Lessons from Trump’s Tariff Wars, Russia’s Sanctions and Implications for Australia
MSQ Capital’s Paul Miron says Trump’s return could reshape global trade and fast-track deglobalisation — with major consequences for Australia.
6 min
OPINION
Regardless of whether you are a Trump supporter or not, given the stock market turmoil and what can only be interpreted as personal attacks on global trading partners, Trump is quickly becoming one of the most globally polarising presidential figures in US history.
The trade war threatens global economic stability and reverses 80 years of globalisation. Geopolitics shape the global financial landscape, resulting in trade wars, wars, and sanctions, forcing nations to rethink their economic strategies.
Expect significant volatility to continue because we are in for a bumpy and uncertain ride during the remaining term of Trump’s presidency; diversification across lowly correlated asset classes has never been more critical.
Trumpenomics might be the most crucial economic experiment in modern history, and if you think this has no impact on Australians, think again.
FROM A US PERSPECTIVE, PERHAPS THE COUNTRY HAS NO CHOICE BUT TO DO SOMETHING DRASTIC
The US economy is the world’s largest consumer of products, and its trade deficit is running at US$147.9 billion per month. This is certainly not sustainable.
Federal debt stands at an all-time high of US$36.4 trillion, equating to 123% of GDP. This has been built up over decades because of the American consumer’s voracious appetite for cheap products delivered to them through globalisation.
However, the music has to stop one day to avoid continuing to fall into the inevitable debt spiral.
Trump argues that the fall in manufacturing in the US from 15.8% to 10.1% of GDP in the past 25 years has resulted in the single most significant deterioration in the living standards of the middle class, with the wealth being transferred to manufacturing economies such as China and Japan.
Despite Trump’s bizarre public interpretation of tariffs, they essentially tax US citizens’ consumption. Trump is infatuated by the Gilded Age in the US (1870 – 1900), when there was no personal income tax and governments raised most of their income through tariffs.
DEGLOBALISATION
Over the past 80 years, globalisation has been a powerful growth engine, lifting billions out of poverty, lowering consumer prices, and fostering unprecedented economic interdependence.
For the US economy, globalisation enabled access to vast export markets, cheap imports, and global capital flows, keeping inflation in check and sustaining consumer demand.
Globalisation has delivered extraordinary prosperity to the US, with the complex, interconnected global supply network we enjoy today.
The benefits of this network have been built over decades, with many US firms opening complex international supply chains to extract maximum global competitiveness. We do not know how they will be impacted, what the unintended consequences of these companies needing to trade under the new world order will be, and how this will affect both US and global markets.
Before the Global Financial Crisis, global trade exceeded 60% of world GDP. Since then, geopolitical fragmentation, supply chain vulnerabilities, and rising protectionism have ushered in an era of deglobalisation. The peak of globalisation is widely considered to have occurred in the mid-2000s.
A deglobalisation trend gathered pace during the COVID-19 pandemic, highlighting countries’ vulnerabilities and sovereignty in severe crises. It is important to note that from an economic standpoint, we have reached a pivotal point where the benefits of globalisation have been fully absorbed by our current Western economies.
Therefore, the current costs of global trade outweigh the benefits and a growing group of economists such as Dani Rodrik, Richard Baldwin and Nouriel Roubini firmly support deglobalisation.
The irony of Trump’s intentions regarding tariffs is that they have a sound fundamental economic basis when applied evenly, fairly, and measuredly. They are not an attack on trading partners, but a tax placed on consumers.
However, when tariffs are intentionally imposed to harforeign countries, we enter a different geopolitical game, resulting in trade wars, shifting alliances, increased global tensions, conflicts, and the risk of wars.
1https://www.economist.com/international/2009/02/19/turning-their-backs-on-the-world
LESSONS TO BE LEARNED FROM HISTORY
Two historical case studies provide glimpses of rational thinking that supports tariffs: the US-China trade war initiated by Trump in his first term in office, and Russia’s economic resilience under Western sanctions, offer valuable lessons for Australia.
While distinct in their circumstances, both examples underscore the importance of self-sufficiency, local manufacturing, and strategic economic policies to withstand external pressures.
UNDERSTANDING TRUMP’S TARIFF WARS
During Trump’s first presidency, he launched a tariff war, primarily targeting China, to reduce the US trade deficit and encourage domestic manufacturing. His administration imposed tariffs on billions of dollars’ worth of Chinese imports, arguing that unfair trade practices and intellectual property theft had disadvantaged American businesses.
The strategy was designed to make imported goods more expensive, incentivising firms and consumers to buy domestically produced alternatives.
While the immediate effects included increased costs for US consumers and retaliatory tariffs from China, the broader goal was to shift supply chains, encourage domestic production, and reduce reliance on foreign economies. Some industries benefited—such as steel and aluminium manufacturing—while others, such as agriculture, suffered from reduced exports due to retaliatory measures.
The long-term impact remains debated, but the lesson is clear: economic policy tools, such as tariffs, can strategically reorient an economy toward self-reliance.
RUSSIA’S ECONOMIC RESILIENCE UNDER SANCTIONS
A parallel case is Russia, which, despite facing heavy sanctions from Western nations, after its 2014 annexation of Crimea and, more significantly, after its 2022 invasion of Ukraine managed to sustain and even grow its economy.
Sanctions aimed to cripple key industries, limit access to global financial markets, and pressure the government into compliance. However, Russia’s response was instructive. The country aggressively pivoted toward self-sufficiency, particularly in food and energy production.
Russia mitigated the impact of sanctions by increasing local manufacturing and shifting trade to non-Western partners such as China and India. The Ruble remained relatively stable due to strict capital controls and alternative trade agreements.
This demonstrated how a nation can adapt when forced into economic isolation by fostering domestic industries and securing alternative markets.
TRUMP’S THE ART OF THE DEAL
Perhaps it is worthwhile to delve into Trump’s psychology, which has been formed throughout his career, a businessman deeply rooted in high-stakes negotiation, underpinned by access to immense financial resources and brand capital.
Inheriting a real estate business from his father, Trump expanded the empire into Manhattan’s luxury property market, leveraging aggressive deal-making and media-savvy self-promotion.
Trump consistently positioned himself as a power negotiator, unafraid of risk or confrontation. This negotiating style, as erratic and aggressive, comes from a position of power and wealth, which has paid off all his life and is all that he knows.
Now, as President, he is applying the same leadership style while in charge of the largest economy in the world, as he has done throughout his life. Regarding the position on tariffs, do not expect any consistency; he will pivot and change his position as frequently as he changes his underwear, leaving everyone consistently guessing.
Meanwhile, Trump-esque logic and rationale will always justify his actions with gusto and unquivering confidence.
Perhaps this is where the high-risk strategy evolves. There is no doubt he is going for broke, and it is anyone’s guess as to where this will end. There may be global recessions with markets overwhelmingly turning pessimistic.
Alternatively, he will end up with low interest rates so that government debt is more manageable, thereby reducing income tax and regaining local popularity by reorienting the economy in record time as world leaders cave into Trump’s outrageous demands and hurt the Chinese economy. It is also plausible that straight base 10% tariffs are applied, with the exception of China; only time will tell.
LESSONS FOR AUSTRALIA AND INVESTORS
Despite Trump’s overall strategy with tariffs in these unprecedented times, any politician, economy, asset class, or equity fund manager can go from hero to villain back, and then back to hero overnight.
Investors should take note and ensure they do not make decisions based on pure emotion and be led by animal spirits (the collective mood of the market).
Many economists and politicians have been calling for an emergency rate cut. This is highly unlikely, despite these recent events damaging consumer and business confidence. There are endless permutations on how this may impact our economy.
Our Reserve Bank Governor has on many occasions said that they make decisions based on data. There is still inflationary pressure that could be placed on our economy from the shifting nature of trade and geopolitics, and there is no need to rush to a decision that could be made in haste.
Whether Trump plays the long or short-term game, tariffs will accelerate the deglobalisation trend. Australia must focus on reducing import dependence, strengthening local manufacturing, and diversifying trade partnerships.
From an investment perspective, there has never been a more critical time to ensure the right diversification in one’s investment portfolio.
Despite the best research conducted by large fund managers regarding the correct composition of shares, fixed interest, alternative assets, and private funds within the portfolio, there is often a lack of understanding of how these types of, either black swan events or long structural changes to the economy, can set back one’s portfolio so considerably.
As a private credit fund manager, we can only see increased investor demand in Australia as there continues to be growing uncertainty and volatility in the equity markets.
Paul Miron has more than 20 years of experience in banking and commercial finance. After rising to senior positions for various Big Four banks, he started his own financial services business in 2004.
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Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
Technology and semiconductor shares fell sharply as investors questioned the debt financing the AI infrastructure boom and confronted higher rates and Chinese competition.
4 minA sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.
The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.
The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.
The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.
This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.
The debt behind the AI build-out
Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.
Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.
JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.
The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.
That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.
A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.
When interest rates rise, those assumptions become less forgiving.
Inflation changes the calculation
September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.
The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.
CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.
Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.
Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.
The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.
China adds another source of pressure
Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.
Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.
The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.
That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.
A reset rather than the end of the boom
The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.
What has changed is the market’s willingness to overlook the price and financing structure of that growth.
The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.
More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.
For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.
Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.
The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.
Fact box
Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026
Philadelphia Semiconductor Index: Down approximately 11.4 per cent
Micron Technology: Down approximately 14.6 per cent
Samsung Electronics: Down approximately 18 per cent
SK Hynix: Down approximately 24 per cent
US September inflation: 3.7 per cent annually
Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion
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