What will the "Donroe Doctrine" mean for global macro and markets?

Paul Diggle: Hello and welcome to Macro Bytes, the economics and politics podcast from Aberdeen with me, Paul Diggle.

Luke Bartholomew: Me, Luke Bartholomew.

Lizzy Galbraith: And me, Lizzy Galbraith.

Paul: Today we are going to be talking about the new “Donroe Doctrine”, Trump's updated version of the Monroe Doctrine. What to look for next, potentially, in terms of US intervention in the Western Hemisphere. With a particular focus, I think, on Greenland. How to think about the implications of this new US foreign policy and security policy for the rest of the world, for China, Taiwan, for the Middle East, for Russia, Ukraine, Europe, and the future of NATO. I think there's a lot to get into here. It's really been a key theme kicking off the start of the year in macro markets and in geopolitics. So, let's maybe start by just outlining a little bit of what the new Monroe Doctrine, what the “Donroe Doctrine” is. It comes out of the new US National Security Strategy published at the end of last year, in which the Trump administration is laying out a more assertive US geopolitical primacy in the Western Hemisphere. So, the US National Security Strategy talks about it being in the US's strategic interests, security interests, that the Western Hemisphere is stable, well-governed, discouraging mass migration into the US, where there is less what the US calls ‘narco-terrorism’ and drug cartels, transnational criminal organizations. And importantly, that the Western Hemisphere is free from hostile foreign incursions or ownership of key assets. So read that the US wants to eject China, Russia, and other foreign influence or power projection in its backyard. So, the National Security Strategy talks about this as a Trump corollary to the Monroe Doctrine, which we might get into some of the history there. But this is a new US approach to pre-eminence, to primacy in the Western Hemisphere, which it says it can do by enlisting countries, by building alliances and allies and economic incentives, or by expansion. Of course, we've had very interesting and dramatic demonstrations of what that means already at the start of the year with US intervention in Venezuela.

Luke: Well, as you say, Paul, one way of getting a little bit more at what this “Donroe Doctrine” means is to go back to the history of the Monroe Doctrine itself, which was foreign policy assertion back in 1823 by the then President James Monroe, that the Western Hemisphere, as far as the US was concerned, was closed to further European colonization and interference. So, I guess this would have been aimed at, say, the British Empire, the Spanish and the French at the time. And what it did is then set out these distinct American and European spheres of influence. And what's quite notable about that assertion at that time in 1823 is, frankly, the US didn't really have the ability to enforce it militarily. It was an aspirational doctrine, a statement of what the US wanted to become in the hemisphere. And I suppose perhaps another irony, given how history unfolded in some ways, is that it was initially welcomed by a lot of Latin American countries who didn't want to see further European imperialism. And then at the same time, or broadly concurrent through the 19th century, along with the Monroe Doctrine, was also this idea in US domestic and foreign policy of ‘manifest destiny’, the idea that the US had some historical calling or geopolitical reason, at least to expand westwards, become a continental power, to form, as it were, an empire of liberty, as it was sometimes described at the time. So, the US is this geographically growing power. And I suppose that sort of history might be relevant of thinking about how Trump is approaching the Greenland question. And then through the 20th century, what, as we discussed, was an aspirational idea for the US to be able to assert its dominance in the Western Hemisphere, then became something it could do with very real hard power. So the Monroe Doctrine was invoked multiple times by various different presidents to justify a range of interventions in Latin America, starting back with the invasion of Cuba at the turn of the century, then of course, various interventions in Cuba in the second half of the 20th century, the Bay of Pigs in 1961, and everything else that went on around then, interventions in Panama in the 80s, various other actions in Latin America in the context of the Cold War and to deal with drug trafficking, securing the Panama Canal, and the like. But the point is that there is this long history of the US making these quite strong claims to sovereignty or dominion in the Western Hemisphere.

Lizzy: And that type of foreign policy by the US had sort of fallen out of favor over the past few decades, we hadn't really seen so much of a focus on Latin America from US administrations, and the focus had moved increasingly towards the Pacific. So, while there's a very strong historical link to previous administrations in this National Security Strategy, it is a bit of a shift from where we've seen more recent administrations focus their attentions over the last 20 years or so. So, when we look at what this means in practice going forward into 2026 and beyond, one of the big factors to consider is that there is actually a really big electoral season coming up across Latin America. And in line with this new national security doctrine, we assume that the Trump administration is going to take steps, in some cases, to try and increase its reach across the region by supporting allies in these elections or potential allies, where they are opposition candidates. So, there's quite a few elections coming up, as I mentioned, one of the biggest in the electoral calendar is going to be Brazil, where incumbent president Lula is not necessarily someone that you would consider to be fully aligned with the Trump administration. So, there's potential here, we think, for some level of US policy intervention to support opposition candidates. President Trump has previously taken steps to support former President Bolsonaro in his ongoing trial as well, levying tariffs on Brazil to try and pressure them to take alternate steps there. So, we think that there is potential here that the US takes further steps to support the Bolsonaro family in upcoming elections or in further trials taking place that could involve more tariff threats. It could also potentially involve more of what we've seen previously in Argentina, which is potential for fiscal support if voters deliver the type of outcome the US is looking for. So not necessarily intervention in a military sense, but certainly one to watch as the election season in Brazil draws closer.

Paul: I suppose, Lizzy, what's interesting there is that, like you say, you don't just need to have what is increasingly in US foreign policy circles called ‘kinetic’ intervention, military intervention. There are carrots as well as sticks. It could be support to ideological allies. We saw that in Argentina, where this swap line was extended to Milei, the Milei government, ahead of midterms there to support the economy and bolster an ideological ally. In Brazil's case, throwing their weight behind Flávio Bolsonaro, the successor to the Bolsonaro family, could be part of that. So, it's carrots as well as sticks, albeit the US does now have this very big stick that it is going to increasingly consider using across Latin America.

Lizzy: Yeah, it is important to remember that the policy toolbox that the US has is significantly broader than just military intervention. So, although we are drawing these historical parallels, and the first thing that maybe comes to mind is previous military intervention by US governments past, there are other measures that can be taken. These are also important tools that this administration is going to be considering, depending on the context. But we shouldn't also forget that at various points, President Trump has threatened military intervention, or at minimum, very significant unilateral law enforcement intervention in some countries, particularly where there is some level of drug trafficking problem or US concern about drug flows. So, one country where we've maybe seen concern about immediate US intervention abate slightly, but there's still some level of risk there is Colombia, which is a very notable drug producing country, drug transit country. Some fentanyl flows seem to originate from there, but primarily as a source of cocaine into the US. And the US government has said that they don't believe the Colombian government is doing enough to stem those flows. They also have concerns about the power that Colombian drug cartels have over Latin American production and flows more generally. And we've seen President Trump hint at various points that if the Colombian government doesn't take greater steps that they may take military intervention themselves to address those cartels. So again, we're not talking necessarily about regime change there. But we are talking about unilateral intervention to address what the US sees as a serious national security issue. And Colombia is another one of those countries where there is an upcoming election with an incumbent that the US doesn't necessarily fully align with, where we'd be watching to see what the US does to potentially shift that outcome.

Paul: I mean, it is very interesting that narcotics are such a big part of how the US is conceiving of security in the Americas and the necessity of intervention in Latin America, whether it is fentanyl or cocaine was sort of one of the things thrown into the mix vis-a-vis intervention in Venezuela. As you say, Lizzy, Colombia and Venezuela are not so much being involved in the fentanyl trade, but more in the cocaine trade. And you can link this personally to some of the key players in the administration as well, that both Secretary of State Marco Rubio and Vice President JD Vance come from backgrounds and upbringings that are in part shaped by widespread drug problems in the communities. And they've both written about this in their own memoirs as well, that that in part shapes their politics. Obviously, it's shaping how the Trump administration now is making foreign policy as well. And it's going to be a big factor in the sort of intervention that we may see in Colombia or elsewhere.

Lizzy: Yeah, we've spoken at length about how national security strategies led by the US, but increasingly in most other countries as well, the concept of what is national security has broadened out considerably over the past decade or so, now encapsulates trade, now encapsulates critical vulnerabilities in your supply chains. But for the US, it also is increasingly about drug flows and particularly fentanyl. But we shouldn't also forget that the cocaine and cocaine finance cartels are still a significant US focus. And that is a driver of US policy priorities and behavior going forward as well. We've seen that as well with some of President Trump's comments around Mexico as well, where President Claudia Sheinbaum has been, by all accounts, a very good manager of Trump. She's been able to navigate that relationship fairly successfully. But we still see these occasional comments from President Trump about the power of drug cartels in Mexico, and whether or not the US should be taking further action there, further military action, to try and stem that risk. So, it is still very much on the mind of US policymakers. And as you said, it's not just about President Trump and his focus, but about other senior leadership in the Trump administration as well. But there are other factors at play as well. Particularly when we look at countries like Cuba. The Cuban regime has long been a focus of Secretary of State Marco Rubio, he's of Cuban heritage, and he has spoken at length over the course of his career about the need to do more to ensure that the Cuban people can transition away from the current system there and towards a more democratic regime. So, we've not really seen too much in terms of US direct action against the Cuban regime so far. But we did see when they were taking action to remove the Venezuelan president, Nicolás Maduro, that Venezuelan sales of oil to Cuba were also cited as a sort of a rationale there that they were helping to sort of prop up the Cuban system as well. So, there is a, I think, a feeling in some parts of the Trump administration that by taking away some of these dominoes in Latin America that allow these regimes sort of support one another, you undermine the sort of the broader system of more geopolitically unfriendly nations across the region, Cuba being one of them.

Luke: And then of course, there's Greenland. And we've talked on the podcast before about the US's interest in Greenland. But I think it is worth going over those, again, because which of those interests turn out to be more important, or the driving factor in current US thinking, I think, will go a long way to determining what turns out to be a satisfactory outcome for the US. So of course, part of what's going on is a question of security in the ‘High North’, as it's sometimes called. And that's especially so with sea lanes opening up and Arctic transit becoming more possible amid climate change and the ice melting. It's about resources. It's about great power competition, the idea that the US has that perhaps Russia or China might move into this space, which is important to US security. And I think there's a thought that the US believes that Denmark is just not taking seriously enough the strategic stakes of Greenland, that it has in some sense allowed this drift towards independence in Greenland. You know, there might be some voices in the administration that thinks Europe, as a whole, doesn't have the civilizational confidence to assert the reason why it should continue to have sovereignty over Greenland, why it shouldn't just give in to claims of independence from the Greenlanders. And it's from the US's perspective, it just wouldn't be serious from the perspective of great power politics to allow somewhere of such strategic significance as Greenland to become independent. And then there's also the fact that an expansion of the US gaining more territory could be important to US national prestige. Maybe it's part of this manifest destiny. In a sense, maybe it's the Monroe Doctrine and kicking another European, quote unquote, colonial power out of the Western Hemisphere, Denmark in this case being the colonial power. And, you know, there's this thought that maybe Trump as a real estate mogul by background just likes acquiring territory, real estate. And then there's also the fact that at this point, maybe the administration has sort of painted themselves into a corner that something needs to happen. They've talked so much about the importance of Greenland that they end up losing face, losing credibility, if they back away without something that they can credibly claim is a win of one form or another.

Lizzy: And that's something that's quite important when we think about the range of options here, it should be noted that Denmark has already put an offer on the table to the US and one that would entail both defense commitments from Denmark to bolster the security situation on Greenland itself, but also would invite an enhanced US military presence there too. So, we do see some scope here for a US deal that does involve some sort of expanded access, both in terms of economic rights to explore critical mineral mining, oil and gas in and around Greenland, as well as quite an enhanced military presence, likely primarily US, but also potentially NATO troops more broadly as well. But there is still this question over whether or not that's going to be enough for the US, whether or not there's actually not really much desire on the part of the US to allow this to continue under the Danish flag more generally.

Paul: Yeah, and Trump spoke, hasn't he Lizzy, about there's some sort of qualitative difference between owning the territory, the real estate, and sort of leasing it or being allowed by Denmark to sort of get everything they seemingly want out of Greenland expansion, military expansion, you know, put more troops onto the Thule airbase, do some minerals exploration, but where it's a sort of it's a lease back or the US is being allowed in, versus actually owning, having sovereign ownership in some way of the territory. And I do think overlaying as you did, Luke, Trump's real estate background, the very long-term history of US expansionism, of manifest destiny, it is important here, flippant or strange or bizarre as it sounds. That is, I think, a big part of what, of the dynamics here. It's not just high politics and geopolitics and great power competition. It's also tied up with the personality of Trump and his background and the fact that owning this real estate in some sense does seem to matter.

Lizzy: Yeah, and as you've said, he says as much in sort of recent interviews that it's very important to him personally, that it's not just about, you know, an enhanced treaty, it's not just about making sure that US has sort of exclusive access versus geopolitical rivals to Greenland and the surrounding waters. It's about that kind of being able to sort of stake your claim to strategic territorial points. And that has the potential to involve some quite difficult negotiations over the next few years with Denmark. So, there are some options out there where Greenland could shift from being part of the Kingdom of Denmark to potentially something like a compact of free association with the US, which is a tool they've used in other instances as well. But it's a complex path because it involves Greenland having to declare independence from Denmark first and then enter into this alternate agreement with the US. And it should be noted that the political position of Greenland seems to be seeking its own independence, although the timeframe for that continues to be subject to debates. But there isn't necessarily a sort of a big groundswell of support so far among Greenlanders for either necessarily staying part of Denmark over the long term, but joining the US or having some sort of association with the US either. So one thing we think the US administration is going to look at is what sort of offer they can put to Greenlanders that would maybe change the calculus there, whether that involves some enhanced economic offering to Greenlanders, either as part of enhanced economic support, an option simply of providing Greenlanders with cheques and hoping to persuade them that way. But there is also, of course, the option that the US simply does enhance its troop presence on the island and unilaterally declares it to be US territory. And that is a very geopolitically fraught situation, particularly for NATO, but it is one that we need to seriously consider, given the quite complex outlook, that, you know, negotiations or solutions by negotiation seem to pose.

Paul: Yeah, so option two, as you're laying it out, Lizzy, the buy Greenland option, or economically induce Greenlanders to vote for independence. Trump has talked about numbers, he's talked about $100,000 per person, the population of Greenland is such that that could get bigger. Why not offer a million, 10 million per person? Fiscally, the impact on the US is not enormous. If this is of such great geopolitical importance, I think we could get to those kind of numbers. Perhaps throw in citizenship. It starts to look like quite an attractive option, potentially to Greenlanders who, as you say, already want independence. I mean, opinion polling says that the party in power in Greenland is not a pro-independence party, but the opposition is. Maybe they could hold a wildcat referendum? Maybe the US provides financial support to the opposition, to the independence movement? Maybe then Denmark doesn't honor it, and the US has pretext for some form of intervention at that point? So, I think these options are absolutely realistically on the table. Of course, it goes without saying that it would be a gamble for the Greenlanders to sort of count on the US taking care of Greenland over the long-term future. And of course, Greenlanders are used for a very different social model than some form of association or even becoming the 51st state of the US would involve. And then this force option, I mean, again, absolutely realistically part of the risk distribution in the context of the US National Security Strategy, as you said, Luke, Trump locking himself in or pre-committing to some form of action or ownership. And we're not talking here, airstrikes or war, right? What we're talking is plant the flag, say that it is part of the US now, and then dare anyone to oppose it, which they almost certainly wouldn't, again, not in a military sense anyway. And then the issue becomes, right, is NATO over at that point? Are European countries chucking US troops out of Europe, out of US bases in Europe, closing them down? Or does Europe have to accept this because of the need it has for US support in Ukraine and against Russia, for example?

Luke: I mean, there is a little bit of a brass tacks issue, Paul, when it comes to writing cheques of really large sizes as to where that money comes from, which budget that comes from and whether Congress is willing to approve a budget that would be needed to finance those kinds of transfers. Maybe it comes from the military budget? Trump has just asked for a very large expansion of that. But yeah, there are potentially domestic political hurdles to some of these moves that are worth noting. But yes, I mean, it is also true that just the vast size of the US economy, compared to how small Greenland is, does mean that some rather temptingly large cheques can plausibly be written.

Paul: Why don't we talk a little bit about implications outside of the Western Hemisphere then of this new “Donroe Doctrine,” of the US National Security Strategy and approach to foreign policy? Because I think the one that's immediately on the agenda and where we may see some form of action very soon is in Iran, where you have these large anti-regime protests on the streets amid collapse of the Iranian economy and long-running opposition there. I think at this point, some form of US military intervention is probably base case. Trump has almost said as much in various Truth Social posts. It would be a lot more consequential than in Venezuela. Iran is a much larger supplier of crude to the global market. It's adjacent to the strategic choke point that is the Strait of Hormuz, this maritime shipping lane through which oil flows come out of the Persian Gulf. So, it affects, potentially, not just oil supply from Iran itself, but from a lot of the Gulf state producers. And given the factions in Iran, the ideological, national, even sectarian cleavages within the country, the scope for a complex state collapse is just much larger. And of course, we've already seen some premia built into oil prices on all these kinds of concerns. But at the same time, the oil market is in a state of oversupply. 60, 65 dollars a barrel are fairly low by recent standards. A lot of forecasts we've seen have oil prices drifting lower still over the course of the year. Perhaps other OPEC states would be willing and able to increase production should Iranian supply be curtailed. And so long as they can still get it out of the Persian Gulf through the Strait of Hormuz. So yeah, notwithstanding that US intervention in Iran could kick off a whole load of complex consequences, that probably doesn't include oil at say, $100 a barrel, at which point it's actually really threatening the global economic cycle, the expansion, it's recession threatening, and it's seeing a very large re-emergence of inflation pressure.

Lizzy: And if we go further across the globe, again, there's maybe less that we can say about how this new US policy affects the Russia-Ukraine conflict in that the US stance, this new US sort of hemispheric view of the world, and the potential that the US is maybe less interested in operating under international norms, it's not necessarily something that particularly alters the dynamics between the US and Russia, in that Vladimir Putin has made it very clear over his time as Russian president, that he already views the US as operating outside of those norms, and that Russia should be continuing to do that as well. Because it's not necessarily a realistic constraint. So, there's not necessarily any major shift that we would see from Russian policy in response to this US shift. Aside from to say that one of the concerns the US has cited when it comes to Greenland specifically, as we've already mentioned, is that the area around Greenland is potentially exposed to Russian submarines, to Russian ventures into the Arctic, and therefore, potentially, there's some overlap in geopolitical competition there. But in terms of Ukraine specifically, it's more confirmation, we think, of existing assumptions about US policy, rather than necessarily something that's going to drive a real re-evaluation of how Russia thinks about the US and its foreign policy approach writ large.

Luke: And then when it comes to China, Taiwan, of course. China wouldn't even grant the premise that it is international law that regulates that relationship, to say that that was a matter of international law would be to grant the premise that the relationship between China and Taiwan was that of two different sovereign states, which is something that China does not accept. It thinks it's a matter of domestic policy. So certainly, any change of stance from the US on the importance of international law might not matter. But you could tell a story, I suppose, that the Chinese would read into this action that the US is granting the hemisphere-like politics should be allowed to dominate international relations, that the US gets the Western Hemisphere, and so perhaps China gets its hemisphere in the South China Sea, that it is able to exert its will in that space. Alternatively, you might think that what China takes from this is that there's been this demonstration of US military might and that's salutary for China. That's certainly something that Trump would like to say. And, you know, in particular, Venezuela was, you know, somewhere that China was working on as a proxy state. It was, you know, not particularly important supplier of oil to China, given the size of Chinese oil imports, but was nonetheless an oil supplier. So, in a sense, Venezuela has been taken off the board as a China proxy. And maybe it's a demonstration to other potential states that lean towards China that maybe having the support of China isn't always that helpful in a pinch, that the US can indeed come and intervene. And maybe that might be a lesson that other countries have taken from this. So, you could see it sort of cutting in both directions when it comes to how China thinks about Taiwan as a consequence of its new US foreign policy.

Paul: I think what's ultimately going to decide that, that contrast that you set up there, Luke, is what sort of bite ‘hemispherism’ has. Is the US only interested in the Western Hemisphere? It's going to project aggressively its power there. But equally, other powers can project in their hemispheres or their spheres of influence. And if that is the new world order that the US is sort of setting up or sanctioning, then I do think there are the sort of implications that you started off laying out, that China will in some sense feel emboldened vis-a-vis its ambitions in Taiwan. If it is a trait or mutual recognition of LATAM for the South China Sea, China would of course jump at that. Or is it the case that despite the particular focus on the Western Hemisphere, the US is absolutely still a global power? I think possible action in Iran would argue for the latter, despite all the talk of the new Monroe Doctrine. The US is not just a hemispheric power; it is a superpower willing to project force globally. And of course, the National Security Strategy does talk a lot about Asia, Europe, as well as the Americas. It mobilizes this language of the US continuing to have military overmatch in the South China Sea to deny China there. That still sounds like wanting to be and acting like a world power to me. And of course, we've again done previous podcasts on the critical importance of Taiwan to global semiconductor supply chains. The semiconductor production out of Taiwan is in a sense the oil of the modern AI economy. So there's absolutely still deep and profound economic interest that the US has in the status quo there.

Paul: Okay, look, I think that's about all we have time for today. I suspect we're going to be revisiting topics of the Western Hemisphere, the “Donroe Doctrine”, that geopolitics is just such a big theme, it's going to turn out to be a big theme in 2026. We're going to revisit that multiple times on the podcast. We've actually got imminent episodes planned on talking about when geopolitics does or, in fact, doesn't matter for markets. Another talking about what NATO needs to invest in, what the private sector may need to invest in alongside NATO in terms of hardware and infrastructure. So, look out for those. But until then, thanks very much for listening. Please do like and subscribe to Macro Bytes on your podcast platform of choice and goodbye and good luck out there.

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