Vitamin boost & side effects

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year ago, I described Donald Trump’s return as a “vitamin boost for America” (see WE No 63): a mix of Colbert-style tariffs, Keynesian stimulus (though compared to the first term the measures are still fairly light-handed), and extensive industrial policy coupled with a communication style markedly different from that of the previous administration.

A MAGA prescription with side effects for old allies and new adversaries. A policy with structural benefits for the domestic economy, but with high volatility and unpredictability. Today, the US superpower appears to be in good health. It is growing, exporting and tweeting with ease. Having regained geopolitical centrality in every theater of conflict, America is aiming to take back control of critical industrial supply chains. As its metabolism accelerates, the rest of the world—Europe in the lead—finds itself chasing the overseas agenda, in terms of trade relations, defense and priorities, in particular in environmental policies.

As expected (tariffs had already been the focus of Trump round 1), 2025 was the year of the return of Protectionism as a brand. Trump has imposed tariffs of between 15 and 25 percent on a wide range of Asian products, aiming to “bring manufacturing home again,” and of 10 percent for most European products (but as high as 50 percent on steel). The moves followed an original assessment of the trade imbalance between the two regions that ignores the US trade surplus in services. Liberation Day—greeted with initial panic by the markets—is, however, bringing results: onshore investment is increasing and the trade deficit is down by USD 78 bn. Macroeconomic data shows short-term success: GDP is growing by 2 percent, inflation has eased to around 2.7 percent on an annual basis, and the main stock market indices are significantly above last year’s levels. However, the unemployment rate has started to rise again, approaching 4.6 percent.

 

 

Deal diplomacy

Meanwhile, geopolitics shows the classic trademarks of the house style—the art of real estate negotiation that Donald built his career on: dynamism, threats and renegotiations, coupled with a pragmatic willingness to reach agreements.
 

It is “deal diplomacy”: unscrupulous, non-ideological, rough and concrete. 

With China, there is an alternation of tariffs, verbal clashes and smiles. The 2025 bilateral meetings froze some trade restrictions, but mistrust remains systemic. Rare earth elements and advanced chips are (and will remain) at the center of the conflict and mutual dependencies, with both actors wanting to buy time to build alternatives to whatever the adversary’s choices may be.

With Russia, diplomatic channels—after the initial assumption of US disengagement in support for Ukraine—have narrowed. The war seems to have entered the stage of attrition—of inches and pressure. Energy is the main pressure point. Dual attacks: on oil facilities, on the one hand, and on those who buy Russian oil (via sanctions) on the other. It is hard to say whether it will last, but the impression is that we have entered a phase of greater effectiveness.

In the Middle East, the ceasefire between Israel and Hamas, brokered by the United States, Qatar and Egypt, led to the release of hostages. The deal marks a turning point after two years of war in which the regional chessboard has seen Israel launch attacks almost unimpeded not only on Gaza, but also on Lebanon, Syria, Iran, and even Qatar, demonstrating its previously recognized intelligence and defense dominance. A new regional order is emerging around Iran’s fragility: the Islamic Republic is not only unable to defend its proxies but, even worse, itself.

Europe now plays the role of the fragile partner: tariffs have hit Brussels and its space for response is limited. Dependence is growing. Defense spending is on the increase and greater dependencies emerge when it comes to gas, with LNG purchases from the US growing by nearly 60 percent. The transatlantic agenda is being dictated by Washington alone. Europe has too many geopolitical weaknesses to be able to engage in a dialog on an equal footing.

 

 

Finally, we come to energy, which along with industrial growth, is a key component of the “vitamin boost.” The United States is now the world’s marginal gas supplier: with about 10 million tons of LNG exported in October 2025, 38 percent more than in October 2024. More than half of those ships land in Europe, which now heats its homes with methane from Texas or Appalachia.
 

“America does not apologize for producing energy”

Long gone are the days when Paris debated banning the import of US gas because it was produced by fracking. As President Trump likes to say “America does not apologize for producing energy.” He hates wind turbines more than Don Quixote. And he is investing in reopening mines for critical minerals. Incredibly, in the most economically liberal country in the world, we see the government acquiring stakes in private companies involved in strategic sectors.

On climate, on the other hand, the tune changed well before Trump returned on the scene, but the tycoon president personifies the dampening enthusiasm. The United States has abandoned the Paris Agreement and reduced subsidies for renewables. It is a coherent vision within a new Cold War where America sees the reindustrialization of the most emission-intensive sectors as a strategic necessity. The transition creates dependence on those who control magnets and rare earth elements. Pursuing it without countermeasures means losing centrality to the benefit of China and Russia. 

 

 

A positive balance

So, what is the balance one year into the “vitamin boost”? The treatment seems to be working—America is stronger, louder, more feared.

The year 2026 does not promise greater tranquility. The Midterm elections will spur still more demand for economic boosts (the Keynesian stimulus is still standing by) and announcements. The fronts are also widening in foreign policy: while Venezuela and Nigeria have been recent targets, the contest with Russia is still open, along with the Middle Eastern entanglement. Meanwhile, China remains the real geopolitical adversary. Certainly, Wall Street will continue to benefit from an Administration so sensitive to equity valuations. For Europe, on the other hand, the relationship will remain—with a few exceptions, such as Italy—one of mistrust.

Finally, on energy, while the focus on reducing oil prices will remain strong, the bigger risk is the end of the golden age of US tight oil. Prices that are too low (at USD 65 per barrel, investment lags) and the depletion of the most profitable areas of the Texas basins could bring a negative surprise in terms of domestic production.

And here an unresolved tension among Trump’s objectives emerges. Industrial growth and focus on energy and mining could drive energy prices higher—especially if fiscal policy remains strongly expansionary.

In short, the Trump recipe is inherently inflationary, and the energy sector will not be able to ignore for long the need for a price signal more consistent with this new US policy. “Drill, baby, drill” is a call to arms. But without the right economic stimulus, it will remain nothing more than a cry in the wilderness.