”Beyond Trump’s tariffs on manufactured goods, the most intense area of speculation is on the potential for a “Mara-Lago Accord”, some form of agreement between the US and its major trading partners on how the latter can pay for the privilege of accessing the US dollar system and accumulating USD reserves. This would help to weaken the US dollar, making US products more competitive globally, as well as helping the US to restructure its sovereign debt. The FT’s Gillian Tett has framed it as “tariffs on goods may be a prelude to tariffs on money”. We’re talking something matching the scale of the Bretton Woods arrangement in a world that is turning multi-polar. Can the US pull this off, assuming that access to the US consumer’s willingness to spend and the US dollar is so great that it is willing to pay a far steeper price? Or will it fail miserably, leading to huge market dislocations? Already, Trump’s style is rapidly eroding US soft power in the world, a risk to his entire agenda outside of North America, at least. It is all an incredibly risky, go-for-broke gambit. In the coming quarter we’ll have a better sense of whether the Musk-led DOGE has any chance of material reduction of fiscal spending, while a growth slowdown and even recession appear likely by year-end, and possibly much sooner, on the fiscal slowdown and a tapped-out US consumer.”
Morten W. Langer
