Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the world“Stock vigilantes” is a term that only recently entered the markets vernacular. It is time to retire it again equally swiftly.It refers to the idea that if the going gets tough, and US stock markets tumble in value, Donald Trump will sit up, take notice, and reverse some of his more aggressive policies. Typically, this is a task left to the bond market, but here we have a president who basked in the reflected glory of upbeat stock markets in his first term. Surely this sensitivity cuts both ways? Investors and analysts certainly assumed so. (Full disclosure: so did I.)This notion had its first trial run in Trump 2.0 in February, when Trump declared he was serious about slapping hefty trade tariffs on supposed friends and neighbours in Canada and Mexico. Alas, stock vigilantes were found lacking. Stocks did stumble, but far too mildly to ring any alarms in the Oval Office. That left the president and his administration free to double down, not back down. Stronger vigilance was required, it seemed.One month later, and markets are clearly in a more pronounced tizz, with US stocks briefly entering so-called correction territory — down a tenth from their most recent high. Whether they have further to fall or not is, of course, a matter of opinion. Ask two analysts, get at least three answers.Either way, even at this point, the scale of the rethink on the US among money managers is quite extraordinary. In its latest monthly survey of fund managers around the world, released on Tuesday, Bank of America found the biggest swing out of the US on record. A net quarter of the fund managers surveyed said they were now underweight in US stocks — holding a smaller allocation than global benchmarks would suggest, a shift lower of some 40 percentage points from the previous survey. Nearly 70 per cent of investors say the much-vaunted concept of “American exceptionalism” has now peaked. Investors are in a foul mood. The bank’s survey also found the second-biggest rise in levels of pessimism — those saying they expected the global economy to weaken — since its records began in 1994. For context, the biggest increase was five years ago, in the teeth of the global Covid lockdowns.This is more like it — an unambiguous message from Wall Street to the president that his constant flip-flopping over tariffs and what we might euphemistically call his geopolitical realignment are a black mark against a stock market that has led the world for as long as most fund managers can recall.Again, though, Team Trump claims to be unruffled. In fact, it is turning the whole idea on its head, seeking to convince the world that this is what they wanted all along — an astringent, purifying reset in markets that is a necessary step to Make America Great Again. I missed this from the campaign trail, too.Treasury secretary Scott Bessent, the very same man who declared last year that “Kamala Harris will start with a Kamala crash in the stock market, and then it will be the Kamala crash in the economy”, is now saying he is “not at all” worried about the “healthy” correction that has been running of late. Commerce secretary Howard Lutnick echoed that, noting earlier this month that the performance of the stock market is not the “driving force” behind the president’s tariff policy.As analysts at Barclays diplomatically put it, “Trump and his administration have expressed more tolerance for adverse economic fallout from tariffs than we had expected.” Those waiting for a “put” here — the point in the market at which the president has a change of heart and backtracks — are creeping to the horrible realisation that they got this wrong. “Where has the put gone?” asked the multi-asset team at HSBC.To bring it back in play, they said, one of a few things needs to happen: a lasting seize-up in the flow of fresh public debt or equity into the world; an outbreak of stress in the deepest plumbing of the financial system; or a global and disorderly collapse in risky assets. None of these is happening yet — the drop in US stocks has not fully infected Europe, for example, and the market moves have been orderly, if unpleasant.One related item to add to that list is a bond shock. Right now, Treasuries are broadly calm and in balance — supported by the rising chance of a US economic slowdown but also held down by lingering concerns over fiscal incontinence and nascent worries over the dollar’s reserve-currency status. If something were to break in either direction there, the administration would be more likely to respond. Bond vigilantes — the original and best — still beat their newbie counterparts in stocks any day of the [email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Beijing is delaying approval for carmaker BYD to build a plant in Mexico amid concerns that the smart car technology developed by China’s biggest electric-vehicle maker could leak across the border to the US.BYD first announced plans for a car plant in Mexico in 2023, along with intentions to make cars in Brazil, Hungary and Indonesia. It said the Mexican plant would create 10,000 jobs and produce 150,000 vehicles a year.But domestic automakers require approval from China’s commerce ministry to manufacture overseas and it has yet to give approval, according to two people familiar with the matter.Authorities fear Mexico would gain unrestricted access to BYD’s advanced technology and knowhow, they said, even possibly allowing US access to it. “The commerce ministry’s biggest concern is Mexico’s proximity to the US,” said one of the people.Beijing is also giving preference to projects in countries that are part of China’s Belt and Road infrastructure development programme, according to the people.Shifting geopolitical dynamics have also contributed to Mexico cooling on the plant. Mexico has sought to maintain relations with Donald Trump, who has put tariffs on cross-border trade, threatening exports and jobs.Trump has also launched a trade war with Beijing, imposing tariffs on imports from China. Beijing retaliated by slapping tariffs on roughly $22bn in US goods, aimed mainly at America’s farming sector.Trump’s team has accused Mexico of being a “backdoor” for Chinese goods to enter the US duty-free through the North American Free Trade Agreement. The Mexican government denies this but has responded to US pressure by placing tariffs on Chinese textiles and launching anti-dumping investigations into steel and aluminium products originating from China.“Mexico’s new government has taken a hostile attitude towards Chinese companies, making the situation even more challenging for BYD,” said the second person.In November, shortly after Trump’s re-election, Mexico’s President Claudia Sheinbaum said there was still no “firm” investment proposal from any Chinese company to set up in Mexico, despite BYD having reaffirmed its intent to invest $1bn earlier that month.“The Mexican government obviously would like to get some of the investments [from China], but [its] trading relationship with the US is a lot more important,” said Gregor Sebastian, a senior analyst at US-based consultancy Rhodium Group. It doesn’t “make business sense” for BYD to hasten the construction of a production facility in Mexico at the moment, Sebastian added, pointing out that the lack of a robust automotive supply chain would force BYD to import numerous components from China, subjecting them to higher tariffs.When asked whether US tariffs and Mexico’s tougher stance on China had stalled the company’s plans, Stella Li, executive vice-president at BYD, said that it had “not decided [on] the Mexico facility yet”.“Every day is different news, so we just have to do our job,” said Li in a recent interview with the FT. “More study has to be done on how we can satisfy and improve to deliver the best result to everybody.”In February last year, Li had said they would select a location for the factory by the end of 2024.BYD reported sales of more than 40,000 vehicles in Mexico last year. It has said it wants to double sales volume and open 30 new dealerships in the country in 2025. Mexico’s economy ministry said it had no further comment beyond Sheinbaum’s previous remarks. BYD and China’s commerce ministry did not respond to a request for comment.BYD sold 4.3mn EVs and hybrids globally in 2024 and unveiled its “God’s Eye” advanced driving system in February, with plans to install it on its entire model line-up.Earlier this month, Tesla’s main rival raised $5.6bn in a Hong Kong share sale, with the proceeds expected to help fuel its overseas expansion. But it has suffered a setback with its $1bn development in Brazil, which was delayed in December when the authorities halted construction over workers being subject to “slavery”-like conditions. BYD subsequently fired a Chinese subcontractor. More

U.S. Vice President JD Vance (C) exits the Oval Office in the opposite direction as U.S. President Donald Trump and Elon Musk (R) walk away before departing the White House on March 14, 2025.
Roberto Schmidt | Afp | Getty Images

The UCLA Anderson Forecast, citing substantial changes to the economy from policies of the Trump administration, issued its first-ever “recession watch” on Tuesday.
UCLA Anderson, which has been issuing forecasts since 1952, said the administration’s tariff and immigration policies and plans to reduce the federal workforce could combine to cause the economy to contract. 

Its analysis was titled, “Trump Policies, If Fully Enacted, Promise a Recession.”
“While there are no signs of a recession happening yet, it is entirely possible that one could form in the near term,” stated a news release from the forecaster. 
U.S. recessions are only officially declared by the Business Cycle Dating Committee of the National Bureau of Economic Research. The committee employs a variety of indicators, including production, employment, income and growth to determine if the economy is contracting. At the moment, none of the specific indicators look to be near levels that would prompt the committee to declare recession. 
The average respondent to the CNBC Fed Survey for March, published Tuesday, forecast a 36% recession probability in the next year, up from 23% in the prior month. But it remains well below the 50% level that prevailed from 2022 and 2023 in the wake of the pandemic and turned out to be wrong. That shows how difficult it is to predict a recession, or even determine if the economy is in one. The Fed Survey also shows that a recession is not the base case for most Wall Street forecasters, only that the concern is somewhat elevated.
Recessions occur when multiple sectors of the economy contract at the same time. The UCLA Anderson Forecast said reductions to the workforce from the administration’s immigration policies could create labor shortages, tariffs will raise prices and could lead to a contraction in the manufacturing sector while changes to federal spending will reduce employment for government workers and private contractors.

“If these and their consequent feedback into the demand for goods and services occur simultaneously, they create a recipe for a recession,” the statement from the forecaster said. 

‘Stagflationary’

Administration officials, from the President to his top economic lieutenants, have not specifically pushed back against the possibility of recession from their policies. President Trump has said there would be a “period of transition,” while the Commerce Secretary had said a recession will be “worth it” for the gains that will eventually come from the policies.
Recessions are often the result of unexpected shocks to the economy. The surge in optimism following the election of President Trump, followed by the recent sharp drop off in some surveys, suggest that both businesses and consumers were unprepared for the extent and even the nature of some of the policies now being pursued. 
On timing, the UCLA Anderson Forecast would only say a recession could develop in the next year or two. Its report said: “Weaknesses are beginning to emerge in households’ spending patterns. And the financial sector, with elevated asset valuations and newly introduced areas of risk, is primed to amplify any downturn. What’s more, the recession could end up being stagflationary.” More

Fed officials at this week’s meeting are expected to hold interest rates steady but adjust their views on the economy and possibly the future path of interest rates.
The committee could maintain its outlook for two cuts, remove one or both, or, improbably, add another as a statement of concern over a potential slowdown. Everything seems to be on the table.
Chair Jerome Powell and his colleagues in recent weeks have advocated a patient approach in which they don’t need to be in a hurry to do anything.

U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” at Capitol Hill in Washington, U.S., Feb. 11, 2025. 
Craig Hudson | Reuters

Federal Reserve officials at this week’s meeting are expected to hold interest rates steady but adjust their views on the economy and possibly the future path for interest rates.
If market pricing is correct, there’s virtually no chance central bank policymakers budge from the current level of their key interest rate, targeted in a range between 4.25%-4.5%. Chair Jerome Powell and his colleagues in recent weeks have advocated a patient approach in which they don’t need to be in a hurry to do anything.

However, they are also expected to drop clues about where things go from here against the uncertain backdrop of President Donald Trump’s trade and fiscal policies. That could include anything from tweaks in projections for inflation and economic growth to how often, if at all, they expect to lower interest rates further.
“There’s no chance of a cut Wednesday, so all the other stuff becomes more important,” said Dan North, senior economist at Allianz Trade North America. “They’re basically going to say, ‘You know what, we are in no hurry at all now.'”
Indeed, that has been the prevailing message from Powell and his Federal Open Market Committee colleagues. In a speech earlier this month to economists in New York, Powell insisted “there is no need to be in a hurry” as central bankers seek “greater clarity” on where the Trump administration is headed.
New outlook for GDP, inflation, unemployment
The public, then, will be left to pore through updates the Fed makes to its quarterly projections on interest rates, gross domestic product, unemployment and inflation. Based on recent data, the Fed could raise its 2025 outlook for inflation (in December, the outlook was for 2.5% in both core and headline) while lowering its GDP projection (from 2.1%). Powell will host his usual post-meeting news conference.
On the rate question, the Federal Open Market Committee will use its “dot plot” grid of individual members’ intentions.

There’s significant disagreement on what could happen there. The committee could maintain its December outlook for two cuts, remove one or both, or, improbably, add another as a statement of concern over a potential slowdown. Everything seems to be on the table.

“I think it may be one or zero cuts this year, particularly if the tariffs stick,” North said. “I don’t think they’re going to try and bail out the economy by cutting rates, because they know that if they stoke inflation, they’re going to have to go back and start all over again.”
Economists worry the Trump tariffs could reignite inflation, particularly if the president gets more aggressive after the White House releases a global review of the tariff situation on April 2. If the Fed grows more concerned about tariff-fueled inflation, it could turn even more reluctant to cut.
Investors are right to be concerned about the direction the FOMC indicates, said Thierry Wizman, global FX and rates strategist at Macquarie.
“That worry is borne by the suspicion the Fed is not ‘in charge’ anymore, having relinquished control of macroeconomic policy to the Trump administration,” Wizman wrote. “Given the current uncertainty, and the recent increase in inflation expectations, the Fed may find it difficult to signal three more rate cuts, or even two more. It could push one rate cut into 2026, leaving only one cut in the median ‘dot’ for 2025.”
Markets still see two or three cuts
Should the Fed decide to stick with two cuts, it likely will be only “to avoid adding to recent market turbulence,” Goldman Sachs economist David Mericle said in a note.
Major stock market averages are hovering around correction territory, or 10% declines from highs.
In the past, under the idea of a “Fed put,” markets have come to expect the central bank to ease policy in response to market unrest. Traders don’t expect an initial rate reduction to happen until at least June, and are pricing in one additional quarter percentage point easing and about a 50-50 chance of a third move by the end of the year, according to the CME Group’s FedWatch measure of fed funds futures pricing.
But that might even be too ambitious, Wizman said.
“In effect, markets appear to have gotten too dovish on the Fed, and instead of signaling its own confidence in its outlook, the Fed may issue signals of no-confidence, instead. In other words, the FOMC meeting may leave many questions unanswered, as will the press conference by Jay Powell,” he said, using Powell’s nickname.
The committee also could address its “quantitative tightening” program where it is allowing a set level of proceeds from maturing bonds to roll off the balance sheet each month. Markets widely expect the Fed to end the program later this year, and recent meetings have featured discussion about how best to handle the central bank’s $6.4 trillion portfolio of Treasurys and mortgage-backed securities. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUS stocks dropped sharply on Tuesday with shares in technology groups including Elon Musk’s Tesla selling off as investors continued fretting over President Donald Trump’s economic and trade policies.The blue-chip S&P 500 ended the session 1.1 per cent lower, with nine of the index’s 11 sectors in negative territory and consumer cyclicals, which tend to fall during times of rising worries over the economy, posting some of the steepest declines.The tech-heavy Nasdaq Composite dropped 1.7 per cent, erasing Monday’s rally. Tesla slumped 5.3 per cent — extending a recent decline that has brought it down by half from its December peak — and Nvidia lost 3.4 per.The declines are the latest sign of how investors remain deeply concerned over Trump’s tariffs on America’s biggest trading partners, and their potential to slow growth and increase inflation. A Bank of America survey released on Tuesday showed investors made the “biggest-ever” cut to their US equity allocations in March.A New York Federal Reserve survey of business leaders, released on Tuesday, showed that the region’s business environment was “considerably worse than normal” as employment declined and input prices for industry increased at the swiftest pace in almost two years.A separate Fed report showed that US industrial production rose 0.7 per cent in February, far more than the 0.2 per cent increase expected by analysts. The reading should “sooth concerns that the [US] economy is on the cusp of recession”, said Bradley Saunders at Capital Economics.He warned, however, that “the drag” from Trump’s aggressive tariffs has “yet to properly take effect”, meaning there was “downside to come for [US] industry over the coming months”.Previously high-flying tech stocks have fallen more than most as investors have shifted away from riskier holdings, with an index tracking the so-called Magnificent Seven of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla down 17 per cent since the S&P 500 hit a record high on February 19.Traders were also bracing for the outcome of the latest Federal Reserve meeting on Wednesday. While investors are widely expecting the central bank to leave interest rates unchanged, any hints from Fed chair Jay Powell on the health of the world’s largest economy will be closely watched.The dollar fell 0.1 per cent against a basket of rivals. The currency had already erased all its gains since November’s US presidential election. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldLeading academic economists are fretting not just about what the Trump administration’s policies might to do US growth and inflation. More than 90 per cent of respondents to the latest FT-Chicago Booth poll said they were very or a little worried, too, about the quality of America’s economic statistics. Concerns have mounted after an influential advisory council — the Federal Economic Statistics Advisory Committee (Fesac) — was disbanded. With thousands of pages of US government data also being altered or removed from websites, not just economists but scientists, researchers and rights campaigners are alarmed by what they see as an incipient White House war on data. Fesac, which for 25 years advised offices compiling inflation, employment and GDP data, is among five advisory councils to federal statistical agencies that were terminated by commerce secretary Howard Lutnick on February 28. A second advised on other economic data; three advised the US Census Bureau. Since they were involved in improving accuracy and effectiveness of data collection and analysis, including adapting to new trends and technology, Lutnick’s claim that their purpose had been “fulfilled” makes little sense.Lutnick also unsettled many economists when he suggested — after being asked whether spending cuts imposed by Elon Musk’s so-called Department of Government Efficiency could cause a downturn — that government spending could be separated from GDP reports. Musk, too, has said GDP would be more accurate if government spending were removed, in a departure from economic theory and international practice.Since Donald Trump returned to the White House, meanwhile, multiple data sets — on climate, crime, natural disasters, and diversity, equity and inclusion — have disappeared from federal websites. Some were deleted or modified due to directives, for example on gender ideology and orders to remove statistics on climate change. Some have fallen victim to Doge-led cuts. Some have been restored, for now, after legal rulings.Trump is not the first US president to dispute some official data or be accused of trying to skew it in his favour; some critics worry less about the extent of changes so far than about what they might portend. But this administration’s interventions already go beyond those of most predecessors. Reliable statistics are, moreover, a public good and vital national asset. The US was a pioneer of modern economic statistics, under the economist Simon Kuznets, in the 1930s and 1940s.Effective policymaking, by government agencies and central banks, as well as decision-making by investors and businesses, relies on accurate and timely data. Trustworthy statistics are vital, too, for experts and the public to assess governments’ performance.Indeed, Doge’s cost-cutting efforts might yet backfire, in a specific way. Reducing government spending is seen, in part, as a route to lowering borrowing costs. But if it reduces trust in economic data, it could raise the risk premia investors demand for buying US bonds. Attempts to curb official data tend to be associated less with democracies like the US than with authoritarian countries such as China under Xi Jinping.Some data that could prove uncomfortable for the Trump team, such as consumer confidence indices, remain beyond its control. Private sector and big tech companies could provide some substitutes for official statistics, but would not necessarily enjoy the trust previously conferred by a government imprimatur. Though economists are signalling unease on data, many investors seem more sanguine. Yet as with much else, how far the White House is willing to go may depend in part on how vocal companies and investors are prepared to be about their concerns. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The pound has climbed above $1.30 for the first time since early November, helped by persistent UK inflation and a broad weakening in the dollar.Sterling rose above the level on Tuesday for the first time since the days after the US election. It has climbed around 3 per cent so far this month, helped by a decline in the dollar as investors worry that President Donald Trump’s stop-start trade war is harming the US economy. Sterling’s gains mark a reversal since January, when concerns over the outlook for the UK’s public finances knocked the currency and UK government bonds. Since then, higher than expected inflation has prompted bets that the Bank of England would be slower to cut interest rates than previously thought.“The pound is along for the ride, as it has better interest rates support . . . UK fiscal concerns are still out there but on the back burner for now,” said Brad Bechtel, a global head of FX at Jefferies. After hitting a two-year high following the US election, as investors bet that Trump’s tariffs and other economic policies would boost inflation, the dollar has fallen sharply since January as investors focus more on the potential economic damage from erratic policymaking in the White House.“It sends another reminder that market participants are no longer confident that President Trump’s policies will boost US growth and strengthen the US dollar,” said Lee Hardman, senior currency analyst at MUFG. Craig Inches, head of rates and cash at Royal London Asset Management, said sterling’s strength was a combination of a “fear of US slowdown leading to more Fed cuts” versus an expected uptick in UK inflation data that will make it harder for the BoE to cut borrowing costs. In January, inflation rose more than expected to 3 per cent.The BoE is widely expected to hold interest rates steady at 4.5 per cent at its meeting on Thursday. Levels in swap markets suggest traders believe the BoE and the Federal Reserve will make two further quarter-point cuts this year, with the Fed more likely to make a third.The upward move for sterling comes despite the OECD this week lowering its growth forecast for the UK, as countries around the world are hit by the fallout from US tariffs. The Paris-based body now expects UK GDP growth for 2025 to be 1.4 per cent, a 0.3 percentage point reduction from its previous calculation.But the pound has weathered trade concerns this year, as investors bet the UK is less exposed to tariffs than some other economies. Last week, UK Prime Minister Sir Keir Starmer said he was “disappointed” by the US’s latest tariff salvo on steel and aluminium, but that the country would keep “all options on table” in terms of a response to the US administration. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump’s chaotic trade policy can only lead to economic chaos. So, might the Trump administration stumble upon something both more coherent and less damaging, yet still meet the president’s protectionist aims? Perhaps. Some members, including Scott Bessent, Treasury secretary, and Stephen Miran, chair of the Council of Economic Advisers, believe so. If one is to understand this more sophisticated approach, one should read Miran’s “A User’s Guide to Restructuring the Global Trading System”, published in November 2024. The author states that “this essay is not policy advocacy”. But if it quacks like a duck, it is a duck. From a man in his current position, this must now be read as advocacy.Underpinning Miran’s argument is a proposition made by the Belgian economist Robert Triffin in the early 1960s. Triffin argued that the growing demand for dollars as a reserve asset could only be supplied by persistent US current account deficits. This in turn meant that the dollar was persistently overvalued relative to the requirements of equilibrium in the balance of payments.Over time, he argued, this weak trade performance would undermine confidence in the fixed dollar price of gold. So, indeed, it proved. In August 1971, in response to a run on the dollar, President Richard Nixon suspended gold convertibility. After hard bargaining, an agreement was reached on new sets of parities of the dollar against other major currencies. These did not last. Soon, these new parities collapsed. The old Bretton Woods system of fixed, but adjustable, exchange rates was replaced by today’s floating exchange rates.Miran applies this perspective to the current predicament of the US. That is why one should view what happened in the 1960s and 1970s as a better parallel to what is being discussed today than the Plaza and Louvre Accords of the 1980s. The latter were aimed at managing a floating exchange rate regime at a time of disequilibrium among the dollar and other currencies, especially the Japanese yen and German mark. What is proposed now is recreating a global system of exchange rate management.Some content could not load. Check your internet connection or browser settings.The justification for this, argues Miran, is that, as in the 1960s, the desire of most other countries to hold the dollar as a reserve currency is driving up its value and so opening a huge current account deficit. This squeezes output of tradeable goods, notably manufactures. That creates a trade-off for the US between possibilities for cheaper finance and international leverage, on the one hand, and the social and fundamental security costs of a weaker manufacturing sector, on the other. Yet Trump wants both to protect domestic manufacturing and maintain the dollar’s global role. Thus, policy has to achieve both aims.One possibility might be unilateral action by the US to weaken the dollar. An option here would be fiscal tightening combined with a monetary loosening. But that would get in the way of Trump’s desire to extend his 2017 tax cuts. Another possibility would be to force the Federal Reserve to drive down the dollar. But that might have devastating effects on inflation and the dollar, as happened in the 1970s.Some content could not load. Check your internet connection or browser settings.Yet another possibility would be tariffs alone. But, other things equal, that would lead to appreciation of the dollar, which would damage the US export sector. Therefore, implies Miran, tariffs should also be used as a weapon in bargaining for a global deal or, if deemed necessary, be complemented by such a deal.Thus, the aim of a stronger manufacturing sector, to be delivered by a combination of tariffs and a weak dollar, needs global co-operation. My colleague, Gillian Tett, has described possible details of such a “Mar-a-Lago accord”.It has two key aspects. The economic aspect is to release the constraints discussed above. The way to do so, suggests Miran, is to turn short-term borrowing into ultra-long-term borrowing, by “persuading” foreign holders to switch their holdings into perpetual dollar bonds. This would allow the US greater room to pursue its desired combination of loose fiscal and loose monetary policy. The political aspect is to point out that accepting such a deal would be the price of being viewed as a friend. Otherwise, a country would be viewed as a foe, or at best as floating in between. In a precise sense, this might be viewed as a “protection racket”.Some content could not load. Check your internet connection or browser settings.This proposal raises four questions. The first is whether Miran’s analysis of the links between the dollar’s role as a reserve currency, the chronic US current account deficit and the weakness of manufacturing employment and output is correct. One must doubt it, because the US is far from the only high-income country with falling shares of employment in manufacturing.A second is whether the proposed new currency accord would in fact allow the US to combine issuance of a reserve currency with its sectoral aims better than any plausible alternatives. A third is whether there is any likelihood of agreement with Trump on the complex set of objectives and instruments in this proposal. A final question is whether Trump is capable of sticking to any deal he has reached. He has, after all, abandoned Ukraine, put the commitment to Nato into doubt and mounted an assault on Canada. The last two points are evidently the most important. Is this administration capable of making a deal any sane person or country should trust? I think not. Yet the analysis of the economic aspects is also important. I plan to look at these next [email protected] Martin Wolf with myFT and on X More