Geopolitics, Trump, and the Tariffs: How Does Risk Shape the Way Forward?

One of the more interesting events to emerge from the series of pronouncements by President Trump on the issue of tariffs is the effect the comments have had on the prices for gold, precious metals, and on trading trends in the commodity sector.

The other day a report was issued via Reuters, noting the surge in gold deliveries to the US, fueled by speculation of further potential import tariffs imposed by the new Administration. The report noted the minimum waiting time to load gold out of the Bank of England – which is the storage house for central banks – has reached four weeks. Typically, the release time is a few days or a week. President Trump has not mentioned precious metals in his tariff plans, but the risks created by the uncertainty has been enough to provide support for havens such as gold and boost deliveries to NYC.

The surge in gold shipments to NYC underscored what is likely a taste of things to come on the tariff front.  Earlier this week Trump slapped a 25% tariff on all Colombia imports, in the context of a dispute involving the return of illegal immigrants to the country.  Colombian authorities reportedly only agreed to accept the planes full of the deportees after it was realized that the tariffs and related measures invoked by the US could have done everything from raising the price of coffee (prices spiked for arabica coffee futures on the European markets) and fresh cut flowers to revoking visas for Colombian officials working in the US. As some domestic experts mentioned – although the claim seemed a little premature – the moves could have decimated the Colombian economy.

To be sure, trade relations between the two countries over the last little while have not been the best: Colombia provoked the ire of the US in 2024 when it raised tariffs on US milk powder and began a formal look into American corn subsidies, fueling concerns that US producers could lose a rather large customer.

Later this week, Latin American heads of state will meet for an ‘emergency summit’ to discuss ‘migration, the environment and regional unity.’  This will provide presumably some vision for a way forward and a means of addressing likely future threats by the US.  My guess is that these sorts of efforts will do much to take the wind out of the sails of some of Trump’s bluster, but the future will likely be a volatile one.  Geopolitical risk is entering a new and exciting paradigm.

*

PRS’ involvement in the literature on the empirical relationship between political risk and trade is well known and rather deep.  Some studies have used our data in panel regression analyses to consider the effect of country risk on the trade patterns of energy importers and exporters, with the findings highlighting the importance of economic risk and – especially for exporters – that political and economic risk has a negative impact on their total trade volume and their resource control ability. (https://www.sciencedirect.com/science/article/abs/pii/S0360544221002280)

A related study using our ICRG data conducted a time-varying stochastic frontier gravity model to explore the interactions between country risk and foreign trade for the Belt and Road countries. By using the data of bilateral trades between 134 countries and China during 2003–2018, empirical results show that reduction of country risk will increase the bilateral trades between China and these countries. Based on these findings, the implementation of the Belt and Road initiative may effectively hedge the country risk of the trade partners and promotes their bilateral trades with China. (https://www.tandfonline.com/doi/full/10.1080/13504851.2020.1854433)

*

In other news, new and existing clients should note that our popular Researchers’ Dataset (RDS) series – containing updates from 2024 – is now available!  The RDS series – derived from our ICRG data – continues to yield unique insights into a range of topics that explore the empirical connection between geopolitical risk and such subjects as asset behavior and prices, inflation and monetary policy, the economic costs of war, forms of internal conflict, and contract repudiation, to name a few. Contact us at custserv@prsgroup.com to acquire about acquisition of the RDS updates or a multi-year series.

Our return to Montreal at the end of the year was very productive, as our various AI platforms continue to be built out and as we prepare ourselves for several gatherings affecting this explosive field in Cannes and in Montreal later this season.  As I mentioned earlier, some of our models would have relatively clear approaches, allowing the university sector to make straightforward queries, to more sophisticated efforts for institutional investors to further extrapolate the data’s connection with the behavior of various financial assets. The independent back testing in the published literature that has occurred consistently over the past 30 years, along with our internal modelling, supports these efforts.

Our creative team in NYC is almost finished the layout of the new PRS, which should be presented within the next month.  I’ve seen the basic layouts and have shared them with my muse, with her suggesting that it ‘captures the romanticism of the classical period but with a nudge to the Renaissance and its innovative spirit.’  Given that our data series is unique and unrivalled, and given that we will be unveiling new depth to the data and acquiring fresh and complementary series, her words are most apt.  PRS is clearly at the forefront of the development of geopolitical risk and AI.

In March I will be making a presentation to the World Bank’s Global Indicators Group, as they convene a gathering of various data providers to the World Governance Indicators (WGI). 

The WGI is widely used for data description, research, advocacy, and by institutions in both the public and private sectors.   The workshop aims to facilitate a solid understanding of the methodologies employed by the data sources, demonstrating their significant value to the governance community, and fostering collaboration and knowledge sharing among the data sources and the WGI project. 

Our new video series is currently in production.  Named ‘Au Courant’ after a previous publication of PRS’ that enjoyed considerable success, the new bi-weekly series will include synopses of timely geopolitical risk events and what they mean for investors and business; trends in the ICRG data and country forecasts; recent academic findings using the PRS data; and the occasional interview with academics and practitioners in the field.  Relatedly, my likely participation in the joint CIFE-PRS Governance and Failed States conference in Nice in May – and the work that the participants will present – will be one of the installments of this series.

PRS has now surpassed the 7.5 million data point mark in relation to our curated geopolitical risk series!  No other risk firm can offer such depth; nor can they claim the mantle of being consistently used in leading academic scholarship and appearing in the top journals, which, according to JSTOR, now occupies just under 1,000 published articles and book chapters.

January was another terrific month for new and returning clients, ranging from some of the world’s top universities to the largest institutional investors throughout the US, Europe, the UK, and the Middle East and Asia.   Our data have become increasingly popular with the international trade offices of various countries that are either in the crosshairs of Trump’s tariff-scope or worried about future action. It’s unfortunate that trade relations are often quite political – or at least shaped by political forces – but as I’ve said on many occasions throughout my 25+ year career – risk in life cannot be totally avoided, but it can be managed.

Our ICRG political risk scoring changes were very good in January, affecting some 90 countries (of 141) and over 120 individual political risk metrics!!

**

As always, ICRG and related PRS data continue to be the gold standard of all geopolitical risk data among the scholarly and research communities. For example, with US inflation data expected to remain firm – and the fate of further rate cuts hanging in the balance – investors are often keen to understand what determines the performance of emerging markets during the Fed’s tightening and easing cycles.

This study published by the National Bureau of Economic Research (NBER) – and using our ICRG data – looked at how macroeconomic and institutional conditions in emerging markets at the beginning of a cycle explain their overall resilience during that time. 

More specifically, the baseline cross-sectional regressions examined how those conditions affect three measures of resilience, namely the bilateral exchange rate against the USD, exchange rate market pressure, and country-specific Morgan Stanley Capital International index (MSCI). (https://lnkd.in/edNuNj-G

Also using our ICRG data, another NBER study considered all presidential and parliamentary elections held globally between 1946 and 2018, and found that turnovers – where the existing government is removed from office – improve several measures of a country’s performance, including, policy decisions, perceived corruption, and accountability.
(https://lnkd.in/e98QJFDA)

CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.