Trump 2.0: how to invest in a geopolitical minefield?
It comes as no surprise that Trump is looking to bring about a radical change of direction in US foreign policy in his second term. The surprise lies in the speed and brutality with which he is implementing that change. As an investor, how do you navigate your way through a world where volatility and unpredictability can disrupt the global economy? ‘Flexibility will be vital,’ says Jeroen Van Boeckel, a strategist at KBC Asset Management.
In times of geopolitical turbulence, it is important for investors to anticipate, apply prudence, and look for trends that transcend geopolitics. Investors need to be on their toes and be ready to change gear quickly. This is set to be a volatile year.
Jeroen Van Boeckel, Strategist, KBC Asset Management
'Flooding the zone'
‘Trump is everywhere,’ Van Boeckel begins, ‘and he is leaving many people in a state of almost permanent outrage.’ Every news cycle begins and ends with the US president. ‘Take his proposal to turn Gaza into a kind of Club Med under US rule, for example. Or the individuals he selects for key positions in his cabinet, who are often not uncontroversial figures. There are any number of examples. The regrettable highlight was the dramatic press conference with Ukrainian President Zelenskyy. It is Trump's favourite technique: stir up so much controversy at the same time that his opponents become disorientated and no one knows where to start. Would he even remember it himself?’
Controversies distract attention from what really matters: technological sovereignty and the resources it requires.
Jeroen Van Boeckel, Strategist, KBC Asset Management
The Trump-friendly tech bosses have a powerful weapon in the form of their social media sites to help him achieve this. There is no doubt that some misinformation is sent out into the world, purely for the purpose of increasing confusion and mistrust. ‘Trump is exploring the limits of his presidential power. For him, the presidency is like a blank cheque. Hence the so-called manual for dealing with Trump: take him seriously, but not literally. And follow what he does, not what he says,’ states Van Boeckel. ‘Some of the threats may fit in with his negotiating strategy of first escalating, then softening his position. More important than what he says is finding out the reasons behind why he says something.’
A cold war revolving around chips
It's something of a cliché to say that without chips, the world would come to a standstill. We cannot imagine a world today without computer chips. That makes the semiconductor industry one of the fastest-growing industries, driven by the ongoing digitalisation of almost everything around us. ‘The emergence of generative artificial intelligence (AI) has ushered in a new era,’ says Van Boeckel. ‘Developments in quantum computing also seem to be gathering momentum, although commercial applications for this technology are a bit further away.’
It is a race where the stakes are huge. Whoever emerges victorious from the fifth industrial revolution - in which humans work together with advanced technology and AI - could find themselves with a huge economic and even military advantage in the coming decades.
Jeroen Van Boeckel, Strategist, KBC Asset Management
Although the war in Ukraine and the turbulent trajectory of the Trump administration are somewhat distracting, one of the key issues on the geopolitical agenda is still the competition between America and China. In the trade war between the two superpowers, import tariffs and export restrictions follow each other in rapid succession, although they are not always each other’s immediate victims. The Trump administration's approach in which both friend and foe seem to be targeted causes raised eyebrows. ‘In taking this approach, Trump is actually building on the momentum of his predecessor, although he will not grant Biden that 'recognition'. By imposing restrictions on exports of the most advanced chips, the previous US president was already trying to slow down China's technological advance. Now Trump is piling on even more pressure with his tariffs,’ Van Boeckel says.
No chips without critical materials
Countries which play a key role in the supply chain of raw materials for military and digital chips can use them as leverage in economic warfare. ‘China dominates the commodities market and will not hesitate to exploit this position should the situation with America escalate,’ Van Boeckel says. ‘So diversification is the order of the day. America could extract raw materials from its own soil, but obtaining permits for mining is a tricky business. It is not unusual for it to take 15 years to obtain a permit. That’s why Trump is looking at Greenland and Ukraine. Even neighbouring Canada is not escaping his attention. Not many people live in Greenland, which in Trump’s thinking should make it easier to get a new mining project off the ground. Following the same line of thinking, Ukraine, a country devastated by war, may be more willing to compromise on environmental standards and social rules. Finally, Canada is also very rich in all kinds of natural resources, and is also sparsely populated compared to the country's huge size. Trump has hinted on several occasions that Canada might be better off becoming America's 51st state.’
The geopolitical stakes in the critical commodities supply chain are high. This explains Trump's interest in Canada and Greenland. The same logic also underlies the billion-dollar deal around Ukrainian raw materials: breaking China's power.
Jeroen Van Boeckel, Strategist, KBC Asset Management
Let us return to Ukraine. The country has substantial resource reserves, ranging from large reserves of titanium to rare earth minerals needed for all kinds of high-tech civilian and military gadgets. Those mineral resources are of interest to both Europe and America in order to reduce their dependence on China. ‘Many of these Ukrainian resources are still untapped,’ says Van Boeckel. ‘Before the war, the country's resource industry was worth around 15 billion dollars, but estimates of the total resources in the ground are a lot higher. On the other hand, these are still just estimates; accurate soil surveys in the region are few and far between. So it could be that Trump is unwittingly buying a pig in a poke with his resource deal.’ Under the controversial resource deal between Ukraine and America, cooperation between the two countries could support the future reconstruction of Ukraine. The question remains for now whether the security guarantees requested by Ukraine might form part of the deal for Trump... ‘The most attractive sites for rare earth metals are in all likelihood in Donetsk and Zaporizia, areas that are partly occupied by Russia,’ adds Van Boeckel. ‘That raises an additional question: is Trump holding similar talks with Russia behind the scenes?’
‘Trump is taking a degree of risk here. Along with the heated debate about where the borders should be for Russia, the Chinese threat hanging over Taiwan is also resurfacing,’ Van Boeckel adds. ‘China is keeping its powder dry for now, but it remains to be seen whether that will continue to be the case as geopolitical conflicts escalate further everywhere.’
‘A cynic might argue that history repeats itself, but the location of the battleground changes. Africa, Latin America, Southeast Asia and the Middle East have all already been implicitly or explicitly subjected to the power politics of major powers throughout history. (Neo)colonialism does not yet seem to be dead and buried. Today the conflict is being waged at Europe's front door, but is there a long-term plan? A resource deal is just a first step. Mining, processing,... getting the whole production chain up and running is not easy. Moreover, applications involving chips require an extreme purity of 99.99%. Currently, only China is capable of providing that on a large scale. Thus, without the right refining and purification infrastructure, China remains the bottleneck in global supply chains. Raw materials in themselves are only one piece of the puzzle.’
Tomorrow's trade relationships will be different from today's.
The European Union (EU) can no longer cling to the old certainties. That much is clear. For years, Europe has relied on cheap energy from Russia, cheap products from China and cheap security from America. ‘The old world order no longer exists,’ says Van Boeckel. ‘We hinted at this last year when we explained the importance of strategic independence. A new exercise in (geo)political navigation will be one of the big challenges for the coming months, and perhaps years. ‘Strategic independence does not necessarily mean that the different power blocs need to become entirely self-sufficient. It’s a matter of finding new balances.’ The major economies are shifting some of their trade towards geopolitically more closely related countries.
The EU should not allow the direction of its moral compass to change, but it will have to learn to play pragmatically in a game whose rules it does not decide.
Jeroen Van Boeckel, Strategist, KBC Asset Management
‘If the EU wants to return to playing a full part in the geopolitical chess game, it will have to seize this moment to become more strategically independent. The momentum is there,’ Van Boeckel says. ‘The time of political immobility, getting bogged down in bureaucracy and procedures, is over, but it will be a matter of balancing on a thin tightrope.’ Geopolitics today seems to be more transactional, dominated by personal relationships and emotion, and less driven by liberal values. ‘For example, there is a strong case to be made for less regulation, which often requires a lot of money, time and energy, but also puts EU member states at a competitive disadvantage compared with countries outside the EU. But let’s not forget that regulation also sometimes serves a purpose; European laws help put a brake on the spread of disinformation on social media. That’s much less the case in America, to give just one example. At the other end of the spectrum are countries like China and Russia, where social media has become a de facto extension of government propaganda.’
‘People always assume the worst, but history has taught us that difficult times always produce innovative solutions,‘ says Van Boeckel. To meet the challenges of the new, multipolar world, countries and industries will reinvent themselves to some extent. That innovation in turn brings investment opportunities. The quest for energy independence, for example, has led to new developments in renewable energy sources. Creating more data independence has led to revelations in cloud computing and artificial intelligence (AI), for example. And it may be that China's Deepseek, which caused a shockwave in AI circles, will in some way also contribute to the further democratisation of AI. Innovation determines economic progress. If Deepseek has demonstrated anything, it is that the chips haven’t yet fallen. Moreover, rumours have even been circulating recently that China is ahead of America in the field of quantum computing. The coming years will be very interesting on that front.’
For investors, the key is to focus on strategically important sectors
The theme of strategic independence is more topical today than ever. For the moment, 2025 is proving to be a year of increased volatility in the markets. ‘Investors need to have their feet firmly on the ground. Flexibility will be the order of the day,’ comments Van Boeckel. So many geopolitical warning lights are flashing today that investors are in danger of becoming befuddled. Investors don’t always know how to deal with geopolitical issues, and as a result they either underestimate the signals or choose to ignore them. ‘And let’s be honest: it isn’t easy for investors to deal with geopolitics. On the other hand, ignoring it doesn’t seem a sensible idea.’
In a world where geopolitical flashpoints can flare up rapidly, active management demonstrates its added value. Provide a solid foundation. Be flexible enough to move quickly when the situation demands it. Build in resilience by focusing on trends that transcend geopolitics.
Jeroen Van Boeckel, Strategist, KBC Asset Management
It’s all about anticipating developments prompted by major macroeconomic or structural trends. From global warming to the regulation of AI and cyber attacks, structural trends have a significant impact in the medium to long term.
- AI and semiconductors
The race for technological dominance - in which AI plays a central role - is accelerating. America wants to be miles ahead of the rest of the world and is pumping 500 billion dollars into AI infrastructure, among other things via the Stargate project. ‘Those close to the Trump clan currently have an edge. But... the competition isn’t dead yet. It’s still alive and kicking between the giants, with big tech companies engaged in a battle with each other. And it’s still alive and kicking in the world beyond, too, where China’s Deepseek has already caused the big tech bros a moment of anxiety. Although the Magnificent Seven led the AI revolution, perhaps the greatest potential lies in the following pack,’ Van Boeckel argues.
- Cybersecurity
In a world where cyberwarfare and the cutting of cables on the seabed are as threatening as physical conflict, protecting data, technology and infrastructure is the cornerstone of our way of life. ‘Besides cybersecurity, the question of digital sovereignty also arises,’ Van Boeckel adds. ‘Do we still want our data to be stored on a server located 10 000 km away? Who do we want at the controls of our satellite infrastructure?’
- Energy independence
International conflicts have already disrupted the oil and gas trade several times. Renewable energy is usually generated locally and preferably also consumed locally. Seen from that perspective, decarbonisation is no longer just something that’s ‘nice to have’, but is an absolute geopolitical necessity.’ Companies that invest in renewable energy now are securing their future. it's about building self-reliance in uncertain times. Artificial Intelligence is moreover driving an explosive increase in demand for energy. The big technology companies are terrified of running out of energy,’ Van Boeckel adds. ‘That creates a need for diversification.’
- Industrial spring in Europe?
In response to the Trump administration's volatile economic and foreign policy, the EU seems to have woken up from its beauty sleep. Member states seem to be in agreement that a major effort is required from everyone to boost spending on industry and infrastructure. As a result, there are numerous opportunities in (sub-)sectors that stand to benefit substantially from these investments.
‘In times of geopolitical turbulence, it is important for investors to anticipate, apply prudence, and look for trends that transcend geopolitics’, Van Boeckel concludes. ‘Investors need to be on their toes and be ready to change gear quickly. This is set to be a volatile year.’
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The information contained in this publication is for information purposes only and should not be considered as investment advice.
