Donald Trump and Benjamin Netanyahu
It was a clear and resounding blow. Donald Trump is once again president of the United States. With crushing victories in the Senate, in the House of Representatives, with the new map of governors across the country, and with the added issue for the Democrats of the Republican triumph in the popular vote.
But what does the new Republican administration hold? How will Donald Trump manage the conflicts in the world that he inherits from the Biden administration during this second term? We can infer some things if we look closely at his first term.
America First:
Firstly, Donald Trump is elected with a clear popular mandate “America First” which implies a withdrawal from the largest conflicts in the world. But beyond the material reality of non-interference directly in military conflicts, 'America First' has reached a theoretical dimension anchored in reality. The United States should not get involved in the world, at minimum until its domestic situation is resolved.
This theorization of isolationism has been spread by figures very close to the tropism. It was Tucker Carlson in February 2024 after his interview with Vladimir Putin who referred to Moscow as a clean, orderly city, more organized than the major cities in the U.S.
“It didn't make me love Putin, it made me hate my own leaders. I grew up in a country that had those kinds of cities. We no longer have cities that orderly. Did Putin do that? No, the governors, senators, and the President did, and they must be judged.”In a subsequent interview with Senator Mike Lee, Carlson criticized the Ukrainian government's policy of selling land, which is some of the most fertile in the world, to foreign entities. According to him, this would plunge Ukraine into a state of dependence and servitude towards the United States. Arguing that this decision would only benefit a few corporations and provoke deep resentment among Ukrainians towards the U.S.
However, there is an aspect of the international agenda where Trump is not completely aligned with his 'America First' policy. There is an agenda where Trump has no problem practicing his interventionism and confronting the geopolitical enemies of the U.S. in the Middle East region.
Trump and Israel as State Policy:
The United States maintains a consolidated policy of unconditional support for Israel. Despite the hesitations of the Democrats, the Biden-Harris administration has supported Israel rhetorically and in practice, even confronting their own electoral base, which radically supports the Palestinian cause. The image that circulated the world reflecting this divorce between the electoral base and leadership was that of police suppressing protesters on university campuses in cities governed by Democrats, like New York. For many analysts, this was closely linked to their electoral failure.
In contrast, Trump has a very clear stance on the unconditional defense of Israel. His usual demand for money in exchange for security, as happens with European and NATO allies, does not seem to apply to the Jewish state. Trump conceives the idea of resolving the conflict in the Middle East through the gradual elimination of the enemies of the West.
During the first Republican administration, Trump employed a two-front strategy. On one hand, he deepened the divisions between Shiites and Sunnis by bringing Israel closer to Sunni countries like the United Arab Emirates (UAE) and Bahrain, through the Abraham Accords. This was followed by a subsequent rapprochement with Saudi Arabia.
On the other hand, Trump imposed draconian economic sanctions on the Islamic Republic of Iran with the goal of crushing its economy. Through blockades on Iranian oil exports, the Shiite country was suffering from a foreign exchange shortage that led to a new increase in inflation, especially in the period of 2018 and 2019. In this way, Iranian proxy groups lost economic capacity and, consequently, military action power. Thus, Iran became a pariah and impoverished nation, while Sunni contacts with the Israeli government were strengthened.
However, although this strategy is concrete in its objectives, it faces two major difficulties that were not present during the last period of the Trump administration. Firstly, the Islamic world, both Shiite and Sunni, is completely mobilized by recent events in Gaza, so new approaches with Netanyahu's government would not be well received by the citizens of countries like Saudi Arabia. According to a survey from The New York Times, 96% of Saudis oppose the normalization of diplomatic relations with Israel.
Secondly, the war in Ukraine that began in 2022 generated the application of international sanctions against Russia that isolated the country from international trade. This forced the Slavic country to reinvent itself on all fronts to sustain the conflict, generating a new international economic axis that does not operate under international rules or traditional trade. At times, the Russian leader even considered the option of using Bitcoin and blockchain transactions to evade economic sanctions. The birth of this informal international trade network could give the Islamic Republic of Iran the possibility of accessing Russian know-how on how to bypass sanctions and leverage this new economic ecosystem to continue financing its proxy operations abroad. This could be further enhanced if Trump fulfills his promise to further deregulate cryptocurrency trade.
If you want to know more, it is essential to consider how these political and economic dynamics can be analyzed from a capital market perspective. The course 'Introduction to Capital Markets' from Fin Gurú provides essential tools to understand and act on these opportunities and risks. By examining the sanctions on Iran and Trump's trade policies, including his potential deregulation of cryptocurrency trade, students can learn to foresee and interpret the effects of these policies on global markets.
Trump 2.0: Challenges of a New Mandate
As Donald Trump resumes the presidency of the United States with a clear focus on 'America First', his foreign policy continues to deeply influence global geopolitics, especially regarding Israel and the Middle East. These decisions, along with the economic consequences of the sanctions on Iran and the potential deregulation of cryptocurrency trade, not only define U.S. foreign policy but also shape the international economic landscape. For investors and capital market analysts, understanding these dynamics will be crucial to navigate an increasingly politically affected financial world and its global economic impacts.
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