Marko Papic, the author of Geopolitical Alpha: An Investment Framework for Predicting the Future, is renowned for his “constraints framework.” This approach focuses on the economic, political, and geopolitical limitations that shape leaders’ decisions—often more decisively than personal preferences or ideologies. Below is a concise summary of his core ideas, followed by recent tweets and developments around the Canada–U.S. tariff conflict. I .highly recommend Marko Papic for interpreting geopolitics.
Key Themes in Papic’s Work
- Constraints Framework: Papic’s central idea is that geopolitical forecasting should focus on the constraints that policymakers face rather than their preferences or ideologies. He argues that these constraints—political, economic, and geopolitical—are more reliable indicators of future actions than the stated goals of leaders.
- Example: During the Greek financial crisis, despite the Greek government’s preferences for brinkmanship with the EU, the constraints imposed by the Greek median voter’s desire to remain in the eurozone ultimately dictated the outcome. This shows how domestic political constraints can override government preferences.
- Material Constraints Over Preferences: Papic emphasizes that material constraints, such as economic realities and geopolitical pressures, are more significant than the personal preferences of leaders. This approach suggests that understanding these constraints can lead to better predictions of geopolitical events.
- Example: In the context of U.S.-China relations, despite ideological differences and security concerns, the economic interdependence between the two countries acts as a constraint that prevents a complete decoupling. This highlights how economic constraints can limit the extent of geopolitical rivalry.
- Multipolar World Dynamics: Papic discusses the shift from a unipolar to a multipolar world, where multiple power centers exist. This complexity requires a nuanced understanding of how different global players interact and the constraints they face.
- Example: The ongoing tensions between the U.S. and China are influenced by the multipolar nature of global politics, where neither country can fully dominate the other due to the presence of other significant powers and economic interdependencies.
- Political Capital and Median Voter Theorem: Papic introduces the concept of political capital, which includes factors like popularity and legislative power, and the Median Voter Theorem, which suggests that political outcomes are often aligned with the preferences of the median voter.
- Example: The Brexit vote can be seen as a reflection of the median voter’s preference for sovereignty and immigration control over economic integration with the EU, demonstrating how political constraints can shape major geopolitical decisions.
Recent Commentary on the Canada–U.S. Trade Dispute
January 29:
- Rumors Surface: Early signs of a potential trade conflict emerge when unnamed Canadian officials express concern about new tariffs on specific Canadian exports. Markets react mildly, anticipating negotiation rather than escalation.
January 31 – from @Geo_papic
- @Geo_papic: “My highly sophisticated model on where we are in the Canada–U.S. trade dispute. This is proprietary, but I have decided to share it with my X followers. You are welcome.”
February 1:
- U.S. announces tariffs on Canada
- Canada escalates and announces counter-tariffs on the U.S.
February 2:
Source: @SpecialSitsNews
@PeterBerezinBCA “Goldman this morning: “While the outlook is unclear, we think the Canada- and Mexico-focused tariffs are likely to be short-lived.”The problem with this view is that Trump won’t change course unless the stock market sells off bigly, but the stock market won’t sell off bigly if investors continue to think that the tariffs will be lifted soon.”
February 3:
@DeItaone “SENIOR CANADA GOV’T OFFICIAL TELLS NEW YORK TIMES THAT OTTAWA IS NOT OPTIMISTIC A REAL OFF-RAMP FROM TARIFFS EXISTS FOR CANADA THE WAY IT MATERIALIZED FOR MEXICO”
@LDrogen Trudeau’s task today is to come up with something completely performative to hand Trump because there doesn’t exist anything within the reasonable universe that isn’t performative he can actually hand him
@Geo_papic “All right, I have re-run the numbers on my sophisticated constraint-based trade war model. Here are the results (color coordinated!).”
- @Geo_papic “I LOVE this statement. The White House is practically PLEADING with Ottawa to give in with a meaningless political display of kowtowing ala the 10,000 Mexican troops. I hope RoW is watching and learning. It’s not that difficult people!”
https://www.reuters.com/world/americas/white-house-mexico-is-serious-canada-appears-have-misunderstood-trumps-executive-2025-02-03/
- @Geo_papic “When you spend all day fielding media and client calls on tariffs that won’t even move the markets over the course of 24 hours because constraints > preferences…”
- @Geo_papic “very nice call on going long the Canadian dollar today at 10:30 AM. On the Bca webcast.”
Canadian Response
February 3 – from @JustinTrudeau
@JustinTrudeau “I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan—reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly 10,000 frontline personnel are and will be working on protecting the border.
In addition, Canada is making new commitments to appoint a Fentanyl Czar, list cartels as terrorists, ensure 24/7 eyes on the border, launch a Canada–U.S. Joint Strike Force to combat organized crime, fentanyl, and money laundering. I have also signed a new intelligence directive on organized crime and fentanyl, backed by $200 million.
Proposed tariffs will be paused for at least 30 days while we work together.”
This development illustrates ‘constraints over preferences’ on both sides. Canada’s political capital and economic interests propel efforts to avoid a significant trade escalation (at least it did at the last minute), while the U.S. has constraints on the potential losses from a trade war, making a face-saving agreement mutually advantageous. We shall see what happens when it comes to NATO/military spend, defense of the arctic, however,…
Why Papic’s Approach Matters for Investors and Analysts
By zeroing in on the material, political, and economic constraints that decision-makers face, Papic’s method helps observers anticipate sudden shifts—such as an unexpected tariff pause or border-control measure. These insights often reveal that market-moving developments are less about leaders’ ideologies and more about the hard realities they cannot ignore.
Broader Context on Border, Crime, FENTANYL,…
The concessions by Trudeau may help towards solving another problem…there is ongoing commentary from figures like Sam Cooper, Stephen Punwasi, and Marc Cohodes, who raise questions about illicit financial flows and potential ties to organized crime, issues that might not have been adequately addressed up until now. Its a pity it took stupid tariff threats for this to materialize
Odds & Ends – An interesting perspective on trade:
Hudson Bay Capital: “The root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade, and this overvaluation is driven by inelastic demand for reserve assets.” “As global GDP grows, it becomes increasingly burdensome for the United States to finance the provision of reserve assets and the defense umbrella, as the manufacturing and tradeable sectors bear the brunt of the costs.”
ennlightenment 
