Trump, Tensions, and Government Restructuring: Special Edition

Week of February 18th, 2025

President Donald Trump is back in the White House, becoming the first president to lose re-election and return to power four years later since Grover Cleveland in 1893. Trump's second-term agenda is set to both dismantle previous policies and build new ones, revisiting and expanding upon his earlier initiatives. He has made numerous claims and promises, many of which are easier said than done, or require further action than simply stating them.

In this section, we examine President Trump’s most recent statements and promises, analyzing their feasibility and impact on the economy and the financial industry.

1. Trump Asserts U.S. Will Reclaim Panama Canal

In his inaugural speech, President Donald Trump declared his intent to reclaim the Panama Canal, stating, “China is operating the Panama Canal. And we didn’t give it to China. We gave it to Panama, and we’re taking it back.” The canal is a vital trade and economic hub, facilitating 6% of global trade and 40% of U.S. trade, making its strategic significance undeniable (U.S. Senate, 2025). Given ongoing geopolitical tensions, the Trump administration has accused Panama of unfairly favoring China and claimed the country is ceding control of key infrastructure to Beijing.

However, there is no evidence to support the claim that China controls the canal’s operations. The Panama Canal Authority (ACP), an independent entity under the Panamanian government, is responsible for managing, maintaining, and overseeing all operations of the canal. While Chinese companies, including Hong Kong-based CK Hutchison Holdings, have a presence in port operations—handling container loading, unloading, and fuel supply (BBC, 2025)—the ACP retains full authority over the canal’s management and navigation (CNN, 2025).

A lingering question remains regarding the extent of the Chinese government's influence over private Chinese firms operating in Panama. The Panama Canal Authority is an independent group that was designated by Panama’s government to manage, operate, and maintain the Canal. The Authority’s functions include infrastructure maintenance, financial management, environment and resource protection, and vessel navigation across the Canal.

This initiative has been a cornerstone of President Xi Jinping’s foreign policy, aimed at strengthening China’s influence across Latin America, Africa, Europe, and Asia through infrastructure investments and coordinated financial, economic, and trade policies—a counterweight to U.S. influence. Beijing has denied any involvement in the Panama Canal’s operations and characterized Panama’s withdrawal from the initiative as a result of “U.S. coercion”.

2. The United States’ New Era of Trade Policy

President Donald Trump has unveiled the United States’ new trade policy through a post on X (formerly Twitter), emphasizing that the U.S. has been treated unfairly by other countries in trade.

If “friends or foes” believe the U.S. imposes high tariffs, they “just have to reduce the tariff they have on the US.” For instance, the European Union currently imposes a 10% tariff on auto imports, whereas the U.S. tariff stands at just 2.5% (Reuters, 2025).

This statement comes amid an ongoing tariff war with Mexico, Canada, Colombia, China, and several European nations, a dispute that began even before Trump took office. As a result, the aluminum, automotive, agricultural, retail, and technology industries have experienced significant volatility in recent weeks. 

On February 17th, the administration announced a new 25% tariff on imported automobiles, semiconductors, and pharmaceuticals (Reuters, 2025), already fueling market speculation and consumer uncertainty. While the President’s goal is to incentivize domestic manufacturing, the reality is that higher import tariffs will lead to increased costs in key industries—expenses that will ultimately be passed on to consumers. 

As trade tensions continue to escalate, concerns over economic stability, inflation, and global trade relations remain. For more news on Trump, tariffs, and rising prices in the United States, check out the latest edition of our weekly newsletter AlphaInisghts: Is a Bond Market Crisis Looming? 📉⚠️💰 

3. The Economic Implications of a Smaller Government and Mass Layoffs

In an effort to reduce “the unnecessary footprint of the government,” the Trump administration—led by Elon Musk as head of the Department of Government Efficiency (DOGE)—has implemented significant layoffs across key federal agencies. Among those affected are the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), the Federal Aviation Administration (FAA), and the IRS. These cuts will undoubtedly impact public health, safety, and the efficiency of critical services such as air travel, but the ripple effects extend far beyond these immediate concerns.

President Trump claims this move could save the government “hundreds of billions of dollars.” However, estimates suggest that even with a 10% reduction in the federal workforce—approximately 2.4 million people—annual savings would only amount to $25 billion, making just a 1% dent in total government spending (Investopedia, 2025). Meanwhile, unemployment is expected to rise sharply, particularly in states where the federal government is a major employer. For example, Washington, D.C.’s unemployment rate could surge from 2.8% to 9.6% (Urban Institute, 2025). 

Beyond job losses, market uncertainty among investors may increase, especially in regulated industries like biotech, pharmaceuticals, and healthcare, due to instability within the FDA and CDC. A downsized IRS could lead to tax return delays, reduced federal revenue, and a rise in tax evasion. The broader economic consequences—including job losses, market uncertainty, and weakened regulatory oversight— could destabilize key industries and reduce consumer demand, compounding concerns over inflation and financial instability. 

TRUMPONOMICS 2.0

Following President-elect Donald J. Trump’s victory over Kamala Harris, the financial world witnessed an immediate response. In just one week, the S&P 500’s value surged by $1.9 trillion, pushing stocks to record highs. The U.S. dollar strengthened globally and Bitcoin achieved unprecedented highs.

Wall Street is preparing for more government spending, lighter regulation, bigger deficits, and accelerating growth under a Trump administration and a Republican-led Congress.

Biden’s Economic Legacy

The Biden era was marked by headlines of massive layoffs and a cost of living crisis. The average worker faced double-digit increases in food, energy, housing, and other essential expenses that impacted middle-class families the most and consumed the bulk of household budgets. Despite record highs in the stock market, nearly half of Americans believed the nation was in a recession. Is this Biden’s fault? No. Global supply chain disruptions, stimulus checks, the aftermath of COVID-19 lockdowns, and the ripple effects of geopolitical tensions all contributed to soaring prices. Did Americans blame Biden? Election results suggest they did. Two-thirds of voters believed the economy was on the wrong track.

Hence, Trumponomics 2.0.

Trump’s campaign capitalized on promises of economic revival, pledging to deliver low taxes, low regulations, low energy costs, low interest rates, and low inflation -Trumponomics.

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Happy reading,

AI8 Ventures’ Research & Investment Team