President Donald Trump‘s deployment of warships off the coast of Venezuela and authorization for the use of force against drug trafficking organizations is fueling speculation of potential military action looming in South America.
However, the White House’s moves also speak to a broader shift in policy focus under Trump’s “America First” movement that envisions the Americas as a whole as part of the U.S. zone of interest, an outlook reminiscent of the 200-year-old Monroe Doctrine that served as the basis for U.S. intervention against European colonialism and communist expansion across the region.
With Venezuela and its leftist leader, President Nicolás Maduro, now in the crosshairs, experts and former officials see the dawn of a new era of U.S. power projection across the Western Hemisphere.
“This massive show of force is consistent with the administration’s efforts to assert dominance in the Western Hemisphere, reviving the Monroe Doctrine that declared the region to be uniquely a U.S. sphere of influence,” Cynthia Arnson, a leading Latin America expert serving as adjunct professor at Johns Hopkins School of Advanced and International Studies, told Newsweek.
‘Gunboat Diplomacy’
Arnson warned of the potential regional consequences of such an approach, noting how just because “many Latin American democracies would welcome the end of the Maduro regime, that doesn’t mean that they are lining up to applaud a 21st century version of gunboat diplomacy.”
Observers have debated whether or not the recent naval build-up in the waters of South and Central America would serve as a prelude to real action or constituted mere posturing, meant to deliver a message to Maduro who the U.S. has accused of being complicit in drug trafficking.
Arnson argued that “the utility of such a huge deployment in fighting drug trafficking is questionable, although there undoubtedly will be some seizures that the administration will tout to justify the exercise of military force.”
She added: “The number of troops deployed, although large, is not sufficient to invade Venezuela with the aim of toppling the government.”
José Cárdenas, a former National Security Council and U.S. State Department official who has dealt extensively with Latin America policy, said the latest moves would prove far more than showmanship.
“It would be a mistake to consider the U.S. naval deployment off the Venezuelan coast ‘business as usual’ or mere political theater,” Cárdenas, who today is a principal at the Cormac Group consulting firm, told Newsweek. “It is too big, powerful, and costly for that.”
“Rather,” he added, “it is a signal by the Trump administration that the status quo—Venezuela as a hub for transnational organized crime and a regional destabilizer through mass migration—is no longer tenable.”
Believe What He Says, or Else’
Cárdenas spoke of a “wide range of options” available to the Trump administration, short of a “full-scale invasion” that could effect change in Venezuela.
For one, he felt “it is likely the U.S. is in contact with Venezuelan military personnel not involved in narco-trafficking and others in charge of guns to state that if they don’t remove Maduro from power the U.S. is prepared to unleash an asymmetric offensive that could consume them as well.”
“The Trump administration has carefully constructed a policy rationale that this is not ‘regime change’ for the sake of exporting democracy to the world’s benighted peoples,” Cárdenas said. “It is a national security initiative meant to eliminate a source of tons of cocaine from entering the United States. Main Street, USA, can identify with that.”
He also said that plans were likely already set in place, and any upcoming action would serve to send a message to great power competitors such as China and Russia, which U.S. officials have long warned were gaining influence in the Western Hemisphere.
“Credibility, moreover, is the cornerstone of Donald Trump’s foreign policy. Believe what he says, or else. There is no climb-down from the current deployment,” Cárdenas said. “No doubt anti-American despots in Moscow, Beijing, and elsewhere are watching the unfolding action in the Southern Caribbean carefully.”
When reached for comment, the White House referred Newsweek to remarks made by press secretary Karoline Leavitt during a press conference last week.
“What I’ll say with respect to Venezuela, President Trump has been very clear and consistent,” Leavitt said at the time. “He’s prepared to use every element of American power to stop drugs from flooding into our country and to bring those responsible to justice.”
She continued: “The Maduro regime is not the legitimate government of Venezuela, it is a narco-terror cartel. And Maduro, it is the view of this administration, is not a legitimate president. He’s a fugitive head of this cartel who has been indicted in the United States for trafficking drugs into the country.”
The Pentagon, meanwhile, shared with Newsweek a statement attributed to chief spokesperson Sean Parnell.
“On day one of the Trump Administration, the President published an Executive Order designating drug cartels as Foreign Terrorist Organizations, clearly identifying them as a direct threat to the national security of the United States,” Parnell said. “These cartels have engaged in historic violence and terror throughout our Hemisphere—and around the globe—that has destabilized economies and internal security of countries but also flooded the United States with deadly drugs, violent criminals, and vicious gangs.”
He added: “This requires a whole-of-government effort and through coordination with regional partners, the Department of Defense will undoubtedly play an important role towards meeting the President’s objective to eliminate the ability of these cartels to threaten the territory, safety, and security of the United States and its people. As a matter of security and policy we do not speculate on future operations.”
‘Competing Factions’
The brewing crisis is not the first time Trump has sought to unseat Maduro from power, and instead marks the latest episode in a downturn in ties between Washington and Caracas that came about after the Venezuelan leader’s predecessor, Hugo Chávez, rose to power through elections in 1999.
Chávez, who would accuse the U.S. of supporting a brief coup against him in 2002, kickstarted what he and his supporters refer to as a Bolivarian Revolution of social and economic reforms that sought to channel 19th-century anti-Spanish colonial leader Simón Bolívar. Somewhat ironically, Bolívar during his time welcomed U.S. President James Monroe’s 1823 declaration of a new doctrine against European imperialism in the Americas.
Yet Washington’s strategy grew increasingly interventionist over the ages, with the U.S. aiding governments and rebels against communist movements across Latin America during the Cold War.
Chávez’s socialist movement emerged from the ashes of this era, painting the U.S. as a new imperialist hegemon seeking to assert its influence across the region. At home, his policies—bolstered by soaring oil prices—initially led to a massive boom in Venezuela’s economic outlook, yet by the time of his 2013 death from cancer, a mix of runaway public spending, economic mismanagement and sanctions had substantially undercut stability, and a subsequent fall in oil prices from 2014 deepened the crisis.
The political situation also escalated in January 2019, as Maduro’s reelection was challenged by critics and rejected by a number of foreign leaders, including Trump, who began a “maximum pressure” campaign against Venezuela during his first term. An opposition coup led by U.S.-backed National Assembly leader Juan Guaidó was attempted that April only to end in failure.
Like Chávez, Maduro would emerge victorious and went on to easily repel a plot hatched the following year involving dozens of dissidents, as well as at least two former U.S. Green Berets operating as private military contractors.
Tom Shannon, a career diplomat who served as undersecretary for political affairs during the Trump administration, noted how past errors have likely informed the president’s thinking as he grapples with conflicting movements in his second administration.
“When he decides to begin his maximum pressure campaign in Venezuela and recognizes Juan Guaidó as the interim president of Venezuela and slaps on secondary sanctions on oil and gas and even attempts to generate a military coup against Maduro, all of which fail, he does this on the advice of people who were advising him on Venezuela, including the current Secretary of State,” Shannon told Newsweek.
“And they were wrong, and he knows they were wrong,” Shannon, now senior international policy adviser at Arnold & Porter law firm, added.
Upon taking office in January, Trump took a different approach. He sent special envoy Richard Grenell to strike a deal in Caracas, specifically to negotiate the release of imprisoned U.S. citizens and secure a license for oil giant Chevron to resume operations in the country.
Trump went on to revoke this license, a move Shannon pointed out took place as the president sought to secure votes for his “Big, Beautiful Bill,” only to reinstate it once again last month.
“I think part of the confusion is that there are competing factions around the president,” Shannon said. “You have [Secretary of State Marco] Rubio, who would love to do the strike, but then there’s people like [Treasury Secretary] Scott Bessent, whose attitude is, ‘You’re out of your mind.'”
Noting how “Venezuela is sitting on the largest reserves of oil and gas in the world, and OFAC [Office of Foreign Assets Control], through its licensing process, gets to control who works in the oil and gas sector,” Shannon argued that if U.S. or European companies were licensed to work in the country, foreign competitors, including some of the nations viewed as hostile to U.S. interests, would be expelled.
“The Chinese are out. The Iranians are out. The Russians are out,” Shannon said of such a scenario. “We control the oil and gas. And guess what? We get to repatriate some of our earnings.”
‘You Should Use Your Power’
Yet the fight for resources does not entirely encapsulate the stakes over Venezuela, nor the administration’s interest in the country.
Trump’s Western Hemisphere doctrine includes pressure campaigns against a host of nations, including otherwise friendly U.S. neighbors Canada and Mexico, as well as territorial ambitions to seize control of foreign-owned territory like Greenland and the Panama Canal.
Drug cartels, from Mexico to Venezuela, are the latest target of Trump’s rhetoric as he portrays a battle against an “invasion” of narcotics, including fentanyl produced with precursors exported by China.
“He has said he is going to use American power to protect American interests, and he is not tied by diplomatic niceties, or by practice, or even by what we could consider to be the norms of international law,” Shannon said. “He believes that if you are powerful, you should use your power.”
He continued: “He’s focused on drug trafficking, cartels, gangs, whatever you want to call them, because first of all, for him, they’re a political winner. He knows that there is broad support in the United States for the use of the American military and intelligence capabilities against these entities that, in his mind, present a very real threat to the United States, to Americans.”
But Shannon also alluded to the costs of a more assertive position in a region that, despite its complex relationship with Washington, has largely courted U.S. influence and investment. In the globalized 21st century, unlike two centuries ago, he argued that the Trump administration may be better suited to bring China-style infrastructure deals than warships and tariffs to win over South America.
“If there is a new Monroe Doctrine, it’s kind of emasculated in the sense that the president is not bringing what you need to the game in order to win,” he said.
The ‘Ultimate Arbiter’
The dissonance in Trump’s “peace through strength” approach is not lost on his support base. A number of influential voices in the president’s populist “Make America Great Again” (MAGA) movement voiced displeasure toward his decision in June to conduct limited yet unprecedented strikes against Iranian nuclear facilities and some continue to criticize his continued support for Israel’s ongoing wars in the region.
Francisco Rodríguez, senior research fellow at the Center for Economic and Policy Research, said the Trump administration was looking only to mount a “credible threat of force” that “some hardline opposition figures and Washington hawks” believed “could be enough to push Venezuela’s military to abandon Maduro.”
Yet he said that a similar approach to Trump’s isolated strikes on Iran “cannot be ruled out,” citing former U.S. Defense Secretary Mark Esper‘s memoir in recounting how “targeted strikes on Venezuelan military installations were seriously discussed at the cabinet level” back in 2019.
Today, “some of the same hawkish voices who favored such strikes are again influential in Venezuela policy,” Rodríguez told Newsweek.
And Rodríguez saw neither contradiction nor incoherence in what he called the “broader Trumpian assertion of hemispheric dominance in line with a MAGA interpretation of the Monroe Doctrine,” despite “the coexistence of that vision with a pronounced aversion, in some MAGA circles, to costly military involvement abroad.”
“Rather, it reflects the dynamics of a personalistic regime in which competing factions with divergent preferences overlap, leaving the final decision to the chief executive,” Rodríguez said. “That enhances Trump’s authority as ultimate arbiter, but it also makes policy unpredictable and inconsistent.”
He added: “The Venezuela case illustrates this perfectly: announcing the deployment of warships while simultaneously authorizing Chevron to expand its oil dealings in the country. It is almost as if, after placing a bounty on bin Laden, Washington had turned around and licensed Halliburton to do infrastructure projects with his family business in Afghanistan.”
https://www.newsweek.com/will-venezuela-first-target-trumps-new-maga-monroe-doctrine-2121883
The US military is deploying more than 4,000 Marines and sailors to the waters around Latin America and the Caribbean as part of a ramped-up effort to combat drug cartels, two US defense officials told CNN — a dramatic show of force that will give the president a broad range of military options should he want to target drug cartels.
The deployment of the Iwo Jima Amphibious Ready Group (ARG) and the 22nd Marine Expeditionary Unit to US Southern Command, which has not been previously reported, is part of a broader repositioning of military assets to the SOUTHCOM area of responsibility that has been underway over the last three weeks, one of the officials said.
A nuclear-powered attack submarine, additional P8 Poseidon reconnaissance aircraft, several destroyers and a guided-missile cruiser are also being allocated to US Southern Command as part of the mission, the officials said.
A third person familiar with the matter said the additional assets are “aimed at addressing threats to US national security from specially designated narco-terrorist organizations in the region.”
On Friday, the US Navy announced the deployment of the USS Iwo Jima, the 22nd MEU, and the two other ships in the Amphibious Ready Group — the USS Fort Lauderdale and the USS San Antonio — but did not say where they were going.
One of the officials emphasized that the military buildup is for now mostly a show of force, aimed more at sending a message than indicative of any intention to conduct precision targeting of cartels. But it also gives US military commanders — and the president — a broad range of options should Trump order military action. The ARG/MEU, for example, also features an aviation combat element.
The deployment of the Marine Expeditionary Unit, however, has raised concerns among some defense officials who worry that the Marines are not trained to conduct drug interdictions and counter drug-trafficking. If that is part of their mission set, they will have to lean heavily on the Coast Guard, officials said.
MEUs have been instrumental in the past in supporting large-scale evacuation operations; a MEU was stationed for months in the eastern Mediterranean, for example, amid tensions between Israel, Hamas and Iran.
A Marine official told CNN that the MEU “stands ready to execute lawful orders and support the combatant commanders in the needs that are requested of them.”
The US military deployed destroyers to the areas around the US-Mexico border in March to support US Northern Command’s border security mission and reinforce the US’ presence in the western hemisphere. The additional assets being moved now, however, will fall under US Southern Command, and are set to support SOUTHCOM for at least the next several months, one of the officials said.
CNN previously reported that a memo signed by Defense Secretary Pete Hegseth earlier this year stated that the US military’s “foremost priority” is to defend the homeland, and instructed the Pentagon to “seal our borders, repel forms of invasion including unlawful mass migration, narcotics trafficking, human smuggling and trafficking, and other criminal activities, and deport illegal aliens in coordination with the Department of Homeland Security.”
The same memo also formally asked Pentagon officials for “credible military options” to ensure unfettered American access to the Panama Canal, CNN reported at the time.
https://www.cnn.com/2025/08/15/politics/us-military-deploying-caribbean-latin-america-cartel-mission
“When ICE detained Rodriguez in February, weeks after filing her green card application, there was no consideration that she’d just given birth two weeks prior. ”I was just taken away from the child. I was leaking breast milk all over. I was still bleeding because I just had a baby and was on medication but I didn’t get those back.‘”
On Feb. 18, two weeks after having her son via C-section, Monique Rodriguez was battling postpartum depression. The Black mother of two, who was born and raised in St. Catherine Parish in Jamaica, had come to the U.S. in 2022 on a six-month visa and settled in Florida with her husband. But after finding herself alone and overwhelmed from the lack of support, she spiraled. “My husband is American and a first-time dad and was scared of hurting the baby. He kept pushing the baby off on me, which I didn’t like. I was in pain and I was tired and overwhelmed. I got frustrated and I hit my husband,” she says. A family member called the police, resulting in Rodriguez’s arrest. Suddenly, a private domestic dispute led to more serious consequences: When Rodriguez’s husband arrived to bail her out the following day, Immigration and Customs Enforcement was waiting to detain her. Despite being married and having a pending Green Card application, she became one of thousands of immigrants deported this year because of contact with police.
Since Donald Trump took office for the second time, ICE has been raiding immigrant communities across the nation. Prior to the raids, Black immigrants, like Rodriguez, have historically been targeted at higher rates due to systemic racism. With a host of complications, including anti-blackness and colorism in the Latino community — which often leaves Black immigrants out of conversations around protests and solidarity — the future is bleak. And Black immigrants and immigration attorneys are predicting a trickle-down effect to Black communities in America, making them vulnerable even more.
On June 6, protests broke out in Los Angeles — whose population is roughly half Hispanic, and one in five residents live with an undocumented person. On TikTok, Latino creators and activists called on Black creators and community members to protest and stand in solidarity. But to their disappointment, many Black Americans remained silent, some even voicing that the current deportations were not their fight. “Latinos have been completely silent when Black people are getting deported by ICE,” says Alexander Duncan, a Los Angeles resident who made a viral TikTok on the subject. “All of a sudden it impacts them and they want Black people to the front lines.” Prejudice has long disconnected Black and Latino communities — but the blatant dismissal of ICE raids as a Latino issue is off base.
For some Black Americans, the reluctancy to put their bodies on the line isn’t out of apathy but self-preservation. Duncan, who moved from New York City to a predominantly Mexican neighborhood in L.A., was surprised to find the City of Angels segregated. “One of my neighbors, who has done microaggressions, was like ‘I haven’t seen you go to the protests,” he tells Rolling Stone. “I said, ‘Bro, you haven’t spoken to me in six months. Why would you think I’m going to the front lines for you and you’re not even a good neighbor?’”
Following the 2024 elections, many Black Democratic voters disengaged. Nationally, the Latino community’s support for Trump doubled from 2016, when he first won the presidency. Despite notable increases of support for Trump across all marginalized demographics, Latino’s Republican votes set a new record. “Anti-Blackness is a huge sentiment in the Latino community,” says Cesar Flores, an activist and law student in Miami, who also spoke on the matter via TikTok. “I’ve seen a lot of Latinos complain that they aren’t receiving support from the Black community but 70 percent of people in Miami are Latino or foreign born, and 55 percent voted for Trump.” Although 51 percent of the Latino community voted for Kamala Harris overall, Black folks had the highest voting percentage for the Democratic ballot, at 83 percent. For people like Duncan, the 48 percent of Latinos who voted for Trump did so against both the Latino and Black community’s interest. “The Black community feels betrayed,” says Flores. “It’s a common misconception that deportations and raids only affect Latinos, but Black folks are impacted even more negatively by the immigration system.”
The devastation that deportation causes cannot be overstated. When ICE detained Rodriguez in February, weeks after filing her green card application, there was no consideration that she’d just given birth two weeks prior. “I was just taken away from the child. I was leaking breast milk all over. I was still bleeding because I just had a baby and was on medication but I didn’t get those back.” Rodriguez thought her situation was unique until she was transported to a Louisiana detention center and met other detained mothers. “I was probably the only one that had a newborn, but there were women there that were ripped away from babies three months [to] 14 years old,” says Rodriguez.
On May 29, her 30th birthday, Rodriguez was one of 107 people sent to Jamaica. Around the same time, Jermaine Thomas, born on an U.S. Army base in Germany, where his father served for two years, was also flown there. Though his father was born in Jamaica, Thomas has never been there, and, with the exception of his birth, has lived within the U.S. all of his life. “I’m one of the lucky ones,” says Rodriguez, who is now back in Jamaica with her baby and husband, who maintain their American citizenships. “My husband and his mom took care of the baby when I was away. But there’s no process. They’re just taking you away from your kids and some of the kids end up in foster care or are missing.”
In January, Joe Biden posthumously pardoned Marcus Garvey, America’s first notable deportation of a Jamaican migrant in 1927. His faulty conviction of mail fraud set a precedent for convicted Black and brown migrants within the U.S.
“Seventy-six percent of Black migrants are deported because of contact with police and have been in this country for a long time,” says Nana Gyamfi, an immigration attorney and the executive director of the Black Alliance For Just Immigration. A 2021 report from the U.S. Committee for Refugees and Immigrants found that while only seven percent of the immigrant population is Black, Black immigrants make up 20 percent of those facing deportation for criminal convictions, including low-level, nonviolent offences. “If you’re from the Caribbean it’s even higher,” says Gyamfi. “For Jamaicans, it’s 98 percent higher. People talk about the Chinese Exclusion Act, but I’ve recently learned that the first people excluded from this country were Haitians.”
On June 27, the Trump administration announced the removal of Temporary Protective Status (TPS) for Haitians starting in September, putting thousands of migrants in jeopardy given Haiti’s political climate. Though a judge ruled it unconstitutional, the threat to Black migrants remains. “You have Black U.S. citizens being grabbed [by ICE] and held for days because they are racially profiling,” says Gyamfi, referring to folks like Thomas and Peter Sean Brown, who was wrongfully detained in Florida and almost deported to Jamaica, despite having proof of citizenship. “Black people are being told their real IDs are not real.” With much of the coverage concerning the ICE raids being based around Latino immigrants, some feel disconnected from the issue, often forgetting that 12 percent of Latinos are Black in the United States. “A lot of the conversation is, ‘ICE isn’t looking for Black people, they’re looking for Hispanics,’” Anayka She, a Black Panamanian TikTok creator, said to her 1.7 million followers. “[But] It’s not just Mexican people they are looking for, it’s all immigrants that are obviously not white.”
“A lot of times, as Black Americans, we don’t realize that people may be Caribbean or West African,” she tells Rolling Stone. Her family moved to the U.S. in the 1980s, after her grandfather worked in the American zone of the Panama Canal and was awarded visas for him and his family. “If I didn’t tell you I was Panamanian, you could assume I was any other ethnicity. [In the media], they depict immigration one way but I wanted to give a different perspective as somebody who is visibly Black.” America’s racism is partly to blame. “Los Angeles has the largest number of Belizeans in the United States but people don’t know because they get mixed in with African Americans,” says Gyamfi. “Black Immigrants are in an invisibilized world because in people’s brains, immigrants are non Black Latinos.”
The path forward is complex. Rodriguez and Sainviluste, whose children are U.S. citizens, hope to come back to America to witness milestones like graduation or marriage. “I want to be able to go and be emotional support,” says Rodriguez.
Yet she feels conflicted. “I came to America battered and bruised, for a new opportunity. I understand there are laws but those laws also stated that if you overstayed, there are ways to situate yourself. But they forced me out.”
Activists like Gyamfi want all Americans, especially those marginalized, to pay attention. “Black folks have been feeling the brunt of the police-to-deportation pipeline and Black people right now are being arrested in immigration court.” In a country where mass incarceration overwhelmingly impacts Black people, Gyamfi sees these deportations as a warning sign. “Trump just recently brought up sending U.S. citizens convicted of crimes to prison colonies all over the world. In this climate, anyone can get it.”
In the drama of Hegseth’s January confirmation hearings, it was easy to get distracted by the financial settlement for an assault allegation, by the multitudinous accounts of heavy drinking on the job, by claims of misogyny from both his mother and his sister-in-law, by the fact that Hegseth, while married with three small children, had fathered a child with a Fox News producer who was also married with small children, during which pregnancy he had slept with the woman who later accused him of assault, and thereby miss some straightforward information about his managerial experience.
Pete Hegseth had run a nonprofit called Veterans for Freedom for several years, an organization that employed fewer than 20 people, and resigned after alleged financial mismanagement nearly bankrupted the organization. He had run a group called Concerned Veterans for America, which employed around 160 people, and resigned amid allegations of misconduct and, once again, financial mismanagement.
In choosing Hegseth, Donald Trump did not choose from the large set of people who had never managed an organization, or the considerably smaller set of people who had managed an organization without incident, but from a smaller still set of people who had managed multiple bureaucracies and resigned multiple times under complex circumstances.
The White House has reportedly lost confidence in Defense Secretary Pete Hegseth’s leak investigation after officials were told that an illegal wiretap was used in the probe.
The Guardian reported on Tuesday that officials had notified Vice President JD Vance after the Defense Department officials claimed they employed an “illegal warrantless National Security Agency (NSA) wiretap” to out senior Hegseth adviser Dan Caldwell, who was fired last month with two other aides.
White House officials found the wiretap claim to be untrue “and complained that they were being fed dubious information by Hegseth’s personal lawyer, Tim Parlatore, who had been tasked with overseeing the investigation,” the report noted.
“Trump advisers tracking the investigation have privately suggested they no longer have any idea about who or what to believe,” the report said.
Tim Parlatore is a personal attorney and top adviser to Defense Secretary Pete Hegseth. At the same time, he’s suing the Navy and defending private clients against the U.S. government.
Parlatore, who represented Donald Trump in a criminal case two years ago and rejoined the Navy Reserve in March to aid Hegseth, was recently tapped to coordinate the leak investigation that led to chaos at the Pentagon. The probe was publicly tied to the firings of top advisers and preceded further revelations that Hegseth was careless with classified information. Parlatore was also reportedly in the Signal group with Hegseth’s wife and brother in which the Defense secretary shared details of a strike on Yemen.
U.S. Defense Secretary Pete Hegseth warned on Tuesday of possible prosecutions of former senior advisors who were fired during a probe into leaks of Pentagon information to the media, saying evidence would be handed over to the Department of Justice once the investigation is completed.
https://www.reuters.com/world/us/pentagon-says-leak-probe-may-lead-us-prosecutions-2025-04-22
In a stunning turn of events, NPR is reporting that the White House has begun the process of seeking a new Secretary of Defense, according to a U.S. official who spoke under condition of anonymity. This development follows a rapidly escalating crisis within the Department of Defense, as Secretary of Defense Pete Hegseth faces mounting scrutiny and calls for his resignation amid a series of scandals and growing dysfunction at the Pentagon.
Bond traders will be trying to gauge who blinks first, will it be the Fed or President Trump? If both stick to their current stance every Treasury auction is a landmine which investors will fear stepping in to.
Yields on the benchmark 10-year Treasury have tumbled about 40 basis points this year, briefly pushed below 4% Monday by President Donald Trump’s barrage of tariffs that economists say raise the risk of a recession.
In contrast, comparable rates in both Europe and Japan have gone up. In Germany, the 10-year bund at 2.61% reflects the prospect of a flood of bond issuance as the government ramps up defense spending. Meanwhile, the rate on 10-year Japanese bonds has soared after spending years around zero and is now around 1.25% as investors brace for tighter monetary policy there.
While both are still well below Treasury yields, they’re at levels that makes them look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure when buying US securities. That might entice investors to shift allocations to their home markets, where the policy outlook appears more stable.
