The new great game

The article was first published in The Business Times on 8 March 2025.

They say America plays checkers – straightforward, tactical, pragmatic and decisive; Russia plays chess – calculating, layered, resilient and aggressive; China plays Go – patient, expansive, subtle and adaptive. What game does the European Union play? Maybe bridge – cooperative, diplomatic, structured and predictable? Okay, I agree, an analogy that seeks to reflect national temperament is inevitably cliched, but if it helps me better understand how the game of international relations is being played right now, I’ll take it.

Suffice to say, we’re living in strange times. In a proverbial blink of an eye, the post-war global order appears to have been upended, and a new global dis-order now reigns. If you’d told me even two months ago that the US would break with the “Ukraine-as-victim” narrative, threaten to cut loose its military ties with Europe, and apparently side with Russia? Well, I’d simply not believe it. We’d need only an announcement of friendly rapprochement between the US and China to convince me I’m living in a parallel universe.

In strange times, diversification isn’t just strategy – it’s survival

America First

I exaggerate, of course. Viewed through a narrow domestic lens, recent pronouncements from the US government make a certain sense. Think the global rise in populism. Think MAGA. Think realpolitik. Perhaps British politician Lord Palmerston put it best when he opined during his term in the 19th century: “We have no eternal allies, and we have no perpetual enemies. Only our interests are eternal and perpetual, and those interests it is our duty to follow.”

Thus, for the first time since WWII, the US seems to be prioritising itself. Meaning that – under the new administration – most of what it says and does has the explicit interests and values of its own citizens at heart. To be fair, globalisation has been in retreat, and deglobalisation underway for a number of years now; but under President Donald Trump, as his immigration policies and tariffs chip away at free trade and open borders, this transition is now being supercharged.

Perhaps the following is an example of the new thinking: “Let’s convert the military aid we’ve committed to Ukraine into an investment, lock in revenues from rare earths, minerals, oil and gas, and protect our key commodity supply chain security. Let’s talk peace with Russia in exchange for their driving up oil production (alongside the Saudis), thereby driving down the cost of gas at the local pump. And let’s unwind our Nato commitments, let the Europeans pay more for their own defence, and use unspent monies for our own citizens.” The purported winner of all this? The US consumer.

Perhaps there exists now a cautious optimism among working people who – over the last 20 years – have witnessed factory closures, stagnating wages, job losses to China, and soaring corporate profits

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Transactional leverage

Of course, the above rationale is a gross simplification, but there is, nonetheless, an underlying truth wherein the US’ national security considerations, trade policies and President Trump’s grand plans for the country are blurred, combined or conflated to maximise transactional leverage with foreign “partners”. It remains to be seen whether the merging (or weaponising) of trade and security policy actually works, which is why observing how corporate earnings, real income growth and financial markets respond to the proposed trade tariffs on China, Mexico, Canada and (later this month) the EU is so important.

Now that these countries are beginning to retaliate in kind with their own tariffs, how will the US respond? For China, the risk of more punitive tariffs in a Trumpian “escalate to de-escalate” gambit cannot be ruled out. For others, one can only assume that, as a last resort, US security guarantees would then be withdrawn. For the Europeans, the consequences of such a decision would be significant. While precise numbers (and actual definitions of Nato-specific spending) are hard to confirm, it would appear that since the North Atlantic Treaty Organization’s (Nato) founding in 1949, the US has spent an estimated US$23 trillion for its defence versus combined expenditures by non-US Nato members of around US$12 trillion. Have a look at the year-to-date performance of European defence-related stocks, and you get an idea of how the market is anticipating the increase in military spending among European countries in the years and decades ahead.

I’m not American, but I can only imagine that among working people of that great country, the messaging around an America First narrative must surely resonate. For example, when viewed through a “local lens”, we see President Trump and Vice-President JD Vance not actually communicating with President Volodymyr Zelenskyy in their recent (slightly unedifying) televised “debate”; rather, they were communicating directly to their base, saying: “We are putting you first, front and centre, and everything else outside the US is secondary.”

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Don’t gamble

 

Spreading risk across assets – equities, fixed income, commodities and alternatives – offers resilience against the chaos

Perhaps there exists now a cautious optimism among working people who – over the last 20 years – have witnessed factory closures, stagnating wages, job losses to China, and soaring corporate profits. Perhaps President Trump is looking ahead to future elections and preparing the groundwork for possible future Republican victories? Maybe, but it’s a gamble. If the wins don’t translate to gains in their pocketbooks – or, even worse, if prices spike instead – goodwill will dissipate and disappear. And the backlash will begin.

What does this mean for investors? Well, all I know for certain is that uncertainty will prevail. The lesson is clear: a diversified, balanced portfolio is no longer optional – it’s essential. As tariffs threaten corporate earnings, deglobalisation reshapes supply chains, and fluid geopolitical gambles test markets, overexposure to any single region or sector could spell disaster.

Spreading risk across assets – equities, fixed income, commodities and alternatives – offers resilience against the chaos. Palmerston’s “interests” may now rule nations; but for individuals, a well-managed portfolio safeguards wealth. In strange times, diversification isn’t just strategy – it’s survival.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.