With Frantic Pace of Changes, Investors’ Concerns About Instability Rise

Investor sentiment is shifting as experts warn the President’s “strong rhetoric and the potential for retaliatory measures should increase global economic uncertainty.”

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With President Donald Trump back in the White House, his administration has already begun implementing the aggressive trade and immigration policies he promised on the campaign trail. While it remains to be seen how far these policies will go, many industry observers agree that his brinkmanship-driven approach to governance will exacerbate global economic and market uncertainty.

Last month, Cambridge Associates’ senior investment director Sean Duffin said he expected Trump “to employ brinkmanship … to secure deals that advance his America First agenda” once back in office. “While it is unclear whether these policies will be enacted as proposed, we anticipate strong rhetoric and the potential for retaliatory measures by other countries should increase global economic uncertainty,” Duffin added.

Not everyone is concerned. In fact, some investors remain optimistic about Trump’s potential economic impact. Third Point’s Dan Loeb expects Trump’s “America First” policies and tariffs to “increase domestic manufacturing, infrastructure spending, and prices of certain materials and commodities,” and believes deregulation “will unleash productivity and a wave of corporate activity.” Meanwhile, KKR’s Henry McVey believes that strong markets and robust corporate earnings will offset any geopolitical risks and tensions.

This unpredictability was evident during Trump’s first term, when escalating tariffs on Chinese imports, threats of tariffs on European autos, and duties on steel and aluminum destabilized global markets and strained alliances. Now, with Trump once again using tariffs as a key tool in his trade policy, investors are bracing for renewed volatility.

Prior to taking office, Trump had already proposed a 20 percent tariff on all U.S. imports and a 60 percent tariff on imports from China. Economists warn that such measures could raise inflation, reduce real U.S. productivity, and provoke retaliatory tariffs that further disrupt global supply chains. And now that he’s back in the White House, Trump has already demonstrated his aggressive approach to diplomatic relations, threatening to impose a retaliatory 25 percent tariff on all goods coming from Colombia, as well as other sanctions, after clashing with President Gustavo Petro over the deportation of migrants. (Petro ultimately backed down and the White House announced that tariffs would be “held in reserve.”)

Harry Broadman, a former White House economic official currently at the RAND Corp. and West-Exec Advisors, told Institutional Investor that Trump’s approach to economic policy remains fundamentally uncertain by design.

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“His economic policy framework is inherently driven by the uncertainty about his real objectives, and that’s the way that he likes it. Paradoxically he does it on purpose. That’s part of his negotiating style,” Broadman said. “He likes to keep other parties on their toes, and what he may say one day he may change the next. That’s fundamental in his DNA.”

In December, Ashmore Group’s head of research Gustavo Medeiros said that while Trump’s proposed tariffs “would be a much more aggressive stance than the 2018-19 trade war against China,” he was skeptical about their feasibility.

“Despite Trump’s talk, we find it hard to believe the U.S. would work to destroy the North American supply chain by levying large indiscriminate tariffs against Mexico and Canada,” Medeiros said. “It would simply be too painful to the American economy.”

Medeiros added that it was “also unclear whether those tariffs would be permissible in the context of the U.S.-Mexico-Canada (USMCA) Trade Agreement. This leaves the other countries more vulnerable.”

Broadman agrees that Trump’s negotiating style lacks nuance and consideration of the broader implications. “He doesn’t take into account business views or governmental views in any systematic way,” Broadman said, which is “a problem for the stakeholders whose interests he believes he’s trying to advance, let alone his own.”

Trump’s immigration policies are even more aggressive than in his first term. Duffin highlighted executive actions increasing deportations, restricting work visas, and overhauling asylum processes, which could create labor shortages in industries heavily reliant on immigrant workers, including agriculture and construction. “This could lead businesses and investors to become more cautious due to fears of talent shortages, potentially adding inflationary pressure,” Duffin said.

Despite these risks, Duffin noted that policies will take time to implement and are unlikely to occur in isolation. “There will be offsetting developments that may mitigate the economic and market impact of these plans,” he said.

Meanwhile, Broadman remains skeptical that Trump will seize opportunities for broader negotiating leverage by better understanding the motivations of other stakeholders, since he doesn’t appear to understand the complexity of today’s global supply chains.

According to the former senior U.S. international trade negotiator, Trump acts as if the global economy is driven by bilateral incentives and constraints akin to real estate deals. While that was largely the structure of cross-border commerce in 1825, that’s not the case in 2025.

“If he was more curious or interested in what other stakeholders want, it could bring him more negotiating leverage,” Broadman added.

U.S. Sean Duffin Harry Broadman Donald Trump Gustavo Medeiros
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