America’s Modern Mercantilism: What It Means for Global Investors

America’s Modern Mercantilism: What It Means for Global Investors

As America pivots toward a new era of modern mercantilism, the shift is beginning to send shockwaves through global trade relationships—and capital markets are paying close attention.

In this week’s newsletter from Bridgewater Associates, co-Chief Investment Officer Greg Jensen distilled the firm’s latest research on the mounting risks to U.S. assets. At the heart of the analysis is a simple but profound observation: America’s traditional role as a consistent economic and geopolitical partner is no longer a given. For institutional and individual investors alike, that new reality raises urgent questions.

The End of Predictable Partnerships

America’s embrace of modern mercantilism—characterized by protectionist policies, industrial subsidies, and an increasingly transactional approach to international alliances—marks a significant departure from the multilateralism that has underpinned global trade for decades.

According to Jensen, this evolving doctrine means that U.S. allies and trading partners can no longer assume reliable access to American markets or support. That’s already leading to a recalibration of foreign economic strategies, including efforts to reduce dependence on U.S. supply chains, financial systems, and even currency reserves.

For investors, this creates a complex risk landscape—one where geopolitical alignment may matter as much as financial fundamentals.

The Impact on U.S. Assets

Bridgewater’s research identifies several key risks for U.S.-based investments:

1. Decreased Demand for U.S. Treasuries: As foreign governments diversify away from the dollar, the demand for U.S. government debt may wane, potentially pushing yields higher and increasing the cost of capital.

2. Erosion of the Dollar’s Reserve Status: A gradual but real shift away from dollar dominance could contribute to long-term depreciation and increased currency volatility.

3. Volatility in Equity Markets: Uncertainty about U.S. trade policy and regulatory frameworks can create additional headwinds for multinational corporations and sectors reliant on global integration.

4. Capital Flight Risk: If foreign investors perceive U.S. policy as unstable or adversarial, they may reduce exposure to American equities and fixed-income securities.

5. Geopolitical Contagion: Heightened global tensions—particularly in Asia and Europe—could spill over into markets, impacting investor sentiment and amplifying systemic risk.

A Call for Strategic Diversification

For both institutional asset managers and individual investors, the message is clear: strategic diversification is no longer optional—it’s essential. While U.S. assets have historically offered a combination of safety, liquidity, and growth, that equation is becoming more nuanced.

Bridgewater’s perspective underscores the need to reassess portfolio assumptions that may have held for decades. That could mean expanding allocations to emerging markets, increasing exposure to non-dollar-denominated assets, or seeking inflation-protected instruments that hedge against macroeconomic policy shifts.

The Road Ahead

America’s transition toward modern mercantilism is not a short-term trend. It reflects a broader political and economic realignment that may define the coming decade. As Jensen puts it, “The world is adjusting to the idea that the U.S. will pursue what it views as its own interests, even if that comes at the expense of system-wide stability.”

Investors who recognize this transformation early—and plan accordingly—may be better positioned to navigate the challenges and seize the opportunities of a new global order.