Macro & Oil Report: Donald Trump's return - a first review

Two Weeks In: A Look at Donald Trump’s Second Term

It’s been two weeks since Donald Trump began his second term as president, and in that time, a range of impactful decisions have been made. The pace of these decisions suggests it’s already time to take stock of what’s happened so far.

Geopolitics: A Mixed Bag of Moves

From the outset, Trump’s foreign policy has been harsh, notably in his approach to international relations and trade. One of the first major developments was a surprising peace agreement brokered between Israel and Hamas. However, progress has been slower when it comes to Ukraine, where Trump’s previous rhetoric about achieving peace within 24 hours has now shifted toward a more tempered goal of an agreement within six months.

Economic tools have been at the heart of Trump’s geopolitical strategy, with a clear demand that NATO allies increase their defense spending to 5% of GDP in exchange for U.S. commitment to the alliance. On the trade front, the U.S. has threatened Denmark with retaliatory actions unless it allows the U.S. to take control of Greenland, a move that highlights the importance Trump places on global strategic positioning. Panama has also come under scrutiny for its ties with China, as the U.S. accuses the country of allowing the Chinese to take control of the Panama Canal.

In terms of diplomatic pressure, the U.S. has levied high tariffs on Colombia to push the country to accept the return of undocumented migrants. Meanwhile, Iran has largely been left out of the spotlight until the Israeli Prime Minister’s visit to the White House, likely due to its complex nature as a long-standing issue for the United States.

Trade Pressures Mount

Trade has been another key area of focus in these first weeks. In a move that set markets on edge, Trump announced 25% tariffs on U.S. imports from Canada and Mexico, along with a 10% surtax on Chinese imports. Although the initial reaction in the markets was panic, agreements were quickly made with Mexico and Canada to delay these tariffs for another month. China, however, retaliated with its own measures.

The aim behind these tariffs is clear: to force other nations to rebalance trade with the U.S. and increase purchases of American products, particularly energy resources.

Energy and Environment: A Regressive Shift

On the environment, Trump has followed through on his campaign promises. He promptly withdrew the U.S. from the Paris Climate Agreement, continuing his stance from his first term. His administration has taken a hardline position against Joe Biden’s Green New Deal, even likening it to harmful ideologies such as Marxism and transgenderism.

At the same time, Trump has called for an increase in oil and gas production, removing regulatory barriers to new drilling operations. His administration’s “Drill, Baby, Drill” approach aims to boost supply and lower oil prices, although the challenge is that energy companies will only ramp up production if market conditions ensure profitability (i.e. if oil prices are sufficiently high). This represents a key contradiction in the current administration’s approach to energy policy.

Oil Prices: A Downward Trend

Since Trump’s return to power, oil prices have been on a downward trajectory, with Brent crude losing around $7 per barrel and dropping below $75. While some of this can be attributed to Trump’s efforts to ramp up production, the broader global context—particularly forecasts predicting an oversupply of oil in 2025—has also played a role. Moreover, trade war fears have contributed to concerns about slower global growth, further impacting oil demand.

Public Spending and Fiscal Measures

Another critical issue under Trump’s second term is public spending. With his desire to extend the tax cuts from his first term and reduce the corporate tax rate to 15%, Trump is already looking for ways to cut back on federal expenditures. Elon Musk has been brought in to oversee this process, taking a radical approach by dismantling existing international aid programs and offering civil servants the option of leaving their jobs while still receiving pay until September. These brutal and unanticipated decisions created such a disorder that it was often necessary to backtrack. But they set the tone for future policy. While this strategy could inspire other governments grappling with soaring deficits, it carries significant risks, including destabilizing society and creating widespread insecurity.

Federal Reserve Tensions Loom

A final notable development is Trump’s relationship with the Federal Reserve. Despite the Fed’s decision to pause interest rate changes, Trump has already called for a rate cut. This tension is compounded by the uncertainty his actions have created, such as the risk that tariffs might spur inflation and the potential labor shortages caused by mass deportations of undocumented workers. The potential for a clash between Trump and Fed Chairman Jerome Powell seems high. As Powell’s term ends in May 2026, there’s speculation that Trump might appoint Powell’s successor early in order to shift market expectations toward a more favorable rate environment, but navigating this process will be complicated.

What’s Next?

It’s clear that 2025 will be a year filled with bold moves, trade tensions, and economic uncertainty. Trump’s second term promises to be a period of significant and potentially disruptive change. As this new administration continues to take shape, the next few months will reveal just how these early decisions will influence the broader trajectory of both the U.S. and the global economy.