The commodity market, a cornerstone of global trade and economic stability, has been significantly impacted by the strategic and often unorthodox decisions of the Trump administration in the past. From energy policies to trade tariffs, President Trump's actions have reshaped market dynamics, creating both opportunities and challenges for investors during the upcoming administration.

Energy Policies: A Double-Edged Sword

One of Trump’s most immediate impacts on the energy sector has been his declaration of a national energy emergency, which aims to expedite oil and gas production permitting while rolling back environmental protections. While these policies theoretically bolster U.S. energy independence, they also inject bearish momentum into the market by threatening oversupply and could turn the US into a net energy exporter, further influencing global oil prices.

However, Trump's intention to refill the Strategic Petroleum Reserve (SPR) adds a layer of complexity, as though bullish for crude prices, this initiative faces significant bureaucratic hurdles, including Capitol Hill’s approval. Past attempts to refill the SPR during periods of low prices highlight the logistical and financial challenges that come with such ambitions.

Consequently, the administration’s focus on energy dominance underscores its commitment to prioritising domestic energy production. By leveraging the national energy emergency declaration, Trump seeks to solidify the U.S. position as a global energy powerhouse, a move that could have long-term ramifications for international energy markets.

Trade Wars and Tariff Ripples

Trump’s aggressive trade policies, including tariff threats on imports from Canada and Mexico, have sent shockwaves through the commodity market, with US refiners heavily reliant on Canadian crude, which cannot be easily substituted. Furthermore, Trump's broad review of trade agreements, particularly the 2020 US-China trade deal, raises concerns about potential retaliatory measures. While no immediate actions have been taken, the looming possibility of renewed sanctions or tariffs injects uncertainty into markets, particularly in sectors like soybeans, where China is a dominant importer.

Consequently, the administration’s ‘America First’ stance is a double-edged sword for commodity markets. As while the focus on domestic production and trade renegotiations aims to boost US economic resilience, it also risks alienating key trading partners. This isolationist approach could lead to fragmented global supply chains and heightened volatility across commodity sectors.

Natural Gas and LNG: A Bright Spot

In this complex macro picture, the natural gas and liquefied natural gas (LNG) markets have emerged as promising investment opportunities for institutions. Europe’s dwindling gas storage levels and increased summer demand, combined with potential competition from Asia, position natural gas as a pivotal commodity in 2025. Additionally, the cessation of Houthi attacks in the Red Sea offers a glimmer of hope for stable LNG exports from Egypt, which could ease supply pressures. In the US, the administration’s push for expanding LNG exports aligns with its broader goal of strengthening its energy influence. By pressuring trading partners through tariffs and leveraging geopolitical developments, Trump’s policies could create a favourable environment for US natural gas producers this year.

Geopolitical and Environmental Overhangs

Geopolitical risks continue to weigh heavily on commodity markets, with Trump’s proposal to halt Venezuelan oil imports, while insignificant for US energy needs, could destabilise Venezuela’s fragile economy and potentially ripple into conflict escalations in Guyana. Meanwhile, the US withdrawal from the Paris Climate Accord signals a long-term pivot away from global environmental commitments. While this approach may benefit energy production in the short term, it risks alienating international partners and amplifying climate-related risks throughout the administration. Consequently, the emphasis on domestic energy and disregard for international environmental frameworks suggest a pivot toward prioritising short-term economic gains over long-term sustainability. This stance will likely create significant sector volatility, however, it may also produce opportunities for commodity investors as these policies evolve.

Key Takeaways

The commodity sector’s trajectory under the Trump administration highlights the influence of political strategy on this market, and while these potential policies bring about significant challenges, they also create avenues for strategic investment. Energy-centric stocks and inflation hedges like gold show promise, but the risks tied to trade wars and geopolitical instability cannot be ignored. For now, a cautious, data-driven approach to investment, with an eye on policy developments, trade negotiations, and global demand trends, is essential. The potential to trigger inflationary pressures through tariffs and supply chain disruptions also warrants close monitoring. Furthermore, attention should be paid to shifts in global demand, particularly in China, where the economic recovery could significantly influence commodity prices in the year ahead.