Trump is the accelerant, not the cause, of the post-1945 order's unravelling. The trade war is really a Capital War over global flows — and the erosion of US rule of law is the deeper systemic risk.
“In America the law is King. For as in absolute governments the King is law, so in free countries the law ought to be King; and there ought to be no other.” — Thomas Paine, Common Sense (1776)
The world has entered what we previously termed the Great Dislocation (Viquo Insights, January 2025) — a structural break from the post–World War II order into a fragmented, decentralised global landscape. The American-led system that underpinned global stability since 1945 is fracturing. In a few short years, US policy has pivoted from defending multilateral norms to actively undermining them, marking the end of Pax Americana. Allies and adversaries alike are recalibrating, confronting a new era in which US indispensability is no longer assumed.
Donald Trump is not the root cause of the Great Dislocation, but its accelerant. Structural forces — China’s rise, decentralisation technologies, institutional fatigue, populism — had already weakened the old architecture. Trump’s governance style, marked by institutional disdain and erratic decision-making, accelerated the unravelling. His withdrawal from multilateral frameworks, imposition of tariffs on allies, and open hostility toward long-standing partnerships eroded the US’s self-appointed role as global stabiliser. In effect, America vacated its leadership position — voluntarily and from within.
Trump’s governance style exhibits traits closely resembling Narcissistic Personality Disorder: craving adulation, rejecting institutional checks, and demanding loyalty above competence. Although not a formal diagnosis, multiple insider testimonies indicate policy is driven by personal impulse, with dissent swiftly purged. Paradoxically, his fixation on image sometimes prompts abrupt policy reversals if a move threatens to tarnish his “winning” image. Overall, however, this narcissism magnifies volatility, reinforcing ongoing political, economic, and institutional vulnerabilities.
The Capital War behind trade tensions
Beneath the loud discourse on deficits and tariffs lurks a deeper “Capital War”: a battle over global capital flows as US dominance no longer seems assured. For decades, the United States financed its deficits cheaply, leveraging the dollar’s role as the world’s reserve currency. That equilibrium is increasingly fragile. Some central banks and large investors have begun reallocating funds away from US Treasuries, calling into question the cheap financing on which Washington depends.
Trump’s abrupt tariff measures in what he mediatically and skilfully called “Liberation Day” — imposing a baseline 10% levy on all imports while disproportionately targeting China — should be viewed through this lens. These steps are not purely about trade fairness or populist theatre; they aim to steer economic activity and foreign capital back toward the US, especially as Washington anticipates significant new debt issuance. By raising import costs, the administration hopes to spur domestic production and collect tariff revenue — funds that Trump has suggested could underwrite an unconventional US sovereign wealth plan.
The notion that trade deficits imply foreign nations are “cheating” the US is economically flawed. Persistent deficits reflect overspending at home — by the government, households, and corporates — not malfeasance abroad. Tariffs cannot resolve this imbalance. Worse, invoking emergency powers to bypass Congress undermines constitutional checks, a point even Republican legislators have flagged as dangerously precedent-setting.
Some say the tariffs are mere negotiation tactics, but any eventual deal may be only a short-term patch. Distrust will linger, potentially accelerating a rotation of capital flows out of US assets and into other regions — an environment in which, ironically, the UK might discover unexpected advantages. Even so, the result could be a smaller overall global economy. Trump’s approach, unmoored from basic economic reasoning, hints that he lacks or dismisses professional advice. As a result, what looks like an economic conflict also poses fundamental governance questions.
“Liberation Day” becomes a defining gambit for US fiscal dominance in an evolving ecosystem. The White House repeatedly spotlights cheap energy, a weaker dollar, and low interest rates as strategic pillars. Initially, events aligned: OPEC+ unexpectedly raised production by over 400,000 barrels a day, driving oil under $60 and pressuring petro-states, while the dollar slid amid worries that tariffs would slow domestic spending. A softer currency aligns with Trump’s push for export competitiveness. However, this trifecta relies on a dovish Federal Reserve stance, which could fracture if inflation surges or investors lose faith in US governance. At that point, financing America’s deficits cheaply might be impossible.
Eroding rule of law — the ultimate systemic risk
Amid tariff skirmishes and shifting currency markets, perhaps the greatest danger lies in the erosion of the rule of law. Historically, the bedrock of US strength has been the predictability of its legal and constitutional institutions: an impartial judiciary, checks and balances, property rights enforced without political bias. This stability underpins faith in the dollar. If that trust disintegrates, it would overshadow any tariff battles in its impact.
The Trump administration has repeatedly tested constitutional limits, invoking emergencies for trade policy, attacking unfavourable court rulings, and undercutting institutions like the Federal Reserve. International players have noticed, as have domestic agencies. Widespread concern that the US is compromising its own legal frameworks could lead to a “rule-of-law discount” on American assets, inflating the country’s borrowing costs and weakening its currency further. John Locke’s warning — “Wherever law ends, tyranny begins” — and Thomas Paine’s view that “the law ought to be King” speak directly to the threat. If global capital ceases to see the US as a safe harbour backed by an incorruptible legal system, investment could pivot decisively elsewhere.
The dislocation in practice
Liberation Day hammered global markets. The discipline that matters in such a moment is not prediction but process. For nearly a year, anticipating a possible break in the dollar-centric regime, we had been tilting Portfolio One toward non-dollar currencies, real assets, and stable consumer staples — positioning that did not avert losses but helped soften them.
When the rout arrived, the instinct we resisted was to react. Instead we revisited every holding to test whether its core logic still held. Where valuations remained fundamentally sound, we did nothing — a stance driven by discipline and method, not indecision. With hindsight, a more proactive hand might have trimmed richly-valued positions at February’s highs to redeploy at lower prices a week later. But the central thesis held, and the posture now is readiness: to act decisively where dislocation drives valuation away from fundamentals, and to wait where it does not.
The shape of what follows
The Great Dislocation is far from over. Volatility will persist, and Donald Trump — “the Great Narcissist” — seems inclined to govern regardless of market turbulence, testing foreign lenders’ patience by recasting the US as an industrial powerhouse reliant on redirected capital. Complicating matters is America’s skewed equity ownership: the top 1% holds roughly half the market, while the bottom half owns almost none, limiting political pressure from Main Street and allowing Trump to ignore the markets without much political harm. Meanwhile, a deeper concern remains the erosion of US legal checks. Trust is easily lost and harder to win back. If trust in America’s foundational governance collapses, no short-term reprieve will prevent capital flight.
Still, with the right balance of caution, flexibility, and commitment to fundamentals, dislocations can be transformed into genuine opportunities. At Viquo, we intend to remain vigilant, prune or expand positions based on evidence, and deploy capital when conviction meets fair valuation. The Great Dislocation continues to reshape financial realities; while its final shape is uncertain, we believe disciplined analysis and a robust investment thesis will guide us to long-term gains — even amid the storm. A second salvo may yet loom in the deregulation of crypto, which could drastically affect capital flows, dollar strength, and the unpreparedness of Europe’s banking system. That, however, is an even bigger storm — one for separate analysis.
Postscript: markets waste no time
Only a day after this article was written, markets delivered a forceful reaction. The US dollar fell to a three-year low against the euro, while the 10-year Treasury yield surged to 4.46%, up from 4.17% just days earlier. This, as we have been anticipating, is the early pricing of governance risk. Investors are questioning the coherence of US fiscal direction, institutional independence, and legal stability.
Meanwhile, China escalated tariffs on US imports to 125%, effectively capping the traditional tit-for-tat game. If needed, China could escalate beyond trade — targeting US firms, devaluing the yuan, or leveraging its Treasury holdings to pressure global markets. In parallel, the EU has floated digital service taxes on US tech giants should trade talks fail — a real threat, given America’s surplus in services and its dependence on sectors like Big Tech, banking, and consulting.
Markets are not just reacting to economic friction; they are responding to an unravelling of consensus around US leadership. The dislocation is accelerating.
Where this leads — This essay is the sequel to The Great Dislocation (2025), reading the Trump administration as the accelerant of a break already under way. The alternative monetary order being assembled on the other side of that break — China’s gold-anchored settlement architecture — is the subject of The Golden Airlock (2026); and the crypto-and-settlement dimension it foreshadows is developed in A New Financial Fabric (2025).
Viquo Insights presents the editorial views of the author and the firm’s ongoing, exploratory thinking. It is provided for information and discussion only, and is not investment advice, nor an offer or solicitation to buy or sell any security or to adopt any investment strategy. You should do your own research, and we would always be very happy to know what you think, what you find, and how we can learn together.