MAGA’s cobra trap: Unintended wins for the MIGA – Sean Peche

MAGA's cobra trap: How Trump's policies unintentionally boost global rivals, highlighting risks of MIGA-driven uncertainties.

Published on:

19 Mar 2025, 3:11 pm

*This content is supplied by Sean Peche, Portfolio Manager at Ranmore Fund Management Ltd

First appeared on LinkedIn

A province in India incentivised cobra capture, but people bred them for rewards, increasing snake numbers – an unintended consequence (UC). Trump's MAGA policies, like NATO spending or chip restrictions, aim to boost the US but backfire, boosting global rivals instead. Diversify internationally to hedge against these MIGA-driven uncertainties.

A province in India once had too many cobras, so they incentivised the capture of these snakes.

Except then, people began breeding cobras to earn the reward…

This means more cobras, not fewer – an "Unintended Consequence" (UC).

This is relevant because the UCs of Trump's policies are everywhere, and his efforts to MAGA are MIGA (Making International Great Again).

Take defence spending where Trump wants other NATO countries to (rightly) spend more. This could've been fantastic for US companies like Lockheed Martin.

But former US allies were so shocked by the suspension of military support to Ukraine that they no longer want to risk being reliant on the US.

With the UC being that Canada, Switzerland, Portugal, and Turkey (so far) are "reviewing" US F-35 orders, swapping them for European jets.

Or semi-conductor chips where the US efforts to deny China access to Nvidia's latest chips unleashed the creativity that spawned Deepseek.

With the UC likely to be fewer chip orders for Nvidia.

Tariffs on Chinese imports negatively impact small Chinese businesses, but what about the UC of lower advertising spending for some US tech giants? "China-based sellers account for significant portions of our third-party seller services and advertising revenues" (Amazon 10k).

The 51st State rhetoric is having the UC of a Canadian consumer backlash – Flight Center reported February bookings to the US down 40% year over year.

DOGE's objectives are worthy – cut wasteful government spending and reduce the deficit. But if private spending doesn't immediately replace this government spending, there will be economic shocks.

And we're only just discovering where.

The 700k fired government employees are crashing the housing market in DC, with inventory up over 40%.

United Airlines recently announced weaker demand, saying Government spending is down 50%. Fewer flights mean fewer hotel stays, taxi rides, restaurant meals, and the multiplier effect of lower spending by waiters, baristas, and taxi drivers in a service-driven economy.

The bottom line is undoubtedly huge earnings uncertainty for many US companies.

Which may MIGA.

Because the shift from US fighter jets to Typhoons benefits European companies.

Consumers shunning Teslas in Europe and China benefits EU and Chinese EV makers.

The move away from iPhones in China benefits Chinese and Korean phone manufacturers.

Retaliatory tariffs on US grain exports benefit Brazilian exporters.

And the Canadian "staycation" will benefit Canadian hotels & resorts.

Because despite the MAGA rhetoric, America has had it very good for a long time.

That's why their companies are "priced for perfection".

In a very imperfect world.

Q1 earnings season will reveal its imperfections, but upside earnings surprises seem unlikely.

Perhaps the best way to protect yourself from any unintended consequences of MAGA is to be diversified internationally.

MIGA.

Disclosure:

The content of this marketing material is provided for information purposes only and is not advice.
Past performance is no guarantee of future performance.

Disclaimer:

Ranmore Global Equity Fund plc is approved for marketing and distribution in South Africa under section 65 of the Collective Investment Schemes Control Act (2002). Collective Investment Schemes (CIS) are generally medium – to long-term investments. The value of shares in the Fund may go down and up, and past performance does not necessarily indicate future performance or returns.

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