Optimism held sway till headlines spooked the bulls. Global indices flirted with or shot past 52-week highs as the news flow propped bullish sentiments. The US benchmark S&P500 touched a new high of 6,187, tech tracker Nasdaq shot past 20,311, Japanese Nikkei 225 hovered at 40,267, Korean Kospi touched 3,093, and India’s Nifty50 surged past 25,650 towards its all-time high, while in London the FTSE100 nudged 8,798.
Donald J Trump was talking up trade deals. A deal with China signalled business as usual for markets even though little is known beyond access to rare earth minerals and magnets discussed at the London détente. A deal with India—“a big one which would open up India,” in Trump’s words—was on the anvil, Vietnam was moving ahead and the European Union was edging closer to a deal, prompting the US to scrap the “revenge tax”.
The whiplash of headlines followed soon enough. Just as punters settled for siesta, DJT declared, “We are hereby terminating ALL discussions on trade with Canada, effective immediately.” The reason: Canada’s move to implement a digital services tax of 3 percent. Predictably, the Canadian S&P TSX slid, as did S&P500 and Nasdaq before recovering at close. Tremors and shocks are a constant cause of volatility since Trump took office. Traders who coined the term TACO (Trump always chickens out) believe Trump’s love for a buoyant stock market will save the day.
You could say the bets are on the madness and the method of Trumponomics. There is a conviction that Trump will wield executive power to protect his image. Soon after the attack on nuclear sites in Iran, as crude oil prices spiralled to $80 per barrel, Trump warned derivative players with capital letters and exclamation marks: “Everyone, keep oil prices down, I’m watching! Don’t do it!” At the Nato summit, when Spain dissented on raising defence spending, Trump threatened higher tariffs. Trump has also repeatedly asserted (despite denials) that he used trade deals to force India and Pakistan to a ceasefire.
The idea of Make America Great Again rests on Trump’s belief that the heft of the US economy and military must be leveraged to make allies pay for protection and an entry fee charged from others for the privilege of participating in the $29-trillion economy’s markets. However, the MAGA dream is haunted by US debt and deficits. In 2024, it ran a trade deficit of $918 billion, federal deficit of $1.83 trillion, and a total debt of $36.2 trillion or 123 percent of the GDP. It is getting worse as the new ‘Big Beautiful Bill’, as per the non-profit Committee for a Responsible Federal Budget, will add $3.5-4.2 trillion of debt by 2034.
There is a method to the madness of Trumponomics. As a solution, Trump has invested in an assembly of disparate ideas—stranded between claims and counter claims—to lift the US economy out. DJT believes tariffs will achieve multiple objectives—it is already garnering revenue of around $30 billion a month, and will bring down trade deficits and force onshoring of output. The foundation rests on cutting taxes and regulation to spur investment, some of which is manifest in the White House’s ‘running list’ of investment declarations by Softbank, OpenAI, Meta, Apple, Nvidia, Micron and others. Trump’s trip to the West Asia was geared for geo-economics. He has claimed this has brought over $2 trillion in investments.
Last year, the US spent $881 billion on interest costs; this year, it is expected to spend $3 billion a day on it. The DOGE experiment is yet to pay out and welfare costs are mounting. Trump has introduced a taxe on remittances and his $5-million Trump Card visa scheme already has over 75,000 applicants. The targeting of Fed chair Jerome Powell on interest rates is aimed at lowering borrowing costs. Foreigners own $9 trillion of US debt and the depreciation of the dollar—reflected in the DXY index’s 10 percent slide since January—could be dubbed as stealth management of debt.
His interventions in geopolitics—whether on Ukraine or Congo-Rwanda—are laced with the goal of extracting minerals rights and making commercial gains. This week, Nato members agreed to hike defence spending from 2 percent to 5 percent of their national GDPs. Trump was triumphant at the promise. In 2024, the US exported arms worth $314 billion, which is expected to rise to $447 billion by 2033. Europe accounts for 35 percent of US arms sales and higher defence spends would filter into American arms companies; the UK, for one, is buying a dozen F35A jets. Unsurprisingly, the valuations of arms companies have shot up.
Cardinal Jules Mazarin, a French statesman, said the question to ask of a general is not is he skilful, but is he lucky. Trump is his own lucky general. His 2024 victory gave him the trifecta of power—majorities in the Senate, the House and the Supreme Court. For a lethal combo, add his uncanny knack to occupy attention. Whether it is attacking Iran or cracking down on law firms, universities and illegal immigration, Trump backs himself. He has threatened to railroad dissenters at party primaries to deliver his campaign promise via the Big Beautiful Bill.
A maximalist approach is in play—the art of the deal is accompanied by the art of the delay. It is an indisputably risky gambit with long-term implications for sovereign balance sheets and the rule-based world order. The markets—at times mocking, and at others wrestling with the method and the madness of Trumponomics—can at best keep singing ‘Kumbaya’.
Read all columns by Shankkar Aiyar
Shankkar aiyAr
Author of The Gated Republic, Aadhaar:
A Biometric History of India’s 12 Digit Revolution, and Accidental India
(shankkar.aiyar@gmail.com)