As markets recover from the tariff-induced volatility that characterized the first quarter of 2025, a cleverly designed economic strategy is beginning to emerge from the chaos. While pundits debate the merits of Trump’s trade policy, they’re missing the broader narrative: The administration is executing a carefully choreographed two-part economic play that will unfold throughout the year, serving different constituencies at different times—first his base, then his wealthy donors who expect returns on their substantial campaign investments.
Part One: Pleasing the Base with Tariff Theater
The opening act of Trump’s second term has been dominated by headline-grabbing tariff announcements that sent markets into a tailspin but delighted his core supporters. This isn’t accidental—it’s strategic. The administration front-loaded its most aggressive trade moves to deliver on campaign promises to the base, knowing full well that many of these tariffs would be negotiated down by summer.
When Trump dramatically announced his “reciprocal tariffs” in the Rose Garden on April 2—a day he dubbed “Liberation Day”—the move triggered a global market sell-off. But within a week, as bond yields spiked dangerously high, the administration pivoted to a “tariff pause” for most countries while maintaining pressure on China.
The immediate economic impact has been exactly what you’d expect: Consumer confidence has plummeted to the second-lowest level on records going back to 1952, with the latest Michigan survey showing “the share of consumers expecting unemployment to rise in the year ahead increased for the fifth consecutive month and is now more than double the November 2024 reading and the highest since 2009.” This widespread economic anxiety is a feature, not a bug, of the current strategy.
“This is not a negotiation,” Trump trade advisor Peter Navarro insisted on CNBC. “This is a national emergency.” Yet simultaneously, President Trump told reporters aboard Air Force One that he would be open to negotiating with other countries for “phenomenal” offerings, directly contradicting his own advisors. This mixed messaging is intentional—it creates negotiating leverage while allowing the administration to claim victory regardless of the outcome.
Meanwhile, National Economic Council director Kevin Hassett has revealed that “we’ve already got offers on the table for more than 15 countries” for trade deals, and the administration is evaluating these offers to present to the president. Trump himself claimed that more than 75 countries have contacted U.S. officials seeking to discuss their new tariff rates.
The first act of this economic drama was never about fundamentally reshaping global trade or bringing manufacturing back en masse. It was about creating the appearance of action, satisfying the base, and building leverage for the real endgame that will unfold in the second half of the year.
The Fed Factor: Powell in the Crosshairs
A crucial subplot in this economic strategy involves Federal Reserve Chair Jerome Powell. Trump has made no secret of his desire for lower interest rates, publicly stating that Powell “is going to have a lot of political pressure” to lower rates. But Powell’s recent speech at the Economic Club of Chicago threw cold water on those hopes.
Powell bluntly stated that Trump’s tariffs would likely lead to higher unemployment as the economy slows and that inflation would “in all likelihood” increase as well. He specifically contradicted Trump’s repeated claim that foreign countries pay tariffs, noting instead that “a portion of the burden of tariffs is going to be paid by the public.”
The day after Powell’s speech, Trump posted on Truth Social calling for Powell’s termination, writing: “The ECB is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!'”
The Fed now faces what economists call a “stagflation” dilemma—weaker growth coupled with higher inflation. This puts Powell in the impossible position of having to choose between his dual mandates of price stability and maximum employment. In a normal environment, the Fed would cut rates to stimulate a slowing economy, but inflationary tariffs make this politically difficult.
Part Two: The Financial Elite Payoff
Here’s where the second act of Trump’s economic strategy comes into view—one that few commentators have fully grasped. By summer, the administration plans to declare victory in its tariff negotiations, settling for relatively modest concessions from trading partners while claiming transformative results.
This pivot will accomplish several things simultaneously:
- Defuse inflation concerns: Moderated tariffs will reduce fears of persistent inflation, giving Powell the latitude to cut interest rates without appearing to cave to political pressure.
- Boost the stock market: Lower interest rates have historically benefited equities, especially after significant corrections. This will be presented as validation of Trump’s economic strategy.
- Reward wealthy donors: The financial sector, crypto industry, and other wealthy backers who played crucial roles in Trump’s return to power stand to benefit enormously from lower rates, which boost asset values and stimulate deal-making.
- Position for midterms: The administration needs economic tailwinds heading into the 2026 midterm elections. A second-half market rally fueled by rate cuts would create precisely the narrative they need.
The foundation for this pivot is already being laid. Treasury Secretary Scott Bessent has been designated as “the point person in the country-by-country negotiations that could address foreign aid and military cooperation as well as economic matters”, indicating these talks go well beyond simple tariff reductions. This creates multiple paths to declare victory even without significant trade concessions.
Wall Street and Crypto: The Mega-Donors Awaiting Their Return
Trump’s 2024 campaign relied heavily on wealthy donors, marking a significant shift from his 2016 grassroots funding. His political operation raised nearly $515 million from donors giving $1 million or more to super PACs, compared to just $260 million from small-dollar donors giving $200 or less. These wealthy backers now expect a return on their investment in the form of policies that benefit their industries and investment portfolios.
The Wall Street Power Players
Several key Wall Street figures who backed Trump’s campaign stand to benefit significantly from the second act of his economic strategy:
- John Paulson: The billionaire hedge fund manager who famously made nearly $15 billion by betting against the housing market in 2008 has been one of Trump’s most vocal supporters and major donors. Paulson is estimated to have raised $48 million for Trump’s 2024 campaign and has reportedly been under consideration for Treasury Secretary. His investment strategies are highly sensitive to interest rates, and he has staunchly defended Trump’s economic policies, including tariffs, which he claims would not be inflationary “if targeted correctly.”
- Stephen Schwarzman: The billionaire CEO of Blackstone, the world’s largest private equity firm and biggest commercial landlord on Earth, is among Wall Street’s biggest Trump backers. Schwarzman was Wall Street’s number one funder of political campaigns in the 2020 election cycle and continued his support in 2024. Private equity firms like Blackstone would benefit enormously from lower interest rates, which facilitate leveraged buyouts and debt-fueled acquisitions.
- Ken Griffin: The Citadel hedge fund founder gave $100 million in the 2024 cycle, making him the fifth-largest contributor overall. Griffin, a self-described “Reagan Republican,” has been a vocal advocate for deregulation and lower interest rates to stimulate market growth.
- Howard Lutnick: The Cantor Fitzgerald CEO donated $5 million to Trump’s campaign and now serves as Commerce Secretary, giving him a direct role in trade negotiations. His position at the intersection of Wall Street and trade policy exemplifies the administration’s dual focus on tariffs and financial markets.
- Paul Singer: The Elliott Management founder contributed $5 million to Trump’s campaign. His hedge fund manages over $50 billion in assets that would benefit substantially from Fed rate cuts and the resulting market expansion expected in the second half of 2025.
- Timothy Mellon: The banking heir and transportation magnate contributed nearly $200 million to Trump’s election efforts, making him the largest individual donor in the 2024 cycle. The Mellon banking legacy is intrinsically tied to interest rate policy.
The Crypto Contingent
The cryptocurrency industry emerged as a major financial backer of Trump in 2024, with total political donations reaching around $190 million. Key crypto donors include:
- Cameron and Tyler Winklevoss: The billionaire twins and Gemini exchange founders were the biggest individual crypto donors this election cycle, giving a combined $10.1 million. They contributed $1.7 million in bitcoin to the Trump 47 Committee, over $700,000 to the pro-Trump Make America Great Again PAC, and $250,000 each to the pro-Trump America PAC.
- Jesse Powell: The Kraken exchange co-founder and Chairman, donated just over $1 million to the Trump campaign. Kraken had previously settled lawsuits with U.S. financial regulators.
- Stuart Alderoty: Ripple’s chief legal officer gave $300,000 to the Trump 47 Committee. At a fundraiser for Trump in June, Alderoty explained how Ripple had spent over $100 million in litigation to defend itself against civil charges brought by the SEC.
- Marc Andreessen and Ben Horowitz: The co-founders of venture capital firm Andreessen Horowitz each donated $2.5 million to the pro-Trump super PAC Right For America. Their firm has been one of the largest backers of pro-crypto political action committees.
- Brian Armstrong: The Coinbase CEO gave over $1.3 million to various PACs, including those supporting Trump and JD Vance.
Trump’s conversion into a crypto supporter—after previously calling the industry a “scam” during his first term—coincided with the influx of crypto campaign money. The industry is particularly invested in regulatory changes at the SEC, with Gary Gensler’s removal a top priority. Lower interest rates would also boost crypto asset prices, benefiting major holders.
Peter Thiel’s Network of Influence
While Peter Thiel reportedly didn’t donate directly to Trump’s 2024 campaign after being a major backer in 2016, his influence in the administration remains profound. Thiel’s network of tech entrepreneurs and investors has become closely tied to the new Trump administration, with allies like David Sacks serving as “AI and crypto czar” and connections to Elon Musk’s Department of Government Efficiency (DOGE).
Since Trump’s election, companies backed by Thiel have seen significant gains, with Palantir’s stock soaring more than 90% and Anduril Industries landing an expanded role in a deal with the US Army potentially worth over $20 billion. Lower interest rates would further boost these tech investments.
The American Consumer: Still Standing
Despite the market turbulence and declining sentiment, the American consumer remains in relatively solid shape—a crucial fact that will enable the second-half recovery the administration is counting on.
In the current job market, with the unemployment rate at 4.0% and average hourly earnings rising faster than the inflation rate, consumer debt is believed to be at a manageable level. This underlying strength provides a foundation for recovery once the initial shock of tariffs subsides and negotiations yield more moderate trade policies.
The administration is counting on this resilience. Once tariff uncertainty diminishes and the Fed begins cutting rates, consumer sentiment should rebound quickly, providing economic momentum heading into 2026.
The Art of the Deal: What to Expect Next
As we move into summer, watch for these key developments that will signal the transition to phase two of Trump’s economic strategy:
- Highly publicized trade “victories”: The administration will announce deals with key trading partners that maintain some tariffs but at much lower levels than initially threatened. These will be framed as transformative concessions won through tough negotiation.
- Pivot to domestic economic stimulus: With the tariff drama receding, focus will shift to tax cuts, deregulation, and other pro-growth policies that appeal to both the base and financial backers.
- Softening Fed rhetoric: Look for subtle shifts in Powell’s tone as inflation fears moderate, opening the door to rate cuts that both Trump and the markets desire.
- Stock market rally: As uncertainty diminishes and rate cut expectations solidify, equities should recover their losses and potentially reach new highs, validating the strategy.
- Administration victory lap: Trump will claim credit for both standing up to foreign competitors and delivering market prosperity, having his cake and eating it too.
TLDR: Method in the Madness
What initially appeared as a chaotic, improvised trade policy is revealing itself as a more calculated strategy with distinct phases designed to serve different constituencies at different times. The first half of 2025 has been about demonstrating toughness to the base through aggressive tariff posturing, while creating the conditions for a Fed pivot that will benefit Trump’s wealthy donors on Wall Street in the second half. And to those who raised cash when I suggested it numerous times.
The success of this strategy isn’t guaranteed. If inflation proves more persistent than expected, or if trading partners refuse to negotiate, the desired Fed pivot may not materialize. But the outlines of the plan are becoming clearer, and investors who understand this two-part narrative will be better positioned to navigate the remainder of 2025.
As the dust settles on the initial tariff skirmishes, one thing is increasingly evident: There’s more method than madness in the administration’s approach to trade and monetary policy. Those who see only chaos are missing the bigger picture—a carefully choreographed economic strategy designed to deliver political dividends through the election cycle while handsomely rewarding the financial elites who funded Trump’s return to power.
Don’t Worry Be Happy!
“I couldn’t care less which party controls the White House or what headlines they’re chasing—those levers of power move on a cycle I can’t change. My edge comes from peeling back the curtain: identifying the architects behind each policy, sizing up its true economic impact, and spotting the capital flows it will ignite. That’s how I turn Washington’s noise into profit.”
The ride will be volatile, but there is going to be a tremendous opportunity down the not-too-distant road. The financial elite and those who raised cash when I suggested it in February will be rewarded by buying stocks at lower valuations. Don’t be surprised when I tell you. I told you so…
The opinions expressed in this article are those of the author and do not necessarily reflect the position of any institution.