America First, Markets Second? The Implications of the 2025 National Security Strategy

President Trump’s updated National Security Strategy, released with little warning in the early hours of December 5, has already sent ripples through global capitals and financial markets. Framed as the blueprint for US foreign, economic, and defence priorities, the report marks a sharp turn away from value-driven internationalism and toward a more cynical, transactional, America-first worldview. For investors, the document matters not because every line will become policy, but because it offers a window into how Washington intends to shape global economic relationships in 2026 and beyond.

Europe in the Crosshairs: Perception vs. Geopolitical Reality

The immediate reaction abroad has been a mix of unease and recalibration. Europe, quite surprisingly, appears to have been singled out for the most ire in the report. It is accused of being a continent sliding into “civilisation erasure” and irrelevance through mass immigration and regulatory overreach, and where democratic principles are being eroded. Yet, in the same report, references to the direct strategic threats posed by Russia and China are noticeably pared back compared to prior years, reflecting a broader shift toward transactional diplomacy and selective cooperation.

Regional Reactions: Asia, the Middle East, and the Americas

Elsewhere, in Asia investors are trying to parse what the NSS means for regional security and supply-chain stability given Washington’s inconsistent approach to China. Middle Eastern governments are wary of what the report means for prior US security commitments, the degradation of which could invoke volatility in oil markets. South America, meanwhile, is framed through the lens of a renewed ‘Monroe Doctrine’-style approach. The NSS emphasises that the Western Hemisphere is a core US sphere of influence, signalling a more assertive posture toward political and security developments in the region and a greater willingness to intervene diplomatically, and potentially economically, to shape outcomes.

Contradictions at the Core: Sovereignty vs. Influence

What stands out most in this NSS is not just its criticism of long-standing allies, but its internal contradictions. On one hand, it champions national sovereignty and argues for reduced US entanglement abroad; on the other, it openly calls for shaping political outcomes in other countries if doing so aligns with this particular administration’s populist tendencies and priorities. The document emphasises a more cautious stance toward military intervention, yet offers a worldview where spheres of influence are acceptable and great powers are free to set regional “rules of the road.” Even China, typically seen as America’s principal rival in the modern era, receives softer treatment than expected, reflecting, many analysts suspect, an administration keen to avoid jeopardising the ongoing trade discussions which the President is personally pushing.

Markets Grapple with Message vs. Mechanics

For markets, these inconsistencies create a challenge: how seriously should the NSS be taken? Many investors see it less as a coherent doctrine and more as a snapshot of the administration’s current mood, part strategic intent, part political messaging. With midterm elections looming in 2026 and the President’s influence within his party facing signs of strain, the gap between formal strategy and actual policy execution could actually be quite wide. This adds a layer of uncertainty that will continue to colour risk sentiment through next year.

Clear Signals on Domestic Industrial Strategy

Still, the document is not without clear policy signals. For the United States, the NSS locks in a trajectory already visible throughout 2025: reindustrialisation, strategic investment, and supply-chain resilience. The report positions economic strength as the foundation of national power, providing political cover for continued fiscal support to favoured industries, namely semiconductors, critical minerals, advanced manufacturing, and energy production. These priorities are likely to attract both public funding and substantial private capital. For US equities, sectors tied to industrial CAPEX and technological infrastructure may remain relative outperformers.

Europe’s Response: Risk and Realignment

The global consequences, however, are uneven, and highly uncertain. Europe appears braced for an increasingly fractious transatlantic relationship. Tensions flared almost immediately after the NSS release, when US officials criticised the EU’s decision to fine X (formerly Twitter) for breaching its digital service rules, an episode that encapsulates the widening philosophical divide over data governance, market regulation, and corporate responsibility. If such disputes escalate in 2026, even the modest US-EU trade understanding reached earlier this year could be tested, and a new, mutually harmful trade war erupt.

For European markets, this raises the prospect of higher risk premiums and reduced policy predictability. Firms may hesitate to commit to long-term cross-border investments if Washington’s stance toward Europe becomes more combative. In response, European governments are expected to double down on industrial autonomy to shore up its clear economic vulnerabilities, whether through defence spending, technology clusters, or critical-raw-material strategies. These moves will support select sectors, but may take years to deliver broad-based growth given the continent’s characteristically slow decision making process.

Dollar Outlook: Strength, Uncertainty, and Policy Expectations

The NSS adds nuance to the dollar’s outlook. By reinforcing industrial strategy and economic competitiveness, the report implicitly underscores the importance of maintaining the dollar’s reserve-currency status. If strategic investment boosts US productivity without triggering immediate inflation, the dollar may retain a firm base of support. However, market expectations currently lean toward a more dovish Federal Reserve next year once Trump’s handpicked choice for governor takes over the Fed, a narrative that could weigh on the greenback in the near term.

Euro Prospects: Autonomy, ECB Strategy, and Geopolitical Drift

The euro, meanwhile, could benefit modestly from US policy uncertainty, provided Europe avoids major internal shocks. A tighter ECB stance relative to the Fed would also offer cyclical support. Yet over the medium term, euro performance will depend more on Europe’s ability to deliver the competitiveness and strategic autonomy that the NSS implicitly challenges it to pursue.

A Market Landscape in Flux

Ultimately, the 2025 National Security Strategy is less a roadmap than a signal, a reminder that geopolitical turbulence and economic statecraft will continue to shape global markets in 2026. For currency markets, tariff announcements, energy dynamics, central-bank messaging, and the evolving tone of US-EU relations will be key drivers. Investors should expect volatility, but also opportunity. In an environment where strategy and politics increasingly overlap, clarity will be scarce, but informed positioning will matter more than ever.