Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK economy unexpectedly contracted by 0.1 per cent in January, underscoring the challenge facing chancellor Rachel Reeves as she prepares to deliver a high-stakes Spring Statement this month.Friday’s monthly GDP figure from the Office for National Statistics was below both the 0.1 per cent growth predicted by economists polled by Reuters and December’s 0.4 per cent. The decline was largely driven by weakness in the production sector.Reeves is preparing to rein in public spending in her March 26 Spring Statement after disappointing growth and higher government borrowing costs sparked fears that she is on track to break her fiscal rules.Growth has largely stalled since May, hitting tax revenues, after the UK economy rebounded from a technical recession at the start of 2024.Labour MPs and some cabinet ministers have expressed concern that Reeves is planning politically damaging cuts to ease pressure on the public finances, including slashing the welfare budget.“It’s the toughest thing we have had to do,” admitted one ally of the chancellor. However, Reeves has ruled out rewriting her fiscal rules to allow more borrowing, forcing her to make what she has called “tough choices”.Mel Stride, shadow chancellor, urged Reeves to turn her March 26 statement into an “emergency Budget”, including reversing tax rises on business and abandoning what he called “extreme employment legislation”.The Office for Budget Responsibility in October forecast economic growth for 2025 at 2 per cent — double the 1 per cent predicted by economists polled by Reuters. The watchdog is expected to release a new forecast alongside the Spring Statement.Suren Thiru, economics director at the Institute of Chartered Accountants, said January’s GDP contraction made Reeves’ Spring Statement “more problematic” since it increased the likelihood that the OBR would downgrade its forecasts, “further undermining the chancellor’s spending plans”.Some content could not load. Check your internet connection or browser settings.The pound weakened slightly after Friday’s data release and was down 0.2 per cent against the dollar by late afternoon, trading at $1.293. Gilts were stable, with the 10-year yield down 0.02 percentage points at 4.67 per cent.The figures come as the fallout from Donald Trump’s escalating trade war has added to the economic strains facing the UK, as well as the prospect of higher defence spending as the US president disrupts western security alliances.“The world has changed and across the globe we are feeling the consequences,” Reeves said in response to Friday’s figures.As a result, she said, “we are launching the biggest sustained increase in defence spending since the cold war, fundamentally reshaping the British state to deliver for working people and their families, and taking on the blockers to get Britain building again”.The Labour party won the general election last July with a promise to kick-start growth, but Reeves has faced criticism over her October Budget, which left businesses bearing the brunt of £40bn in tax increases.Businesses have warned of job cuts as a result of the measures, which take effect from April. Paul Dales, economist at the consultancy Capital Economics, said January’s fall in output “highlights the weakness of the economy before the full effects of the rise in business taxes and the uncertain global backdrop is felt”.The Bank of England is expected to keep rates on hold at 4.5 per cent at its meeting next week amid signs of a rebound in inflation. Last month, the central bank cut its economic growth forecast for the first quarter of 2025 to 0.1 per cent, from the 0.4 per cent expected in November.Despite January’s contraction, Thiru said a rate cut by the BoE next week was “unlikely” as rate-setters would probably want to assess the impact of the increase in employers’ national insurance contributions from the Budget.Friday’s data cemented traders’ expectations that there will be at least two further quarter-point interest rate cuts from the BoE this year, with a small chance of a third, according to levels implied by swaps markets.According to Friday’s ONS data, the manufacturing sector contracted 1.1 per cent in January, with a 0.2 per cent decline in construction, while services grew 0.1 per cent. Liz McKeown, ONS director of economic statistics, said the overall picture for the UK economy was of “weak growth”. However, services continued to grow in January, she said, “led by a strong month for retail, especially food stores, as people ate and drank at home more”. The ONS said the publication of trade data, usually released alongside GDP figures, had been delayed due to errors. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US government’s tariff announcements have become a “big headache” for technology companies such as iPhone maker Apple and cloud service provider Amazon, their manufacturing partner Foxconn said on Friday, in a rare public admission of the disruption caused by President Donald Trump’s erratic trade policy.“The issue of tariffs is something that is giving the CEOs of our customers a big headache now,” chief executive Young Liu told investors on an earnings call. “Judging by the attitude and the approach we see the US government taking towards tariffs, it is very, very hard to predict how things will develop over the next year. So we can only concentrate on doing well what we can control.”Liu said the company’s customers were “one after another” hatching plans for co-operating with Foxconn on manufacturing in the US. He declined to give details as those plans were not yet finalised, but said there should be “more and more” manufacturing in the US.The world’s largest contract electronics manufacturer assembles the vast majority of the world’s iPhones for Apple and also makes a broad range of other electronics products, including laptops, servers, robots, medical equipment and electric vehicles.Foxconn itself is affected by Washington’s attempts to force more manufacturing to move onshore. The lion’s share of its manufacturing capacity is in China — recently hit by an additional 10 per cent US tariff — India and Vietnam, which are both likely targets for Trump’s planned reciprocal tariffs. Foxconn is also building what it said last October would be the world’s largest factory for Nvidia Blackwell servers in Mexico, where Trump has slapped a 25 per cent tariff on its exports to the US.Foxconn forecast its information and communication products business, dominated by its contract work for Apple, would be stable this year. “But under the uncertainties related to geopolitics and tariffs, manufacturing will face challenges and demand might also suffer,” Liu said, adding that the company would work closely with customers to adjust its global footprint.  But the Taiwanese group gave a bullish outlook for AI servers. The company’s server assembly revenue increased 78 per cent in the fourth quarter of 2024 compared with the same period a year earlier, and it said it expected the AI server business to more than double in the current quarter.Liu said he did not share concerns that cloud service providers might cut spending this year. He said the success of Chinese AI company DeepSeek in developing a large language model with smaller hardware investment was likely to encourage larger numbers of medium-sized companies to develop their own LLMs, further boosting server demand.Driven by that strong growth, cloud and networking products would account for half the company’s revenue this year, overtaking the consumer electronics business, which has long weighed on Foxconn’s margins with its low-margin smartphone assembly operations.Foxconn reported a surprise 13 per cent year-on-year drop in net profit for the fourth quarter. Net earnings slid to NT$46.3bn (US$1.4bn) in the three months to the end of December, but the decrease was due to a drop in non-operating income, while operating profit increased by 32 per cent. More

Men and women socialize at the end of the day outside The Castle Pub in London, United Kingdom.
Robert Nickelsberg | Getty Images News | Getty Images

The U.K.’s economy unexpectedly shrank by 0.1% month-on-month in January, official figures showed on Friday.
Britain’s Office for National Statistics said the fall was mainly due to a contraction in the production sector.

Economists polled by Reuters had expected the country’s GDP to grow by 0.1%.
At 7:35 a.m. in London, shortly after the data release, the British pound was down by around 0.15% against the dollar to trade at $1.293. Sterling was flat against the euro.
Meanwhile, long-term government borrowing costs, which spiked to multi-decade highs earlier this year, rose. The yield on 20-year U.K. government bonds — known as gilts — added 2 basis points, while 30-year gilt yields were up by 4 basis points.
Services output picked up by 0.1% month-on-month in January, but marked a slowdown from the 0.4% hike of December. Production output dropped by 0.9% on the month, after recording a 0.5% rise in the previous month. Monthly construction output meanwhile fell by another 0.2% in January, after also shedding 0.2% in December.
The U.K. economy grew by 0.1% in the fourth quarter, beating expectations, ONS data showed last month. It flatlined in the third quarter.

The monthly GDP data has been checkered since then, with a 0.1% contraction in October, a 0.1% expansion in November and a 0.4% month-on-month expansion in December thanks, to growth in services and production.
Friday’s GDP release will be the last data print before the U.K. Treasury’s “Spring Statement” on March 26, when Chancellor Rachel Reeves presents an update on her plans for the British economy.
The statement is released alongside economic forecasts from the Office for Budget Responsibility, the U.K.’s independent economic and fiscal forecaster, which gives its assessment on the likely impact of the government’s tax and spending plans.
There have been concerns that the Treasury’s fiscal plans, which were laid out last fall and which will increase the tax burden on British businesses, could weigh on investment, jobs and growth. Reeves has defended the tax rises, saying they’re a one-off measure and necessary to boost investment in public services.
The Bank of England made its first interest rate cut of the year in February, signaling further cuts were to come as it halved the U.K.’s growth forecast for 2025 from 1.5% to 0.75%.
Markets are widely expecting the Bank of England to hold rates steady at 4.5% at its Monetary Policy Committee meeting next week, LSEG data showed on Friday.
The central bank said it would judge how to balance the need to boost growth with the inflationary risk posed by U.S. President Donald Trump’s trade tariffs. The U.K. has not been specifically targeted so far, but its exports of steel and aluminum to the U.S. will fall under Trump’s blanket 25% import duties on the metals.
In a note on Friday, Paul Dales, chief U.K. economist at Capital Economics, said the data highlighted the weakness in the British economy before the impact of rising business taxes and geopolitical uncertainty had fully set in.
“Most of the weakness is just payback from the surprisingly strong 0.4% m/m rise in GDP in December,” he said. “In other words, December’s figures made the economy look stronger than it really was and January’s make it look a bit weaker. The truth is probably that the underlying pace of growth is a little bit above zero.”
He added that although U.S. President Donald Trump’s blanket tariffs on steel and aluminum had only come into effect this week, they could already have impacted the U.K. economy.
“The 1.1% m/m fall in manufacturing output was partly due to a 3.3% m/m drop in metals output,” he explained. “It’s possibly related [to tariffs] as they have been anticipated for a while.”
Speaking in parliament on Wednesday, Britain’s Prime Minister Keir Starmer told politicians he was hopeful the U.K. could still evade Trump’s protectionist trade policies.  
“I’m disappointed to see global tariffs in relation to steel and aluminium, but we will take a pragmatic approach,” he said. “We are negotiating an economic deal which covers and will include tariffs if we succeed, but we will keep all options on the table.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.BMW has warned that EU, US and China tariffs will cost it €1bn this year after its profits fell 36 per cent in 2024 and it warned earnings were expected to remain at a similar level in 2025. The German group, which also makes the Rolls-Royce and Mini, said on Friday that 2024 earnings before taxes fell to €11bn, compared with €17bn the previous year. This was in line with a profit warning in September after slowing sales in the lucrative Chinese market and a recall of 1.5mn cars sold in the past two years due to potentially faulty brakes.However, it added that earnings were not expected to recover this year and that tariffs enacted up to this week were likely to dent automotive margins by 1 percentage point.Duties targeting Chinese electric vehicle imports into the EU, Mexican imports into the US and US aluminium tariffs were behind BMW’s guidance that automotive margins this year were expected to be in the range of 5 to 7 per cent, compared with 6.3 per cent last year.It added that the impact of any potential future tariffs — the US has threatened duties on cars imported from Europe — had not been included in the guidance. BMW is one of several western carmakers that has been hurt by EU tariffs on EV imports from China. Its electric Mini Cooper, for example, is produced in China and is subject to import duties of 20.7 per cent.US President Donald Trump has granted the car industry a 30-day reprieve on tariffs on goods from Mexico and Canada. But BMW is not part of the exemption because its cars are not compliant with the terms of a 2020 trade deal between the US, Canada and Mexico.The company said it had been hardest hit by tariffs from the EU targeting China and US tariffs against Mexico, with each of these hitting BMW by a “mid triple-digit million amount”. US tariffs on aluminium had cost the company a “high double-digit million” figure. Tariffs on trade between the US and China cost it a “low triple-digit million”.Chief executive Oliver Zipse on Friday said Germany and the US were BMW’s main export hubs. The company’s plant in Spartanburg, South Carolina — BMW’s largest globally — last year exported cars worth €10bn, he said, while 56 per cent of the 1mn cars produced in Germany last year were shipped beyond the EU.“We do hope that soon everyone will notice that there are no winners in such a situation,” Zipse said. BMW’s figures for the fourth quarter showed net profit of €1.5bn, a 41 per cent fall on a year earlier.Its share price, which has dropped more than a fifth in the past year, was down more than 2 per cent on Friday morning. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereToday’s agenda: Tesla’s tariff warning; DeepSeek’s strategy; Deutsche Bank weighs Canary Wharf exit; Big Read on the Olympics; and gold’s triangular tradeGood morning. We end the week with the latest on Ukraine and the US proposal for a 30-day ceasefire with Russia ahead of a busy weekend of diplomacy.What Putin wants: Vladimir Putin has said he “supports the idea” behind the US plan but added that it will allow Ukraine’s forces to regroup just as Russia’s military is gaining the upper hand in Kursk. His preconditions include Ukraine recognising Russia’s annexation of four partially occupied regions and Crimea; a pledge to never join Nato; caps on Ukraine’s military; protections for the country’s Russian speakers; and elections to replace Volodymyr Zelenskyy.What this means: Moscow’s demands would in effect end Ukraine’s existence as a functioning state, place it squarely in Russia’s orbit and severely limit Nato’s presence east of Germany. One expert said Putin did not want to be blamed for standing in the way of Donald Trump’s deal but felt no pressure to “back off”, adding: “They want to play a game of chicken with the US.”Looking ahead: Trump called Putin’s remarks “promising” but “incomplete” and said he had discussed with Ukraine “land that would be kept and lost”, apparently referring to territorial concessions by Kyiv. The US president’s special envoy Steve Witkoff is currently in Moscow for high-level talks, while Sir Keir Starmer’s adviser Jonathan Powell will be in Washington today to urge the US to provide a security “backstop”. The UK prime minister will hold a virtual call with EU and other leaders tomorrow.Here’s more on the tough conditions Putin has set for a Ukraine ceasefire.Kursk: Seven months after a daring invasion to capture the Russian region, Ukrainian troops are now beating a hasty retreat. Russian sanctions: Hungary has threatened to block the EU’s renewal of sanctions imposed on about 2,000 Russians unless oligarch Mikhail Fridman is removed from the list.Here’s what else we’re watching today and over the weekend:Economic data: The EU releases fourth-quarter labour data today, Germany has its February consumer price index and the UK reports its GDP estimate for January.US government shutdown: Chuck Schumer, the top Senate Democrat, said he would back a Republican stop-gap funding bill, reducing the risk of a shutdown early tomorrow.Results: Allianz, BMW and Foxconn report.Join FT experts on March 27 for a subscriber-only webinar, as they discuss Ukraine’s future with Russia’s full-scale invasion entering its fourth year. Register for free.Five more top stories1. Tesla has warned that Donald Trump’s trade war could make it a target for retaliatory tariffs and increase the cost of producing vehicles in America. In an unsigned letter to US trade representative Jamieson Greer, Elon Musk’s carmaker said it “supports” fair trade but warned that US exporters were “exposed to disproportionate impacts when other countries respond to US trade actions”.2. Exclusive: China’s DeepSeek is choosing to focus on research over chasing revenues as its billionaire founder decides not to follow Silicon Valley rivals by taking advantage of a sudden jump in sales. A surge in demand for the artificial intelligence start-up’s services meant revenues were enough to cover ongoing costs for the first time last month.3. Exclusive: Deutsche Bank could leave Canary Wharf or shed a third of its space when its lease expires in 2028. The German lender has maintained an outpost in the east London financial district for nearly a decade, but the shift would mark the latest financial services tenant to retreat from the area.4. Neither investors nor management of Shein have raised concerns about the company’s valuation, its executive chair has insisted. While the fast-fashion retailer was most recently valued at $66bn, some stakeholders want to cut that to $30bn to speed up its blockbuster London listing. But Donald Tang told the Financial Times there had been “zero conversations” among its management about doing so.5. The US has unlocked almost $5bn in funding for a liquefied natural gas project by France’s TotalEnergies in Mozambique, potentially restarting work on one of Africa’s largest energy investments. The company put the project on hold in 2021 after Islamist insurgents killed civilians and workers in attacks near the site. Here’s why the Trump administration has reapproved the loan.How well did you keep up with the news this week? Take our quiz.The Big Read© Fabrizio Bensch/ReutersOn the face of it, the Olympics are riding high after the success of Paris 2024, which attracted a surge in viewership and revitalised a brand many feared was losing relevance with younger audiences. But as the organising committee chooses a new president next week, the world’s biggest sporting event is facing an exodus of major sponsors and a fast-changing media landscape.We’re also reading . . . Romanian politics: The country’s authorities need to release more evidence on why far-right candidate Călin Georgescu was blocked from elections, writes our editorial board.Simon Sadler: Once a heavyweight in Hong Kong finance, the Blackpool FC owner now faces the possibility of jail. Kaye Wiggins goes inside the downfall of a trading titan.Peak brain power: Data across countries and ages reveal a growing struggle to concentrate and declining verbal and numerical reasoning, writes John Burn-Murdoch.Trump’s tariffs: Levies on goods may be a prelude to tariffs on money, writes Gillian Tett, with capital inflows a possible next target.Graphic of the dayFears of possible tariffs on gold imports have sparked a rush in transatlantic trade of the metal. But due to a quirk in global bullion markets and the asset’s physical nature, refineries in Switzerland are working overtime, resizing the 1kg bars used in New York to the 12.5kg bricks traded in London. Here’s how the time-consuming process of shipping gold has become strained.Take a break from the news . . . After 13 years of reviewing restaurants, Tim Hayward is questioning his own tastes and prejudices in his final critique. Restaurants have brought new menu items and exciting ideas, but one thing always stuck out. Now, he finally explains himself.© Simon BaillyRecommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThis month, many investors feel dazed and confused. No wonder: as the US government flirts with another shutdown and President Donald Trump intensifies his trade war, indices of economic uncertainty have skyrocketed above even the 2020 pandemic or the global financial crisis of 2008. But the uncertainty could get worse. For amid all the tariff shocks, there is another question hovering: could Trump’s assault on free trade lead to attacks on free capital flows too? Might tariffs on goods be a prelude to tariffs on money? Until recently, the notion would have seemed crazy. After all, most western economists have long seen capital inflows as a good thing for America, since they have helped to fund its $36tn national debt and business. For instance, Elon Musk, Trump’s adviser, has benefited from Chinese investment, some of which is private.But some maverick economists, such as Michael Pettis, have long dissented from this orthodox view. Pettis sees these capital inflows as not “just” the inevitable, and beneficial, corollary of America’s trade deficit, but as a debilitating curse. That is because inflows boost the dollar’s value, foster excessive financialisation and hollow out America’s industrial base, he says, meaning that “capital has become the tail that wags the dog of trade”, driving deficits. Pettis wants curbs, like taxes, therefore. And six years ago, Democratic senator Tammy Baldwin and Josh Hawley, her Republican counterpart, issued a congressional bill, the Competitive Dollar for Jobs and Prosperity Act, which called for taxes on capital inflows and a Federal Reserve weak-dollar policy.The bill seemed to die. But last month American Compass, a conservative think-tank close to vice-president JD Vance, declared that taxes on capital inflows could raise $2tn over the next decade. Then the White House issued an “America First Investment Policy” executive order that pledged to “review whether to suspend or terminate” a 1984 treaty that, among other things, removed a prior 30 per cent tax on Chinese capital inflows. This did not grab headlines, since Trump was “flooding the zone” with other distractions, notably on tariffs. But it spooked Asian observers and probably contributed to recent US stock market falls, as some investors preemptively flee. In reality, a tax shift might not happen — or affect anyone other than the Chinese. Trump is (in)famously mercurial, which makes predicting future policy hard, particularly since his entourage is split into at least three warring factions: nationalist populists (such as Stephen Bannon), techno-libertarians (like Musk) and pro-Maga congressional Republicans. The last two factions might fight capital curbs, due to concerns about destabilising Treasury markets. But Trump is also eager to use all available tools to bolster his leverage on the world stage. And Pettis’s ideas seem to be influential among some advisers, such as Treasury secretary Scott Bessent, Stephen Miran, the chair of the Council of Economic Advisers, and Vance. This trio appears minded to reset global trade and finance, via a putative Mar-a-Lago accord, although their ambitions are on a grander scale than the 1985 Plaza accord. The latter “merely” weakened the dollar via joint currency intervention but Miran’s vision of a Mar-a-Lago accord includes a possible US debt restructuring too, which would force some holders of Treasuries to swap them for perpetual bonds. Some well-connected financial analysts, like Michael McNair, also expect to see a sovereign wealth fund, backed by America’s gold reserves, that would buy non-dollar assets to balance capital inflows (like, say, Greenland’s resources). A third idea is imposing taxes on capital inflows in a wider sense. This might become the preferred approach if the idea of debt swaps leaves rating agencies threatening to downgrade US debt. “[The trio’s] ultimate goal isn’t a series of bilateral [trade] deals but a fundamental restructuring of the rules governing global trade and finance [to remove] distorted capital flows,” says McNair. “Whether this approach succeeds remains to be seen, but the strategy itself is more coherent and far-reaching than most observers recognise.”Let me stress that I am not endorsing this, nor predicting with any confidence it truly will happen. And it must be noted that Pettis’s theories provoke outrage among many mainstream economists. But Pettis is unrepentant. And critics should also note that the 2019 Baldwin-Hawley bill was not only applauded by conservative groups like American Compass, but some union voices too. Since it has populist appeal, it might yet fly. Either way, the key point to understand is that a shift in economic philosophy is emerging that is potentially as profound as the rethinking unleashed by John Maynard Keynes after the second world war or that pushed by neoliberals in the 1980s. As Greg Jensen of the Bridgewater hedge fund recently quipped, paraphrasing Milton Friedman: “We are all mercantilists now.” Don’t expect that to be reversed any time soon.gillian.tett@ft.com More

The US Treasury secretary this month insisted Donald Trump had not changed America’s long-standing “strong dollar” policy. But investors have been puzzling over the president’s aims for the currency as some of his allies tout the benefits of a softer greenback for manufacturers.Many global currencies have recently appreciated against the dollar, but that is not by design. The foreign exchange movements reflect the expectation that the new administration’s radical economic agenda will weaken growth.With Trump still intent on turning the US into a manufacturing export powerhouse regardless of the short-term economic pain, investors have wondered if the administration might ever turn to a radical currency proposal known as the “Mar-a-Lago Accord” — though prospects of it being put into practice are remote.Why is the dollar in focus? Before winning his second term, Trump last year said he thought dollar strength against the Japanese yen and Chinese renminbi had been a “tremendous burden” on US industry and an obstacle to America becoming a “production economy”. JD Vance, now vice-president, had previously argued that while the greenback had been “great for American purchasing power”, that had come at a cost to US manufacturing. By historical standards, the dollar is strong.In the months after the election, it reached its highest level, against a basket of trading currencies including the euro and pound since 2022 and on a trade-weighted basis against a broader group, its highest in decades. The dollar’s gains were triggered in part by anticipation of higher tariffs, which were expected to stoke inflation and make it harder for the Federal Reserve to cut interest rates.But in recent months, concerns over a potential US recession have reversed some of those bets and weakened the currency as investors have priced in more cuts.What about the ‘strong dollar’ policy? Talk in Trump’s orbit about an overvalued dollar has prompted investors to ask whether the administration can back away from a “strong dollar” stance, in place since the Clinton administration. Treasury secretary Scott Bessent insisted in an interview with CNBC last week that the president was “committed to the policies that will lead to a strong dollar”. However, Bessent also decried countries that sought to engineer a bilateral weakening of their currencies against the US. Asked on Thursday about recent declines in the dollar, Bessent described the moves as a “natural” adjustment.Where does talk of a Mar-a-Lago Accord come from? The idea — touted by Stephen Miran, chair of Trump’s Council of Economic Advisers, in November — takes its name from the Plaza Accord, signed in 1985 in the New York hotel Trump later owned, to help bring an over-mighty dollar back down to earth.The Plaza Accord brought the US, France, Germany, Japan and the UK together to weaken the American currency. Forty years on, Miran believes a repeat is needed to correct a “persistent dollar overvaluation that prevents the balancing of international trade”. At the same time, Washington still wants the dollar to retain its role as an international reserve currency — a privilege that enables the government to pay relatively low interest rates on its debt. As part of the accord, foreign governments would be pushed into agreeing to increase the duration of their Treasury reserves, in exchange for remaining under what Miran refers to as the US’s “defence umbrella” and avoiding punitive tariffs. The paper has come under increasing scrutiny amid a climate of uncertainty, triggered by Trump proving far more aggressive on tariffs than many investors had anticipated. Steve Hanke, an economics professor and adviser in the Reagan White House, said: “It’s definitely in the wind, there’s no question about it.”How are markets reacting? Investors have struggled to position for the impact of a Mar-a-Lago Accord — if one is ever realistically put forward — in part because of uncertainty over what policies are being considered. “The problem for the new administration is that it simultaneously wants a weaker dollar, a reduced trade deficit, capital inflows and the [dollar] to remain the key currency in international reserves and payments,” said Standard Chartered’s Steven Englander in a note last month.Sonal Desai, chief investment officer for fixed income at Franklin Templeton, also highlighted the “internal inconsistency” in wanting a weak dollar and imposing tariffs that are likely to have the opposite effect. The mounting risk of a US slowdown — and the potential for that to lead to more aggressive interest rate cuts from the Fed — has opened the door for Trump to get a weaker dollar while continuing with his trade war. Traders are now pricing in two quarter-point cuts by the Fed by the end of the year, with a very high probability of a third. That compares with the one or two predicted before Trump returned to office. The dollar’s weakness has left some people wondering whether something deeper is going on. Deutsche Bank’s George Saravelos questioned last week whether we were witnessing the “potential loss of the dollar’s safe haven status”.Could the US do a deal on the dollar? Economists are sceptical. Adam Posen, director of the Peterson Institute for International Economics, noted that the Plaza Accord was struck with a small group of states, most importantly Japan and Germany, which were dependent on the US for security. “Now, [in 2025] you would be dealing with China, the Middle East and half a dozen or more east Asian economies, most of whom are not direct military allies of the US,” Posen said. “They’re extremely big hurdles.”Michael Strain, at the American Enterprise Institute, argued that the idea of an “accord” was “implausible on its face”. “Europe is not going to rejigger its savings and investments balance or take other sorts of big macroeconomic steps in order to revalue its currency just because the Trump administration wants it to,” he said. “I’m pretty confident in saying this is not a real thing and is not going to happen.” Hanke said that, while shifting exchange rates might alter the contribution of various countries to the trade balance, it “won’t affect the overall deficit”. Tinkering with the Treasuries market would also take the government into dangerous terrain. The nearly $30tn market is the bedrock of global finance, underpins the dollar’s role as the world’s de facto reserve currency and affords the US flexibility in its public finances. One of the proposals Miran discusses — that countries hand over their current holdings of US government debt in return for century bonds — can be seen by rating agencies as a technical default. Such an event would be so dramatic that the impact would be nearly impossible to predict. Connor Fitzgerald, a fixed-income fund manager at Wellington Management, said: “It’s so out of the box that there’s not really a precedent for it.”Data visualisation by Keith Fray More