Overview
Whether most investors acknowledge it or not, we are in the midst of a multi-front war, with massive implications for investors. In this installment, we aim to identify the major conflicts, likely outcomes, and implications for investors.
International Trade
This area has received massive attention over the past couple of weeks with the current administration announcing and then reversing tariffs on numerous trading partners. The stated goal is to even the playing field so that tariffs on foreign goods are equalized with those on American goods. While sounding fair, the markets have reacted negatively to the announcements leading to a refinement in the approach. The fear of many is that the tariffs will result in a repeat of the experience in the early 1930’s under the Smoot-Hawley Tariff Act, which is believed to have prolonged the Great Depression.
Possible Outcome – while the fear of a tariff-induced recession is real, in our opinion, the more likely course is that the current administration will succeed in adjusting tariff levels. As is, the tariffs are probably most problematic for the major exporting countries such as China, and the recession fears are probably the most acute there. (See additional comments below).
Universities
The Trump administration has balked at values expressed by university administrations and is attempting to make changes. In addition to deporting foreign students who are reportedly engaging in disruptive actions, the administration is blocking funding from those institutions which support DEI policies and is threatening Harvard’s non-profit status. In response, as expected, Harvard is filing a suit to block the actions.
Possible Outcome – like most lawsuits, we expect this one to be settled, with Harvard modifying its practices and thereby retain its tax-exempt status. However, watch for a significant cutback in grants to Harvard and other universities.
Ukraine War
The current administration has attempted to end the war, but it appears that neither side is ready for peace. For Russia, the war is proving far more costly than originally expected but has not yet reached the point whereby an end is demanded due to Russian casualties (as was the case in a forced withdrawal from Afghanistan in 1988¹). Meanwhile, the Ukrainians continue to hold their own, albeit at a high price in terms of casualties, destruction, and the resources of its allies.
Recent news of China’s contribution of troops and ammunition² has caused alarm, but it is unclear whether it will be any different than North Korea’s support.
The adage that generals often prepare to fight the last war might be true in this case. Russia appears to be desperately fighting to close two pockets through which an invading army could attack Russia. However, the cost expended to achieve relatively minor land gains appears to make the offensive a loser from Russia’s perspective. Additionally, land is secondary or tertiary for a country’s well-being. Perhaps Singapore and South Korea are prime examples of countries with little and relatively poor land that have achieved stellar growth.
Possible Outcome – we expect there eventually will be a negotiated peace in Ukraine with some assurances via the West that will deter future Russian aggression.
DEI/ ESG
The current administration believes DEI and ESG are discriminatory and a violation of the 14th Amendment to the US Constitution:
“It ensures that individuals are treated equally under the law, regardless of their race, gender, or other characteristics.” ³
“No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”⁴
The “rub” in this area is the perception of many that rather than judging people formulaically on merit alone, that adjustment should be made for the resources and opportunities afforded to individuals. Perhaps the concept of Noblesse Oblige⁵ is operative: to those which much is given, much is expected.
Mr. Al Sharpton is supporting the prior DEI initiatives at Target and has supposedly threatened a boycott if an agreement can’t be met.⁶ Egan-Jones recently wrote an analysis of the evolving ESG landscape.⁷
Possible Outcome – we expect neither side will be totally successful, with some pushback and some programs remaining in place. Perhaps the ultimate “fair” solution is to make some adjustments for the resources and opportunities available to applicants.
Executive and Judicial Branches
The current administration is attempting to make massive changes at record pace. As expected, plaintiffs are fighting back with support from judges in favorable jurisdictions. While we are not at the point of the Constitutional Crisis, there is little doubt that the views of the two factions (the Trump Republicans and typically Washington traditionalists) are at odds. It is hard to keep up with the multiplicity of suits, but the normal issue is the extent of executive powers.
Possible Outcome – we expect the current administration will be mostly successful, but there will be constraints in some areas.
China
The latest installment in this conflict is the White House’s declaring that the Covid pandemic was caused by China.⁸ From our perspective, the implication of such a statement is that numerous nations and individuals can pursue a claim against China for losses realized due to the Covid pandemic. Assuming the typical individual had a loss of $20K in terms of lost wages, direct expenses, and pain and suffering, for the US’s 320M population, the loss is $9.6 trillion. Furthermore, other countries are now likely to press claims.
Two additional recent developments are the supposed use of Chinese satellite imaging to assist the Houthi attacks on Red Sea shipping and the discovery of Chinese support for Russia in the Ukraine War (of the two, the Houthi support is probably more of a concern).
Possible Outcome – China is likely to dispute and then ignore the Covid claims, but it might be forced to pay some restitution. Regarding the Houthis, shipping firms and their insurers are likely to press claims against China. The result will likely be increased wariness of doing business associated with China.
Unfortunately, economic isolation increases the risk of war. This risk is exacerbated by America potentially seeking to assert its hegemonic position, particularly in the western Pacific.
It is common for war to occur when an emerging power (China) displaces and existing power (America). This fact has been recognized at least since Thucydides, who wrote about the Peloponnesian War, “what made war inevitable was the growth of Athenian power and the fear this caused in Sparta.”
Conclusion
The current administration believes it has a mandate for change and is proceeding with alacrity. However, this multi-front “war” is having massive impact on portfolios and therefore a better understanding is crucial. Stay tuned.
Sources
[1] Google AI Overview: Russian withdrawal from Afghanistan
[2] https://thehill.com/opinion/international/5252196-china-soldiers-ukraine/
[3] Google AI Overview anti-discrimination, amendment
[4] https://www.law.cornell.edu/constitution/amendmentxiv
[5] https://www.merriam-webster.com/dictionary/noblesse%20oblige
[6] https://apnews.com/article/target-al-sharpton-dei-520dbc23cd668b57b3bfef76d1bc7cdd
[7] https://corpgov.law.harvard.edu/2025/02/14/the-evolving-anti-dei-and-anti-esg-landscape-implications-for-the-public-sector/
[8] https://www.reuters.com/business/healthcare-pharmaceuticals/trumps-white-house-launches-covid-website-that-criticizes-who-fauci-biden-2025-04-18/