In its foreign policy priorities, the second Trump administration hasn’t differed so much from the first iteration: fostering economic self-reliance, notably in manufacturing; rebalancing longstanding trade and military relationships so as to punish ‘free-riding’; and projecting the optics of pre-eminent US military power. But there is a stark difference in method, with the second administration displaying markedly less deference to longstanding norms that would otherwise curtail its range of action. This can be seen in the administration’s willingness to dabble with annexation by force in Greenland; its decimation of WTO-led global trade; and the ‘decapitation strike’ against the Maduro regime.
Legal and behavioral norms perform an important function. They represent the rules by which the game of international relations is played. They create the predictability that underpins global commerce and diplomatic exchange. Their absence invites mutual suspicion, zero-sum thinking, and instability, evident in ongoing conflicts from Myanmar and the DRC to Sudan and Ukraine.
How can we predict behavior and quantify risk when operating outside this normative framework, when decision-making is increasingly concentrated in one individual? We need to get creative and assess on a case-by-case basis. And as the available corpus on the second Trump administration grows, the decisive variables are coming into greater focus.
Polling is an important predictor of foreign policy behavior in democratic states because, if ignored, that administration risks losing its chance to pursue any policy. The degree to which public opinion filters into foreign policy decision-making is a matter of academic debate, but at bare minimum it acts as a feedback loop that catches up to an administration sooner or later, particularly if the foreign policy in question is demanding sacrifices of the public.
The idea of a delayed feedback loop could apply to the second Trump administration because, at least so far, it has not been swayed by what the public thinks about its foreign policy. This dynamic is most stark on the matter of Greenland, which finds a rare bilateral consensus in the 75% of Americans who oppose US attempts to take control of the island. Around 61% of the US public was against President Trump’s tariff policy as of August last year, and 59% doubted the wisdom of his approach to the Ukraine war. Just 33% agreed with the president’s decision to remove Maduro, and perhaps most telling of all, 72% expressed concern about the U.S. getting overly involved in Venezuela.
This is to say that the public has not been on board for the second Trump administration’s foreign policy, though there is scant evidence to indicate that this has resonated in top-level decision-making. One important note here is that President Trump has yet to cross the public’s red line by launching new open-ended commitments in the vein of Afghanistan or Iraq. In terms of public opinion, this is arguably the critical guardrail for predicting Trump’s foreign policy, though midterm elections in November could ultimately provide feedback that resonates over the final two years of his term.
Oil Prices
No issue is more important to the Trump administration than affordability. Runaway inflation helped seal the 2024 election win, and affordability is now casting a long shadow over the midterms, forcing Trump to adjust his messaging amid sagging approval ratings.
Oil prices are where domestic affordability meets global geopolitics. High oil prices feed inflation, eroding consumer spending power. The Trump economy is benefitting from lower-than-average prices thanks to a combination of market oversupply and dampened global demand amid trade ruptures and tepid global growth. This helps takes some of the edge off of an uncomfortably high 2.7% year-on-year inflation rate (note gasoline in the BLS yearly breakdown). It also provides a useful talking point for the president as he pivots toward affordability ahead of the midterms.
The 2025 Iran-Israel war and US strikes on Iranian nuclear facilities represents one blip in otherwise tranquil oil markets during Trump’s second term, but it’s an important one. Oil prices shot up around 15% over just two weeks before stabilizing after Trump’s de-escalatory signaling was reciprocated in Tehran. Herein lies another guardrail for predicting the Trump administration’s foreign policy behavior: a deep aversion to higher oil prices, which risk striking at the heart of the president’s tariff agenda by fueling inflation.
A sensitivity to oil prices may be a motivating factor, but one must always also account for miscalculation. President Trump has deployed a selective use of force that sidesteps the risk of protracted conflict or regional destabilization, either of which risks a counterproductive spike in oil prices. But that won’t necessarily always be the case. With this in mind, the recent US military deployment to the Middle East is telling. A joint US-Israel air war would spike oil prices at a sensitive time, and the presumed goal of regime change carries a slew of risks and destabilizing externalities. The prospect of a new war in Iran is also a non-starter for the US public. With this in mind, the deployment is most likely an act of signaling in the hope of restarting a diplomatic process, something that the Iranians themselves have appeared amenable to, rather than the opening salvo in a new conflict. As of January 27, the ‘armada’ has arrived and has embarked on several days of aerial drills.
Bond Yields
US bond yields are another nexus between affordability and geopolitics. Foreign investors now hold about one third of US government debt, or $9.5 trillion, up from almost nothing after World War II. The US government was running a deficit of $1.74 trillion toward the end of 2025, approximately 6.3% of GDP (total debt has surpassed 120%). So long as a large deficit persists, the US government will need foreign institutional investors and central banks to step in and fill the funding gap or risk higher borrowing rates. And while the portion of foreign-owned debt has been dropping since the 2008 financial crisis, foreign entities still account for a significant portion of demand in absolute terms. In one recent January auction for a year-long T-Bill, indirect bids (primarily foreign institutional investors) accounted for roughly 72% of demand, above the expected 55-65% range.
Strong foreign demand in debt auctions helps to keep yields low. The United States is exceptional in this regard owning to how its currency and financial system are intertwined with global commerce – its ‘exorbitant privilege.’ For the Trump administration, bond yields aren’t just a macroeconomic data point. When borrowing costs rise for the government, the rates for mortgages and private debt are dragged upward in tow as private capital flows toward safer returns. Consequently, the appetite of foreign investors for US debt becomes an existential variable in President Trump’s affordability agenda.
There have been two events during the second Trump administration where foreign policy moves have produced volatile spikes in US debt markets. The first was Liberation Day, which saw the ten-year Treasury yield spike by 44 basis points in a two-week span, leading to an eventual pause in implementation. The second was a more recent 16 basis point swing in the aftermath of President Trump threatening tariffs on EU trading partners over Greenland. The Greenland saga is intriguing because it strikes at the heart of US exorbitant privilege, the idea that allies will continue to fund US borrowing unquestioningly (the top holders of US debt are close allies and China continues to unwind its holdings). Hints of a turning point were discernible in yield movements and on the floor at Davos. There is no doubt that they contributed to President Trump’s eventual decision to de-escalate.
Guardrails in Context
It isn’t history, diplomatic norms, or the dictates of complex interdependency that informs the foreign policy of the Trump administration. There is a different method at work, and true to the brand it adheres to an ‘America First’ framing: cheap oil, cheap debt, and cheap interventions. These three dictates can help predict and understand the second Trump administration’s foreign policy decision-making. But accommodation must always be made for miscalculations. What begins as surgical strikes can devolve into a protracted and costly military campaign; instability one country can cascade across the region; and bilateral trust can be frayed beyond repair.
