US Domestic Politics — Trump Era
The second Trump administration: tariffs, institutional pressure, and the domestic policy shifts reshaping global markets.
slug: us-domestic-trump title: US Domestic Politics — Trump Era description: The second Trump administration: tariffs, institutional pressure, and the domestic policy shifts reshaping global markets. tag: geopolitics updatedAt: 2026-07-25 active: true
Current Situation
Last updated: July 25, 2026
The administration has accelerated its nationalist economic agenda, transitioning from targeted threats to broad-based tariff implementation. This week, the White House imposed 50% tariffs on Canadian alcohol, dairy, and wood products and established new duties between 10% and 12.5% on 60 trading partners, including China and the EU, citing forced labor enforcement failures. Long-term industrial policy is now centering on pharmaceuticals, with announced import tariffs on generic drugs starting at 100% in August 2028 and rising to 200% the following year to force domestic manufacturing.
The executive branch is aggressively leveraging federal agencies to target academic and electoral institutions. The Department of Justice and Department of Education launched probes into Harvard and five medical schools, including Dartmouth, over financial aid and admissions practices. Simultaneously, the administration is intensifying pressure on the electoral system, with the DHS threatening states over election measures and the DOJ pursuing at least 39 prosecutions for non-citizen voting over the last 18 months. This follows a pivot by the president to frame the 2020 campaign as subject to Chinese interference.
Fiscal and structural shifts are prioritizing ideological alignment and military readiness. The House passed a $95 billion budget blueprint allocating $73 billion for war operations in Iran, while the administration is redirecting $200 billion in annual research funds from colleges directly to individual scientists to compete with China. Internally, the administration faced a setback with the resignation of the Trump AI Security Agency head and a court ruling preventing the revocation of federal grants that conflict with administration priorities.
Investment implications center on escalating supply chain costs for generic drugs and Canadian imports, alongside significant shifts in research funding. The consolidation of over $400 million by the MAGA Inc Super PAC suggests a high-spending cycle for the 2026 midterms. Market volatility may increase as the administration replaces temporary 10% tariffs with more durable levies and considers a split with the UN refugee agency.
Key variable to watch: Whether the Senate accepts the House's short-term spending measure or demands changes that could lead to a funding gap before the November elections.
Background
Origins
The second Trump administration — beginning January 2025 after Trump's victory over Kamala Harris in November 2024 — represents the most significant shift in US domestic and foreign policy since the Reagan era. Unlike the first term (institutional resistance, internal chaos, relative inexperience), the second arrived with a prepared blueprint (Project 2025), experienced loyalists in key positions, and a Supreme Court ruling granting broad presidential immunity from criminal prosecution.
Trump's movement is a continuation and radicalisation of the populist nationalism that emerged from 2008–2016: declining manufacturing employment, stagnant wages for non-college workers, the opioid crisis, and a perception that the professional-managerial class captured both parties and major institutions. MAGA has outlasted the person — it has reshaped the Republican Party and altered the political geography of the US. Three policy axes matter most for markets: trade and tariffs (most direct near-term impact), institutional independence (the Fed, regulatory agencies, DOJ), and fiscal policy (tax cuts and deficits).
How US Governance Works
Because the updates constantly reference clashes between branches, a quick map. The President sets policy through executive orders (directives that carry the force of law but can be challenged in court and reversed by a successor) and through the agencies he controls. Congress — the House and Senate — holds the power of the purse: major spending and any funding request must be approved by both chambers, which is why a president's agenda can stall even with party control if the majority is thin. The federal courts can block executive orders and laws they find unconstitutional; a district judge can freeze a policy nationwide, and these injunctions are then appealed upward, often to the Supreme Court. This three-way friction — president acts, Congress funds or refuses, courts block or permit — is the recurring structure behind most domestic-politics updates.
Key Actors
Donald Trump: Far more operationally experienced than in the first term, with loyalists who execute rather than constrain. His decision-making remains transactional and instinctive, but he now understands the levers of executive power. Unable to run again, he is motivated primarily by legacy — which both constrains and liberates him.
JD Vance: Vice President and the most intellectually serious figure in MAGA — a nationalist-populist with genuine convictions on industrial policy, supply-chain nationalism, and the limits of free trade. The heir apparent; his views matter increasingly through 2028.
Scott Bessent (Treasury): A hedge-fund manager who brought relative professionalism to fiscal and currency policy, moderated some tariff rhetoric, and is the main interlocutor between Wall Street and the administration — the key figure to watch for whether policy prioritises stability or ideological purity.
Pete Hegseth (Defense): Drives the administration's military buildup and the push for a sharply expanded defence budget — relevant to every defence-spending and procurement update.
RFK Jr. (HHS): Leads Health and Human Services with heterodox views on vaccines and food policy, creating regulatory uncertainty for pharma and processed-food companies.
Congressional Republicans: A thin House majority gives enormous leverage to individual members; the fiscal agenda — extending the 2017 tax cuts while finding offsets — requires near-unanimity, empowering both extremists and moderates.
The Federal Reserve / Powell succession: Trump has repeatedly called for cuts, and whether he installs a more compliant Chair following the 2025 immunity ruling is among the term's most consequential market risks. (The rate path itself is covered in the Fed dossier.)
Historical Context
2015–2016 — First Campaign: MAGA emerged from dissatisfaction with the Republican establishment, free-trade ideology, and interventionist foreign policy. Trump beat 16 establishment Republicans, then Clinton.
2017–2021 — First Term: The Tax Cuts and Jobs Act (2017) cut the corporate rate from 35% to 21% (permanent) with temporary individual cuts expiring in 2025. The first China trade war (2018) made tariffs a tool of statecraft. COVID produced the largest peacetime fiscal expansion in US history. January 6 and two impeachments defined the end.
2021–2024 — Biden Interregnum: Biden's term produced the Inflation Reduction Act (IRA), the CHIPS and Science Act, and the Infrastructure Act — the largest industrial-policy intervention since the New Deal, much of it formalising the direction Trump gestured at but couldn't legislate. Understanding what Trump is now reversing (clean-energy subsidies) versus continuing (chip and reshoring policy) requires this baseline.
2024 — Return: The first campaign by a convicted felon. The immunity ruling, an assassination attempt, and Biden's debate performance shaped the outcome. Trump won a broader coalition than 2016 or 2020, gaining with Hispanic and Black voters — completing MAGA's transformation from insurgency to governing coalition.
2025–present — Second Term: Project 2025 as governing template; aggressive use of Schedule F (replacing civil servants with appointees), tariff escalation, withdrawal from international bodies, and executive orders across social and regulatory policy.
Market Exposure
Tariffs: The 10% universal baseline, 145% on China, and sector-specific tariffs (steel, aluminium, pharma, solar) are the largest trade-policy shift since Smoot-Hawley (1930) — inflationary and supply-chain-disruptive. Domestic producers in tariffed industries benefit; importers, retailers, and downstream manufacturers lose. The macro effect depends on retaliation, which so far has been partial.
Dollar and Treasuries: The "Mar-a-Lago Accord" concept — using tariffs as leverage for a multilateral dollar devaluation — is the most market-significant theoretical policy in play; a deliberate weakening would be inflationary, negative for Treasury holders, positive for gold and commodity exporters. Speculative, but with 1985 Plaza Accord precedent.
Regulation and Energy: Deregulation in oil and gas (permitting, LNG exports), financial services (potential Basel III rollback), and tech (permissive merger review) — generally positive for energy, financials, and large-cap tech. Expiring clean-energy credits are a headwind for renewables.
Defence: Bipartisan support for elevated spending plus NATO burden-sharing pressure — direct positive for US and European contractors.
Healthcare/Pharma: RFK Jr.'s HHS leadership and the pharmaceutical-tariff proposal create material regulatory uncertainty for a sector with globally integrated supply chains.