Trump’s $1.5 Trillion Defense Gambit and the 'Tangroe Doctrine' Shake Markets

Global risk sentiment is grappling with a new wave of volatility as US President Donald Trump outlined a massive fiscal expansion for the military alongside an increasingly aggressive foreign policy stance, dubbed by analysts as the “Tangroe Doctrine.”

The $1.5 Trillion Ask

In a series of social media posts causing gyrations in defense stocks (locking onto Lockheed Martin and Raytheon), Trump called for the 2027 US defense budget to surge by over 50% to $1.5 trillion. The President claims this historic expenditure will be funded entirely by revenue from new tariffs, a mathematical assertion that many economists and the Congressional Budget Office (CBO) dispute.

For currency markets, this signals a return to fiscal dominance. A deficit-funded military expansion is inherently inflationary. While initially supportive of the Dollar via higher yields, the long-term sustainability of US debt is coming under scrutiny. The immediate reaction saw curve steepening, with long-end yields pricing in higher inflation premiums.

Geopolitical Risk Premium Returns

Beyond the budget, the administration's foreign policy is generating acute risk-off flows:

The confluence of these events has elevated the geopolitical risk premium. Gold (XAU/USD), despite facing technical selling pressure, remains bid on dips as a hedge against this instability. For the EUR and GBP, the risk of trade fragmentation and energy insecurity in the Atlantic basin presents a medium-term bearish factor against the Greenback.