PESTLE & MORTAR 19 June 2025

#1
Deportation Risks Threaten Several Industries
The Trump administration’s aggressive deportation campaign is triggering mounting concern among U.S. businesses, which warn that the crackdown threatens their operations and broader economic stability. Since January, more than 40 companies across sectors, ranging from agriculture and construction to tech, energy, and finance, have disclosed deportation-related risks in their SEC filings. These concerns span labor shortages, rising operational costs, and heightened recession risks, particularly in industries heavily dependent on undocumented workers such as farming, homebuilding, hospitality, and food processing. For example, Hawaiian Electric and Hanmi Bank explicitly cited mass deportations as factors contributing to potential economic downturns, while construction firms like Century Communities warned about their ability to maintain service quality without sufficient immigrant labor. The disruption is already playing out: a raid on Glenn Valley Foods in Nebraska led to the arrest of half the plant’s production staff, reducing capacity to just 20% and illustrating how quickly essential supply chains can be destabilized. Similar enforcement actions at farms, construction sites, and restaurants have caused widespread delays and operational chaos. Despite decent wages, business leaders report difficulty replacing undocumented workers due to a lack of willing domestic labor. Meanwhile, international firms like Pricesmart and Pacific Airport Group have raised alarms about the impact of deportations on remittances and travel, warning of economic destabilization in Central America and Mexico. Ethical and reputational risks are also surfacing, with investors pressuring companies like Alphabet to account for their contracts with immigration enforcement agencies. Internal divisions within the federal government further complicate matters, as some DHS officials initially sought to deprioritize workplace raids in vulnerable sectors, only to reverse course under pressure from hardliners emphasizing enforcement at all costs. With undocumented immigrants comprising 4.4% of the total U.S. workforce—and up to 19% in specific industries—the sweeping deportation efforts risk weakening labor markets, driving up food and housing prices, and delaying recovery in already strained sectors. Public sentiment reflects these tensions: while Trump’s overall job approval remains steady at 42%, recent polling shows a decline in support for his immigration policy, with disapproval rising to 49%. The growing divergence between political aims and economic realities shows the challenge of reconciling strict immigration enforcement with the functional needs of the U.S. economy, and it indicates the Trump administration is unlikely to continue this approach over the medium term.

#2
U.S. Tariffs Continue to put Market in Flux
U.S. trade and investment landscapes are being reshaped by a volatile mix of rising protectionism and targeted liberalization. Importers are increasingly burdened by “tariff stacking,” in which new Trump-era tariffs are layered atop pre-existing duties, inflating total costs well beyond headline rates. Companies like Rodgers Wade Manufacturing report effective tariff rates as high as 70% on Chinese metal fixtures, prompting a shift toward suppliers in Mexico and India. These added costs are forcing firms to raise prices, apply for exemptions, and reorganize supply chains—adding complexity and uncertainty to operations. This trade friction is contributing to investor caution, with many retail investors reducing their exposure to U.S. equities despite recent market recoveries. Following the market volatility triggered by Trump’s April tariff announcement and subsequent walk-backs, retail stock buying has declined sharply, and many investors are reallocating into cash or international markets. Concerns about policy unpredictability, market overvaluation, and fiscal instability have driven a more conservative approach, particularly among those near retirement. Meanwhile, the announcement of an impending U.S.–U.K. trade deal, expected to reduce auto tariffs and improve aerospace trade terms, offers a counterbalance by boosting transatlantic economic confidence. However, key details—such as quotas and unresolved issues around steel and aluminum—remain under negotiation. These developments point to a global trade environment in continuous flux, where businesses and investors must navigate cost inflation, reconfigured supply chains, and uneven liberalization efforts while positioning for both risks and opportunities.

#3
U.S. Pushes Further Decoupling with China
The United States is intensifying efforts to decouple its technological and manufacturing supply chains from China through a multi-pronged strategy of export controls, diplomatic pressure, and trade leverage. Ahead of recent U.S.–China trade talks in London, the Commerce Department considered expanding restrictions on semiconductor manufacturing equipment exports to China—potentially affecting tools used to produce even basic chips—before temporarily shelving the proposal. These controls would have severely disrupted global chip supply chains and threatened billions in revenue for key U.S. firms, but they remain a potent option as strategic tensions persist. At the same time, the Biden and Trump administrations have continued to constrain China’s artificial intelligence and semiconductor sectors, with the Bureau of Industry and Security slowing approvals of export licenses and reviewing technologies of "strategic significance." Aligning with Washington’s hardline stance, Taiwan recently added Huawei and SMIC to its export-control list, signaling heightened regional concern over tech transfer and talent flight to China. Simultaneously, the U.S. is pressuring Vietnam to reduce its use of Chinese-made components in goods destined for American markets, threatening tariffs of up to 46% if changes are not made. Together, these moves reflect a growing commitment among U.S. allies and partners to restrict China’s access to critical technologies and reduce systemic dependencies, even as the cost of such decoupling—both economic and geopolitical—continues to grow.

#4
Central Banks Respond to Volatile Economics
Global central banks are adopting increasingly cautious stances as geopolitical instability, trade tensions, and inflationary pressures cloud the economic outlook—moves that carry significant implications for global markets. The Bank of Japan recently announced it will slow the pace of its bond tapering, reducing its quarterly reduction from ¥400 billion to ¥200 billion and extending purchases into 2027. This shift reflects growing concerns over external risks, including heightened Middle East volatility and the potential economic fallout from renewed U.S. tariffs, and is intended to stabilize long-term yields and manage domestic liquidity. In parallel, the U.S. Federal Reserve held interest rates steady at 4.25–4.50% and signaled only two rate cuts in 2025, while significantly scaling back its expected easing in 2026 and 2027. Fed officials cited persistent inflation, driven in part by supply-side disruptions and protectionist trade measures, as the primary reason for the more conservative forecast. In response, U.S. rate futures have increased the probability of a rate cut in September to around 64%, with growing expectations of another cut in October, suggesting investor confidence in eventual monetary easing as inflation moderates. This evolving divergence creates arbitrage opportunities in currency and bond markets, especially involving the yen and U.S. Treasuries. For markets, this complex environment presents a mixed picture: monetary easing supports equity valuations and lowers borrowing costs, but persistent macroeconomic uncertainty from inflation to trade wars to conflict risk injects volatility and forces investors to hedge against sudden shifts in policy or geopolitics.

#5
Oklahoma Pushes to be Hub for Mineral Processing
Rural Oklahoma is emerging as a key strategic hub for critical minerals processing in the United States, positioning itself at the center of efforts to reduce dependence on China for essential materials like nickel, lithium, and rare-earth elements. Startups such as Westwin Elements, Stardust Power, and USA Rare Earth are spearheading projects that include the nation’s only nickel refinery, its largest lithium refining facility, and a rare-earth magnet plant, along with advanced battery-recycling operations. Backed by state incentives, a skilled energy workforce, and strong logistics infrastructure, Oklahoma’s business-friendly environment is attracting significant corporate and federal interest, including defense sector engagement and eligibility for tax credits. For U.S. corporations, this development holds major significance: it strengthens domestic supply chains, enhances resilience against geopolitical disruptions, and offers cost advantages through local sourcing and regulatory predictability. Companies in sectors like EVs, renewables, aerospace, and defense stand to benefit from stable access to critical inputs, improved ESG alignment, and increased investor confidence as the U.S. rebuilds a sovereign industrial base not as dependent on China.

#6
Denmark Pursues Digital Sovereignty
Denmark's Ministry for Digitalisation has begun phasing out Microsoft products, transitioning from Windows and Office 365 to open-source alternatives like Linux and LibreOffice, as part of a broader “digital sovereignty” strategy. The move is scheduled in stages through late 2025, with over half the ministry’s staff shifting in the summer and full transition by autumn. Similar shifts are underway in Copenhagen and Aarhus, following rising concerns over dependency on proprietary U.S. technology, cost escalation, and political risks tied to global tensions. The government maintains a fallback to Microsoft is possible if technical challenges arise. This transition matters because it signals a growing trend among governments to reclaim control over digital infrastructure. For U.S. technology firms, especially Microsoft, it raises the prospect of losing major government contracts and licensing fees, as well as facing increased competition from open-source alternatives. Danish and European moves emphasize the geopolitical and operational vulnerabilities of relying on foreign tech providers, pressuring companies to offer more transparent, modular, and sovereign-friendly digital solutions. As governments globally weigh security and autonomy, U.S. tech vendors may need to adapt their offerings, diversify regional partnerships, and consider compliance with localization demands to retain institutional customers in an evolving market.

#7
News Consumption Moving Away from Traditional Media
According to the 2025 Reuters Institute Digital News Report, U.S. news consumption has shifted dramatically, especially among Americans under 35, away from traditional media and toward social platforms, podcasts, and AI chatbots. This marks the first time that social and video networks overtook TV and news websites as primary news sources in the week following January’s presidential inauguration. Podcasters like Joe Rogan and Tucker Carlson are gaining prominence, with around 20% of Americans encountering Rogan’s content during that period. These voices particularly appeal to young men, right-leaning individuals, and those skeptical of mainstream outlets, though they are also cited as significant sources of misinformation. Additionally, about 15% of under-25s regularly access news via AI tools like ChatGPT and Gemini. Alarmingly, over 70% of Americans express concern about differentiating true from false news, even as overall trust in news sources remains at about 40%. For analysts, the clients who rely on geopolitical analysis are themselves increasingly consuming news through these same fragmented and often polarized channels. This creates a credibility gap. Analysts providing objective, evidence-based assessments may find that their conclusions clash with the narratives their clients have internalized from popular figures like Joe Rogan, Tucker Carlson, or from AI-generated content. The result is not just disagreement over policy or outcomes, but fundamental divergence on facts and frames of reference. Maintaining analytical integrity while also building trust with clients steeped in such varied—and often unverified—information sources will require a delicate balance of education, persuasion, and adaptability.

#8
Israel and Iran
After a week of intensive airstrikes, Israel has achieved temporary aerial supremacy over Iran, crippling air defenses, killing senior commanders, and damaging nuclear infrastructure, yet it still falls short of eradicating Iran’s underground facilities or ending Tehran’s nuclear ambitions. Analysts caution that without U.S. assistance Israel lacks the depth to sustain a protracted campaign, and its military successes have not translated into uncontested regional hegemony: Israel remains reliant on American support, constrained by unrest in Gaza, and tarnished by international criticism. Paradoxically, the breadth of the operation, seen in Tehran as an effort at regime change, has strengthened Iranian support for building a bomb and could spur a covert, less-monitorable nuclear program or even withdrawal from the Non-Proliferation Treaty. The strikes have also split the region’s strategic visions, pitting Israel’s containment doctrine against Gulf Arab efforts to integrate Iran through diplomacy and economic ties; Gulf states have condemned the attacks and are scrambling for de-escalatory off-ramps to shield their own growth agendas and deter U.S. entanglement. With Iran already launching missiles at Israeli cities and Israel ill-suited for a drawn-out war of attrition, the conflict now risks devolving into an open-ended, mutually damaging struggle that could destabilize energy markets, undermine U.S. policy coherence, and ultimately accelerate rather than halt Iran’s drive toward nuclear deterrence. See Insight Forward’s Strategic Memo for more in-depth analysis.

#9
Minnesota’s Revolutionary Violence
The targeted political assassination of Minnesota House Speaker Melissa Hortman and attempted murder of Senator John Hoffman underscores a disturbing trend Insight Forward identified in its report Revolutionary Violence in the New Gilded Age. This incident, marked by premeditated attacks, ideological extremism, and the use of data broker services to locate elected officials, exemplifies the growing convergence of polarization, anti-elite sentiment, and technological enablers of violence. As the report warned, we are entering an era where symbolic acts of terror, such as assassination attempts on public officials, are likely to increase. This tragedy validates those findings and highlights the urgent need for renewed attention to protective measures and the social dynamics fueling grievance-based violence. Insight Forward continues to track this evolving threat landscape.

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