President-elect Trump’s foreign policy is beginning to take shape, based on pre-inaugural diplomacy and his appointments to date. Uncertainties abound, from unexpected world events—such as a sudden regime change in Syria—to Trump’s mercurial nature, the congressional confirmation process, and how his team settles into producing policy.

Areas of Certainty

1. Tariffs: Trump will deploy tariffs—targeted and broad–to leverage political goals and bring jobs back into the US economy. Likely targets include Mexico, Canada, Europe and especially China, as well as other nations with high bilateral trade deficits. Generally, implementing tariffs takes time, leaving room for negotiations in advance. Some statutory tools enable tariffs to be implemented more quickly, so that negotiations may begin after tariffs are imposed. Financial markets and legal processes will act as guardrails to limit extreme volatility.
2. China: Trump’s forceful policy will go beyond tariffs, shaped by a team of China hawks. Secretary of State-designate Rubio, National Security Advisor appointee Waltz, Representative Elise Stefanik (nominated as Ambassador to the UN), and former Senator David Perdue (nominated as Ambassador to China) have all championed legislation to counter Beijing. They’ll join prior Trump administration China hawks Senior Counselor for Trade Peter Navarro and USTR nominee Jamieson Greer. Trump will negotiate with President Xi, adding tactical uncertainty.

Works in Progress

1. Europe/NATO/EU: Trump is likely to pressure European allies to shoulder more Ukraine funding, increase defense spending beyond the 2% GDP benchmark, align with US policies on China, and reduce the EU trade surplus. Europe will struggle over a coherent response, straining the transatlantic relationship, with a trade war likely. Trump’s negotiations to end the war in Ukraine will likely take time.
2. Middle East: Trump will staunchly support Israel to finish the war in Gaza and maintain the ceasefire with Hezbollah in Lebanon. Despite his anti-Iran nominees, Trump may explore negotiations with a weakened Iran, a possibility Iran has signaled. His handling of Palestinian and Iranian issues will directly influence his broader goal of normalization between Saudi Arabia and Israel.
3. Mexico and Canada: Trump’s tariff threats aim to compel reductions in illegal immigration and drug trafficking. A renegotiation of the USMCA trade agreement is likely in 2025 and possibly beyond, with potential change to rules of origin to stymie Chinese components, especially in the automotive sector.
4. Investment-driven Foreign Policy: Traditional foreign aid could take a backseat to public-private investment initiatives to counter China. Prominent investors close to the Administration will play pivotal roles. The Development Finance Corporation (created during Trump’s first term) may see significant expansion upon reauthorization next year. Strategic economic corridors such as those established during the Biden presidency–Lobito in Angola, India-Middle East-Europe (IMEEC), and Luzon in the Philippines—could continue receiving US support, possibly with a stronger emphasis on energy, a longstanding Trump priority.
5. US Global Role and Trump’s Team: While Trump’s ambitions are bold, his preference for selective engagement and discretionary use of force—designed to maximize negotiating flexibility—may diminish the long-term dominance of US alliances. Many world leaders are comfortable with Trump’s transactional diplomacy and are already engaging him and his inner circle on proposed business deals. Maintaining coherence will be a challenge for Rubio and Waltz, particularly given the presence of special envoys and influential non-governmental figures such as Elon Musk and Jared Kushner. Unlike during Trump’s first term, his current appointees, including Wall Street veterans nominated for Treasury and Commerce, have demonstrated loyalty and support for his tariff-driven agenda. 

With less than five weeks until inauguration, the contours of Trump’s foreign policy are becoming clearer. However, much remains uncertain, from the longevity of his cabinet appointees to the impact of unpredictable global events. Investors and businesses should prepare for a dynamic and volatile foreign policy landscape shaped by Trump’s unique approach to diplomacy and economic security.