist Nation”), protectionism was the rule for most of America’s history. That only changed after World War II:

America only seriously turned away from protectionism as a Cold War gambit to prop up capitalist economies abroad and tie them to the U.S. Geopolitics trumped domestic economics.

That’s no longer the case under the Trump 2.0 Administration. Geopolitics and domestic economics are becoming more aligned.

Adjusting To The Current Multipolarity

When you have the world’s strongest military and largest economy by far, maybe you can afford to be a bit lax about migration and trade. That’s not the case for America anymore. We may have the world’s strongest military on paper, but we are no longer in a position to conduct gunboat diplomacy against China in its front yard. China’s missile technology and manufacturing capacity make that untenable.

And China’s real economy is now much larger than ours, as indicated by everything from shipbuilding to electricity usage.

All of Trump’s policies, from Panama to Greenland to shutting down the USAID make sense in light of this. Consider:

• Tariffs on Mexico and Canada. These are, in part, about getting them to crack down on illegal migration and drug trafficking across their borders with the U.S. But they are also a signal that both countries are going to be managed more firmly in the U.S. sphere of influence from now on.

• Tariffs on China. In a multipolar world, it doesn’t make sense to continue to outsource crucial manufacturing industries to your largest geopolitical competitor.

• Deportations. It was never in America’s economic interest to tolerate migration of people who consume more in government resources than they pay in taxes. Now it’s not in our geopolitical interest to do so either.

• The Panama Canal. Bringing the Canal back under U.S. ownership is—as with pressure on Canada and Mexico—reasserting America’s Monroe Doctrine. We are moving from globalism back to the Monroe Doctrine.

• Greenland. Buying Greenland is consistent with the Monroe Doctrine, as it is part of North America geographically. Pulling it away from Denmark is also consistent with the Monroe Doctrine as it distances the U.S. from Europe.

• Shutting Down The USAID. This is also consistent with retreating from globalism to the Monroe Doctrine. Under Trump, we’re no longer going to be using NGOs to foment color revolutions in countries like The Ukraine and Georgia.

Investment Implications

Over the weekend, Jeff Park, of crypto fund firm Bitwise argued that the longer term result of Trump’s tariffs would be to send Bitcoin “violently higher”. Of course, Bitcoin did the opposite after the tariffs were announced. Readers may recall my conversation with the CEO of Bitcoin miner Bit Digital (BTBT 0.00%↑) last fall.

The company reached out to me last week about doing a second interview. One of the questions I submitted this time was what Bit Digital’s CEO thinks about Jeff Park’s take on the eventual impact of these tariffs.

In the meantime, I’ll be looking for potential buying opportunities on names that have been hammered by the recent uncertainty. For risk averse investors, it may be prudent to use the next rally to hedge. As a reminder, you can download the Portfolio Armor optimal hedging app by aiming your iPhone camera at the QR code below (or by tapping here, if you're reading this on your phone).