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    Flattery gets Starmer somewhere as The Donald stays awake to toot tariff deal | John Crace

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    Three days ago, Donald Trump promised an announcement that would be very possibly the greatest announcement in the whole history of announcements. Come Thursday morning, he said the US and the UK had reached a full and comprehensive trade deal.I guess a lot depends on what you mean by the words “greatest announcement” and “full and comprehensive”. As details of the deal began to emerge, it rather looked as if the UK had managed to negotiate a worse deal with the US than we had even two months ago. One that was hardly transformative. Just reversing some of the damage that had been done to the UK by the US starting a global trade war. Tariffs as a protection racket.Still, a deal is a deal. These days, Keir Starmer has learned you get what you can get. And it’s more than any other country has got so far. It remains to be seen if others come out of the White House with anything better. But Keir wasn’t the only one who needed a quick result. Trump did, too. He had a reputation to maintain as a deal-maker and Americans were beginning to get twitchy that none had been reached. It wasn’t clear if this was a victory for crack negotiating teams, or a sign that both the US and the UK had been a bit desperate. So both sides were keen to chalk the deal up as a win for themselves.Then there was the choreography to think of. A televised phone call between the president and the prime minister, before each gave separate press conferences. In both instances it was Agent Orange to go first. Presumably, because no one was sure he could stick to the script. When you do a deal with The Donald, there’s no guarantee he isn’t going to change his mind before the ink is dry. It would be no surprise if he were to announce new tariffs by the weekend.Cut to the Oval Office where, 45 minutes later than planned, Trump was on the phone to Starmer. Bizarrely, he started by talking about rare-earth minerals, which weren’t part of the deal. He seemed to have forgotten what had been agreed with whom. His minders set him back on track and there were warm words about one of America’s greatest and most cherished allies. You wondered why he had previously treated the UK with indifference if he cared so much.“This is an historic day,” said Starmer. All the more so because it had happened on VE Day. Keir could almost believe he was Winston Churchill addressing a jubilant nation after six years of war. At this point, it looked as if Agent Orange might drop off.Trump’s powers of concentration aren’t all they might be and he finds it difficult when he’s not the centre of attention. Keir did his best to stop the president from flatlining by showering him with flattery. The Donald had been the best. Everyone and everything would be nothing without him.At this, Trump began to perk up. The US and the UK had been working for years on a trade deal. People had said it couldn’t be done, he boasted. And yet he had done it in a matter of weeks. Truly, he was incredible. He didn’t seem to realise that he hadn’t negotiated a full trade agreement. Just a small side hustle encompassing a few sectors. There was a ripple of applause from the sycophants in the Oval Office when Trump managed to press the right switch to disconnect the call.The Donald then invited his commerce secretary, Howard Lutnik, to expand a little on the deal. Howie is reportedly a billionaire but he also delivers a pitch-perfect impersonation of a halfwit. It’s hard to imagine him in a room negotiating the sale of a secondhand car. “This was the president’s deal,” he cooed. “If it had been left to me, it would have taken at least three years. He did everything. He is the closer.” Imagine. Howie had just told the entire world he had been out of his depth in a puddle. Truly, the world is fucked if he is one of its masters.Next up was the British ambassador, Peter Mandelson. Bowing deeply. Full of reverence. Mandy was born for days like these. When all that is required is oleaginous smooth-talking masquerading as sincerity. Truly, The Donald was nothing short of a genius. He wasn’t fit to wipe the president’s shoes. Trump had achieved more than anyone else in the history of the world. Thank you, thank you. We have reached the end of the beginning, he sobbed. Everyone was getting in on the Churchill act this VE Day. Trump nodded. Mandy was right about him.Back in the UK, Starmer was just starting his own press conference at the Jaguar Land Rover factory. Britain was open for business, he said. No less than the whole future of the UK had been saved. Keir, alone, had altered the course of history. Some men are born great, some achieve greatness and some have greatness thrust upon them. Keir had managed all three. This was bigger than VE Day. Bring out the bunting. Drink the pubs dry. We were entering a new era of prosperity.This wasn’t just a victory for the UK. It was a victory for Starmer personally. Some people had said he should stand up to Agent Orange. Put the phone down. Don’t give in to bullies. But Keir had emerged triumphant. His brown-nosing had achieved the impossible. Which was, er … not quite as good as the deal we had not so long ago. It was time for the king to get out his silk pyjamas, line up the Diet Cokes and the Haribos and prepare for his sleepover with the president. If Keir had to suck it up, then so could Charles. More

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      Trump tariffs to hit small farms in Maga heartlands hardest, analysis predicts

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      The winners and losers of Trump’s first tariff war strongly suggest that bankruptcies and farm consolidation could surge during his second term, with major corporations best placed to benefit from his polices at the expense of independent farmers.New analysis by the non-profit research advocacy group Food and Water Watch (FWW), shared exclusively with the Guardian, shows that Trump’s first-term tariffs were particularly devastating for farmers in the Maga rural heartlands.Farm bankruptcies surged by 24% from 2018 to 2019 – the highest number in almost a decade – as retaliatory tariffs cost US farmers a staggering $27bn.Numbers of farms fell at the highest rate in two decades with the smallest operations (one to nine acres) hardest hit, declining by 14% between 2017 and 2022. Meanwhile, the number of farms earning $2.5m to $5m more than doubled.Losses from the first-term trade war were mostly concentrated in the midwest due to the region’s focus on export commodities such as corn, soy and livestock that are heavily reliant on China. States with more diverse agricultural sectors such as California and Florida experienced lower rates of insolvency and export declines than in previous years, suggesting the trade war played a role, according to Trump’s Last Tariff Tantrum: A Warning.The breakdown in closures suggests that Trump’s $28bn tariff bailout package in 2018-19 disproportionately benefited mega-farms while smaller-scale farms and minority farmers were left behind.The top tenth of recipients received 54% of all taxpayer bailout funds. The top 1% received on average $183,331 while the bottom 80% got less than $5,000 each, according to previous analysis.The number of Black farmers fell by 8% between 2017 and 2022, while white farmer numbers declined by less than 1%.View image in fullscreen“President Trump’s first-term trade war hurt independent farmers and benefited corporations, offering a warning of what is to come without a plan to help farmers adjust,” said Ben Murray, senior researcher at FWW.“Trump’s latest slap-dash announcements will likely further undermine US farmers while benefiting multinationals who can easily shift production abroad to avoid high tariffs. Farmers’ livelihoods should not be used as a foreign policy bargaining chip. Chaotic tariff tantrums are no way to run US farm policy.”The first 100 days of Trump 2.0 have led to turmoil and uncertainty for consumers, producers and the markets, amid an extraordinary mix of threats, confusing U-turns and retaliatory tariffs from trading partners.Trump’s second trade war could prove even more damaging for US farmers and rural communities, as it comes on top of dismantling of agencies, funds and Biden-era policies to help farmers adapt to climate shocks, tackle racist inequalities and strengthen regional food markets. By the end of April, more than $6bn of promised federal funds had been frozen or terminated, according to the National Sustainable Agriculture Association’s tracker.Rural counties rallied behind Trump in 2024, giving him a majority in all but 11 of the 444 farming-dependent counties, according to analysis by Investigate Midwest.Last week, the agriculture secretary, Brooke Rollins, played down the likely harm to Trump’s farmer base, but said the administration was preparing a contingency bailout plan if farmers are hurt by escalating trade wars. “We are working on that. We are preparing for it. We don’t believe it will be necessary,” Rollins told Fox News. “We are out across the world, right now, opening up new markets.”US farm policy has long incentivized large-scale monocropping of export commodities such as wheat, corn, soy, sorghum, rice, cotton – and industrial animal farming – rather than production for domestic consumption. This globalized agricultural system favors large and corporate-owned operations, while undermining small, diversified farms and regional food systems. It is a system inextricably tied to global commodity markets, and therefore extremely vulnerable to trade wars.The 2018-19 bailout payments were set up in a way that, inadvertently perhaps, “subsidized, encouraged and promoted” the loss of smaller and mid-size farms to the benefit of mega-farms – in large part because the tariffs were implemented without a coherent plan to reform US farm policy and help farmers transition to domestic markets.The number of large farms – those earning more than $500,000 – grew by 18% between 2017 and 2022. “The taxpayers are essentially being asked to subsidize farm consolidation,” the Environmental Working Group said at the time.Trump’s first-term tariffs hit soybean farmers, who are highly dependent on China, hardest, with exports slumping 74% in 2018 from the previous year. The number of soybean farms fell almost 11% between 2017 and 2022 – a significant turn of fortune given the 9% rise over the previous decade. In fact, the only winners after Trump’s trade war were big farms, those harvesting at least 1,000 acres of soybeans, the FWW analysis found.The 2018/19 tariff bailout package was also used to facilitate contracts and commodity purchases. A significant share went to the billion-dollar corporations which already have a stranglehold on the US food system, and rural communities.skip past newsletter promotionafter newsletter promotionArkansas-headquartered Tyson Foods received almost $29m in federal contracts and purchases between August 2018 and July 2019, while Brazil-based JBS secured nearly $78m. JBS used its market power to undercut competition, winning over a quarter of the total $300m in taxpayer dollars allocated towards federal pork purchases, according to FWW.The two multinationals currently control 40% to 50% of the US beef market, 45% of poultry and, along with two other corporations, 70% of the pork market.Things could be even worse under Trump 2.0, with the president no longer seeming concerned by the markets or the polls.John Boyd Jr, a fourth-generation Black farmer, has been unable to secure a farm operating loan since Trump’s tariffs sent commodity prices tumbling. USDA field offices that help farmers apply for credit and government subsidies, which Black, Native and other minority farmers were already disproportionately denied, are being closed in the name of efficiency.View image in fullscreen“This administration is putting the heads of Black farmers on the chopping block and ridiculing us in public with no oversight and no pushback from Congress,” said Boyd, president and founder of the National Black Farmers Association, who farms soy, wheat, corn and beef in Virginia. “Trump’s tariffs are a recipe for complete disaster, and this time his voters in red states will also get punched in the face.”Trump 2.0 tariffs against China are higher and broader, and also target scores of other agricultural trading partners. China is better prepared, having diversified its import markets to Brazil and other Latin American countries since Trump’s first trade war, while US domestic farm policy has barely changed.“The administration seems completely blind to the harm that was done previously, and in many ways what’s happening now is already worse … The concern is that trades are stalled and nothing’s really flowing,” said Ben Lilliston, director of rural strategies and climate change at the Institute for Agriculture and Trade Policy.In late April, China cancelled a 12,000-tonne order of US pork – the largest cancellation since the start of the Covid pandemic, suggesting Trump’s tariff war is already sabotaging trade.“The lesson from last time is we didn’t get the money to the right farmers. But the longer-term lesson is that the US lost credibility in trade. US Secretary Rollins is going overseas to try to open up export markets but they seem to be in deep denial right now about the harm that’s already been done to these relationships,” Lilliston said.A USDA spokesperson said: “President Trump is putting farmers first and will ensure our farmers are treated fairly by our trading partners. The administration has not determined whether a farmer support program will be needed at this time. Should a program need to be implemented in the future, the department’s goal will always be to benefit farms of all sizes.”JBS, Tyson and the American Farm Bureau Federation, a lobby group, have been contacted for comment. More

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      UK officials land in Washington as talks over trade agreement continue

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      A team of senior British trade negotiators has landed in Washington as talks over a deal between the two countries gather pace.Officials from the business and trade department are in the US for much of this week, attempting to get an agreement signed before the planned UK-EU summit on 19 May.Downing Street did not deny reports the deal could be signed as early as this week, although government sources said the recent announcement by the US president, Donald Trump, of film industry tariffs had proved a significant setback.One person briefed on the talks said: “We have a senior team on the ground now, and it may be that they are able to agree something this week. But the reality is the Trump administration keeps shifting the goalposts, as you saw with this week’s announcement on film tariffs.”Another said Trump’s threat of 100% tariffs on films “produced in foreign lands”, which could have a major impact on Britain’s film industry, had “gone down very badly in Downing Street”.UK officials say they are targeting tariff relief on a narrow range of sectors in order to get a deal agreed before they begin formal negotiations with the EU over a separate European agreement. A draft deal handed to the US a week ago would have reduced tariffs on British exports of steel, aluminium and cars, in return for a lower rate of the digital services tax, which is paid by a handful of large US technology companies.The Guardian revealed last week the Trump administration had made negotiating a trade deal with the UK a lower-order priority, behind a series of Asian countries. UK officials said they have been able to continue talks with their US counterparts despite that, describing the Trump administration’s approach as “chaotic”.Officials from the trade department arrived in Washington this week hoping to reach an agreement on two outstanding issues, pharmaceuticals and films.Trump has said he will impose tariffs on both industries, mainstays of the British economy, but has not yet given details.This week, the US president said the US film industry was dying a “very fast death” because of the incentives other countries were offering to draw American film-makers, and promised to impose a 100% tariff on foreign-made films. Britain offers producers generous reliefs on corporation tax to locate their projects there, which help support an industry now worth about £2bn, with major US films such as Barbie having recently been shot in Britain.Trump also said that he planned to unveil tariffs on imports of pharmaceutical products “in the next two weeks”. The UK exported £6.5bn worth of such goods to the US last year.Keir Starmer, the prime minister, has ruled out reducing food production standards to enable more trade of US agricultural products, as officials prioritise signing a separate agreement with the EU, which is likely to align British standards with European ones.Officials are racing to sign the US agreement before the planned UK-EU summit, at which both sides will set out their formal negotiating positions. Leaked documents revealed on Wednesday the two remain far apart on their demands for a youth mobility scheme, with Britain demanding that visas issued under the scheme should be limited in number and duration, and should exclude dependents.EU ambassadors met in Brussels on Wednesday to discuss the progress of the deal. One diplomat said: “Negotiations are going well, the mood is still good but it is a bit early to see bold moves from one side or another.”This week Starmer also signed an agreement with India after giving way on a demand from Delhi for workers transferring to the UK within their companies to avoid paying national insurance while in the country.The concession has caused some unease in the Home Office, with Yvette Cooper, the home secretary, not having been told about it in advance.It was also criticised by Kemi Badenoch, who accused the prime minister of bringing in a “two-tier” tax system. The Tory leader denied reports, however, that she had agreed to the same concession when she was business secretary.The prime minister defended the deal on Wednesday, telling MPs at PMQs it was a “huge win” for the UK. Other senior Tories have also praised the deal, including Steve Baker, Oliver Dowden and Jacob Rees-Mogg, the latter of whom said it was “exactly what Brexit promised”.British officials say they have been surprised at the willingness of the Labour government to sign agreements which have been on the table for years but previously rejected by the Conservative government.With economists having recently downgraded the UK’s growth outlook, Starmer is understood to have decided to sign deals such as that with India, even though they do not include a number of British demands, such as increased access for services.One source said the approach was to clinch a less ambitious agreement and use that to build a fuller economic partnership in the coming years. More

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      Federal Reserve warns of inflation and jobs risks amid Trump’s erratic trade strategy

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      The Federal Reserve kept interest rates on hold and called out growing dangers in the US economy amid Donald Trump’s erratic rollout of an aggressive trade strategy.Jerome Powell, the US central bank’s chair, cautioned that the president’s tariffs were likely to raise prices, weaken growth and increase unemployment if maintained.Fed policymakers cautioned that “the risks of higher unemployment and higher inflation have risen” as they opted to maintain the benchmark interest rate for the third time in a row. “Uncertainty about the economic outlook has increased further,” they said in a statement.With inflation expectations – how consumers think prices will move – rising,Powell, the Fed chair, said the “driving factor” appeared to be Trump’s tariffs.At a press conference, he said: “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.”The US president has repeatedly demanded in recent months that the Fed cuts rates – and even raised the prospect of firing Powell, before walking back the comments – as Trump’s tariffs plan appeared to knock the US economy.The Fed has been sitting on its hands for months, however, citing heightened uncertainty. It last cut rates in December, to a range of between 4.25% and 4.5%.As Trump pushed ahead last month with sweeping tariffs on imported goods from much of the world, Powell cautioned this would probably raise prices and slow growth – despite the administration’s pledges to revitalize the US economy and reduce the cost of living for millions of Americans.US gross domestic product (GDP) shrank for the first time in three years during the first quarter, raising fears of recession as Trump’s tariffs – and threats of tariffs – cast a shadow over the world’s largest economy.Asked whether he was trying to take responsibility for stronger parts of the economy, while blaming his predecessor, Joe Biden, for any sign of weakness, Trump told NBC’s Meet The Press: “I think the good parts are the Trump economy, and the bad parts are the Biden economy. Because he’s done a terrible job.”After Fed policymakers finished their latest two-day meeting on Wednesday, the central bank reiterated in its statement that they would “carefully assess incoming data, the evolving outlook, and the balance of risks” ahead of future meetings.Its callout of greater risks in the US economy amounted to “a thinly veiled critique of the new administration’s import tariffs”, said Samuel Tombs, chief US economist at Pantheon Macroeconomics, “and represents an assertion of independence”.Addressing reporters after the meeting, Powell said he could not provide a timeframe for rate cuts. “We are going to need to see how this evolves,” he said. “There are cases in which it would be appropriate for us to cut rates this year. There are cases in which it wouldn’t. And we just don’t know.”While concern over the economic outlook is mounting, Powell stressed there had been no “big economic effects” in the data so far. “People, they are worried now about inflation, they are worried about a shock from the tariffs,” he said. “But they really haven’t – that shock hasn’t hit yet.”Asked how Trump’s demand for rate cuts affected the Fed’s latest decision, and the difficulty of his job, Powell responded bluntly. “Doesn’t affect doing our job at all,” he said.He reserved perhaps his briefest response for when a reporter asked what he thought when Trump said last month he had “no intention” of firing him – days after saying his termination could not come fast enough. “I don’t have anything more for you on that,” said Powell. More

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      Colbert on Trump administration’s ethos: ‘Take full responsibility and dump it on somebody else’

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      Late-night hosts dug into the chaos at Newark airport leading to a cascade of cancellations, Donald Trump’s alleged Hollywood tariffs and the visit of the Canadian prime minister, Mark Carney, to the White House.Stephen ColbertOn Tuesday’s Late Show, Stephen Colbert looked into the cascade of delays at Newark airport this week, causing the cancellation of hundreds of flights. The culprit was a terrifying 90-second blackout during which air traffic controllers temporarily lost radar and communications with the aircraft under their control, making them unable to see, hear or talk to them. “Those are three fairly important things,” Colbert deadpanned.The blackout was caused by a fried piece of copper wire. “Unlike the other blackouts at Newark, which are caused by the grand coconut margarita at terminal A Chili’s Too,” Colbert joked.In response to the crisis, Trump’s transportation secretary, Sean Duffy, went on Fox News to, as Colbert put it, “take full responsibility and dump it on somebody else”.Duffy criticized old infrastructure in the US that hasn’t been updated in “30 or 40 years”, but said “this should’ve been dealt with in the last administration. They did nothing.”“Yes, this problem has been going on for years,” Colbert agreed. “Biden should’ve done something about it. Or really, the guy before him should’ve done something about it.”In truth, Biden did do something about it; in the 2021 infrastructure bill, he approved $25bn to improve airports. The upgrades began, but were partially derailed by Trump’s “department of government efficiency” (Doge) laying off more than 400 staffers at the Federal Aviation Administration shortly after taking office, including maintenance mechanics and employees who work on electrical issues. “Those are the people who do the stuff!” Colbert exclaimed. “There are plenty of useless people you could’ve fired, like the TSA agent who says you can’t bring in a snow globe. I hate having to chug my snow globe right before security.”Duffy claimed that he was going to spend the money on a new system, but warned that it would take three to four years. “Not exactly what you want to hear in a crisis,” Colbert noted.And it’s a crisis that probably won’t get better soon, as many air traffic controllers are now out on a 45-day trauma leave following the blackout. “Wait a second, there’s such a thing as trauma leave?” Colbert wondered. “Bye! I’m off to the tropics.”Jimmy KimmelIn Los Angeles, Jimmy Kimmel recapped the visit of the new Canadian prime minister, Mark Carney, to the White House, where Donald Trump insisted that “regardless of anything, we’re going to be friends with Canada”.“Poor Mark Carney had a helluva job today,” said Kimmel, noting that Trump keeps referring to Canada as the “51st state”. “It was like an Ewok going to a meeting on the Death Star.”But Carney “handled it well”, according to Kimmel. “In a friendly way, he made sure Trump knows they have no intention of becoming our 51st state.” Carney diplomatically told Trump that Canada is “not for sale, won’t be for sale”, to which Trump interjected: “But never say never!”“He doesn’t take no for an answer – in fact, he was found liable for it in a court of law,” Kimmel said, referring to a May 2023 verdict in which a New York court found Trump liable for sexual abuse and defamation of the writer E Jean Carroll, and ordered him to pay $5m.Kimmel also addressed Trump’s threat to (somehow) slap a 100% tariff on any movie made outside the US, “which caused every studio executive in Hollywood to double up on their Ativan yesterday,” he quipped. “No one seems to know what’s going on with these tariffs, including our own secretary of the treasury.“Remember how everyone said the main requirement to get a spot in his cabinet was to be good on TV? Well, here is our treasury secretary, Scott Bessent,” Kimmel continued before a clip of Bessent struggling to answer the basic question “who pays tariffs?” before Congress.“Try unplugging him and plugging him back in,” Kimmel laughed. “Scott Bessent has the demeanor of a headmaster at an all-boys school that’s under investigation.”Seth MeyersAnd on Late Night, Seth Meyers opened with Trump’s Truth Social post on Monday in which he claimed that he would order the government to reclaim and reopen the infamous Alcatraz prison. “I love that you can tell from his social media post what movie he watched on the plane,” said Meyers, referring to Clint Eastwood’s 1979 film Escape from Alcatraz, which played on public television in Florida while he was at Mar-a-Lago.Trump also joked with reporters about the possibility of becoming pope and said: “I would not be able to be married, though.”“And it looks like Melania has voted,” Meyers quipped next to a photo of white smoke.The Vatican’s conclave to elect a new pope is set to begin on Wednesday. “So just remember, black smoke means no decision, white smoke means a new pope and pink smoke means it’s a girl!” Meyers joked.The Late Night host also touched on reports that the US army is planning a parade to honor its 250th anniversary as well as Trump’s 79th birthday, including military vehicles, aircraft and nearly 7,000 soldiers. “And to honor Trump’s military service, he won’t be there,” Meyers quipped. 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      Why Donald Trump’s plan to weaken the dollar is flawed | Kenneth Rogoff

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      Now that US President Donald Trump’s tariff war is in full swing, investors around the world are asking: what’s next on his agenda for upending the global economic order? Many are turning their attention to the “Mar-a-Lago Accord” – a plan proposed by Stephen Miran, chair of Trump’s Council of Economic Advisers, to coordinate with America’s trading partners to weaken the dollar.At the heart of the plan is the notion that the dollar’s status as the world’s reserve currency is not a privilege but a costly burden that has played a major role in the deindustrialisation of the American economy. The global demand for dollars, the argument goes, drives up its value, making US-made goods more expensive than imports. That, in turn, leads to persistent trade deficits and incentivises US manufacturers to move production overseas, taking jobs with them.Is there any truth to this narrative? The answer is yes and no. It’s certainly plausible that foreign investors eager to hold US stocks, bonds, and real estate could generate a steady flow of capital into the United States, fuelling domestic consumption and boosting demand for tradable goods such as cars and non-tradables such as real estate and restaurants. Higher demand for non-tradable goods, in particular, tends to push up the dollar’s value, making imports more attractive to American consumers, just as Miran suggests.But this logic also overlooks crucial details. While the dollar’s reserve-currency status drives up demand for Treasuries (Treasury bills, Treasury bonds, and Treasury notes), it does not necessarily increase demand for all US assets. Asian central banks, for example, hold trillions of dollars in Treasury bills, to help stabilise their exchange rates and maintain a financial buffer in the event of a crisis. They generally avoid other types of US assets, such as equities and real estate, since these do not serve the same policy objectives.This means that if foreign countries simply need to accumulate Treasury bills, they don’t have to run trade surpluses to obtain them. The necessary funds can also be raised by selling existing foreign assets such as stocks, real estate, and factories.That is precisely what happened in the 1960s through the mid-1970s. By then, the dollar had firmly established itself as the global reserve currency, yet the US was almost always running a current account surplus – not a deficit. Foreign investors were accumulating US Treasuries, while American firms expanded abroad by acquiring foreign production facilities, either through direct purchases or “greenfield” investments, in which they built factories from the ground up.The postwar era was hardly the only time when the country issuing the world’s reserve currency ran a current account surplus. The British pound was the undisputed global reserve currency from the end of the Napoleonic wars in the early 1800s until the outbreak of the first world war in 1914. Throughout that period, the UK generally ran external surpluses, bolstered by high returns on investments across its colonial empire.There is another way to interpret the US current account deficit that helps explain why the relationship between the exchange rate and trade imbalances is more complicated than Miran’s theory suggests. In accounting terms, a country’s current account surplus equals the difference between national savings and investment by the government and the private sector. Importantly, “investment” here refers to physical assets such as factories, housing, infrastructure, and equipment – not financial instruments.When viewed through this lens, it is clear that the current account deficit is influenced not just by the exchange rate but by anything that affects the balance between national saving and investment. In 2024, the US fiscal deficit was 6.4% of GDP, significantly larger than the current account deficit, which was under 4% of GDP.While closing the fiscal deficit would not automatically eliminate the current account deficit – that would depend on how the gap is closed and how the private sector responds – it is a far more straightforward fix than launching a trade war. Reducing the fiscal deficit would, however, involve the difficult political task of convincing Congress to pass more responsible tax and spending bills. And unlike a high-profile trade confrontation, it wouldn’t cause foreign leaders to curry favour with Trump; instead, it would shift media attention back to domestic politics and congressional negotiations.Another key factor behind the current account deficit is the strength of the American economy, which has been by far the most dynamic among the world’s major players in recent years. This has made US businesses particularly attractive to investors. Even manufacturing has grown as a share of GDP. The reason employment has not kept pace is that modern factories are highly automated.skip past newsletter promotionafter newsletter promotionMiran’s plan, clever as it might be, is based on a flawed diagnosis. While the dollar’s role as the world’s leading reserve currency plays a part, it is just one of many factors contributing to America’s persistent trade deficits. And if the trade deficit has many causes, the idea that tariffs can be a cure-all is dubious at best. Kenneth Rogoff is professor of economics and public policy at Harvard University. He was the IMF’s chief economist from 2001-03.© Project Syndicate More

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      Mike Pence rebukes Trump over tariffs and ‘wavering’ support for Ukraine

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      Donald Trump’s tariffs policy will trigger a “price shock” and possible shortages, and lead to public pressure on him to change his approach, the former vice-president Mike Pence has said.In one of his most wide-ranging critiques yet on the policies of the president he used to serve, Pence, speaking to CNN, derided the White House’s “wavering” support for Ukraine and declared – in direct contradiction of repeated assurances from Trump – that President Vladimir Putin of Russia “doesn’t want peace”.Pence’s comments came in an interview after receiving the John F Kennedy Profile in Courage award in recognition of his refusal to bow to pressure from Trump to overturn the 2020 presidential election when he presided over Congress’s certification of the results on 6 January 2021.The vice president’s determination to carry out his constitutional role and certify Joe Biden’s victory presaged an attack on the US Capitol by a violent mob, who chanted “hang Mike Pence”, as the vice-president was spirited to safety by security personnel.Pence told CNN’s Kaitlan Collins that Trump’s decision to pardon about 1,600 convicted rioters after he returned to office in January “sent the wrong message”.“I was deeply disappointed to see President Trump pardon people that engaged in violence against law enforcement officers that day,” he said.Addressing tariffs – which Trump has made a signature policy of his second presidency while implementing a 90-day pause on exports from most countries after international markets plunged – Pence said they were “not a win for the American people” and warned that their worst effects had yet to be seen.“I do have concerns that, with the president’s call for broad-based tariffs against friend and foe alike, that ultimately the administration is advancing policies that are not targeted at countries that have been abusing our trade relationship, but rather are essentially new industrial policy that will result in inflation, that will harm consumers and that will ultimately harm the American economy,” he said.“Even the administration has conceded that there may be a price shock in the economy, and there may be shortages” after the current pause expires, Pence said.He said the White House was in danger of stoking a political backlash, citing Trump’s recent comment that tariffs might result in American children having two dolls instead of 30 and that “maybe the dolls will cost a couple of bucks more”.“Keeping our kids’ toys affordable: that really is part of the American dream,” he said.“I think the American people are going to see the consequences of this. I think they’ll demand a different approach.”He criticized the administration for threatening to abandon support for Ukraine, whose president, Volodymyr Zelenskyy, Trump has publicly blamed for Russia’s invasion, while repeatedly praising Putin – relenting only recently after the Russian leader rebuffed peace offers and instead ordered missile attacks on Kyiv.Pence said: “If the last three years teaches us anything, it’s that Vladimir Putin doesn’t want peace; he wants Ukraine. And the fact that we are now nearly two months of following a ceasefire agreement that Ukraine has agreed to and Russia continues to delay and give excuses confirms that point.“The wavering support the administration has shown over the last few months, I believe, has only emboldened Russia.”He was equally scathing about Trump’s stance towards Canada, which he had hit with trade tariffs and said he would like to annex as the 51st US state.Pence, by contrast, called Canada “a great ally, whose soldiers have fought and died alongside Americans in every war since world war one”. More

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      Trump says Biden caused the economic downturn. That’s malarkey | Steven Greenhouse

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      While Donald Trump delusionally asserts that “we’re celebrating the most successful first 100 days of any administration in American history”, last week’s economic news emphatically refutes that. Trump’s commerce department reported on Wednesday that the US economy – in a sharp and dismaying reversal – shrank in the first quarter of this year.That of course is when Trump returned to the White House, but Trump, true to form, denied that he was in any way responsible for the surprisingly bad economic news. Trump, who has spent his life blaming others and refusing to admit mistakes, was quick to blame Joe Biden for the downturn. The nation’s gross domestic product declined at a 0.3% annual rate in the quarter, after adjusting for inflation.At Wednesday’s cabinet meeting – where cabinet secretaries sounded like North Korean officials obsequiously extolling Kim Jong-un – Trump noted the bad first-quarter report and said: “This is Biden, and you can even say the next quarter is sort of Biden.” Later in the day in a speech to corporate executives, Trump continued to try to dodge responsibility, saying: “This is Biden’s economy.”Even the very careful New York Times said that Trump was full of it. The Times wrote that Trump “blamed his predecessor for handing him a bad economy, despite data showing that growth was strong when he took office”.When Biden left office, many economists had glowing words about the economy. “President Trump is inheriting an economy that is about as good as it ever gets,” said Mark Zandi, chief economist at Moody’s Analytics. “The US economy is the envy of the rest of the world, as it is the only significant economy that is growing more quickly post-pandemic than pre-pandemic.”With regard to the bad first-quarter GDP report, economists overwhelmingly agree that there was one overriding cause, and that cause was not Joe Biden. Rather, it was the huge uncertainty and fears stirred by the prospect of Trump’s tariffs. Eager to stock up on foreign goods before Trump imposed his wave of tariffs, US businesses rushed to increase their imports, and according to the formula used to calculate GDP, soaring imports have a downward effect on economic growth.Like the boy who would never admit he broke the cookie jar, Trump refused to admit that his tariffs had anything to do with the first-quarter downturn. For Trump, truth is a distant galaxy. It’s a foreign enemy that he is forever trying to repel. He stubbornly refuses to admit that the economy was in strong shape when he took office, just as he shamelessly refuses to admit that “MS-13” was Photoshopped on to the knuckles of Kilmar Ábrego García, an immigrant who was wrongly deported to a brutal prison in El Salvador. Far too often, Trump seems allergic to the truth. During an interview with Terry Moran of ABC News, he brazenly insisted that Moran accept Trump’s falsehood about Ábrego García, telling him: “Why don’t you just say: ‘Yes, he does’” have MS-13 tattooed on his knuckles.It’s as delusional for Trump to claim that “we inherited from the last administration an economic catastrophe”, as he did in a speech to a joint session of Congress in March, as it is for him to insist that Ábrego García’s knuckles say “MS-13”.When Biden left office, no economists were forecasting a recession anytime soon – that’s why Wednesday’s report that the economy shrank in the first quarter was such a surprising reversal. During last year’s fourth quarter, Biden’s last full quarter in office, the nation’s GDP grew at a solid 2.4% rate. Indeed, ever since the Covid-19 pandemic ended, economic growth in the US was considerably stronger than in Britain, Germany, France, Japan and other G7 nations. Several weeks before election day, the Economist magazine ran headlines saying the US economy was “the envy of the world” and had “left other rich countries in the dust”.When Biden’s term ended, the jobless rate was a low 4.0%. Not only that, during Biden’s four years, the average unemployment rate was lower than for any president since the 1960s. Trump won over many voters by attacking high inflation under Biden – and it was a serious problem – but by the time Biden left office, inflation had slid to just 2.9%, far below its 9% peak in 2022 and nearly down to the Federal Reserve’s inflation goal.As part of his economic disinformation efforts, Trump has repeatedly said that job growth was a disaster under Biden. Sorry, Donald, that’s a lie. The fact is that during Biden’s four years, the US added 16.6 million jobs, more than during any four-year term of any previous president. (Trump will never tell you this, but during his first term, the nation lost 2.7 million jobs overall, making his first-term presidency the first presidency since Herbert Hoover’s to suffer an overall loss in jobs. The pandemic was largely responsible for that.)As part of his never-ending effort to dodge responsibility, Trump blamed Biden for the stock market’s recent troubles. During Trump’s first 100 days, the S&P 500 fell 7%, making it the market’s worst beginning to a presidential term since Gerald Ford took office in 1974 after Richard Nixon resigned due to the Watergate scandal.Devious as ever, Trump posted on Truth Social on Wednesday: “This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th.” What Trump failed to say was that the stock market didn’t begin to plunge until 2 April, when he announced his steep, worldwide “liberation day” tariffs. That was more than two months after Biden left office – so it’s absurd for Trump to blame him for that decline. And don’t expect Trump to ever acknowledge that Wall Street soared during Biden’s four years. The Dow Jones Industrial Average climbed 39% and the S&P 500 soared by 55.7%, including a 28% jump during 2024.Jared Bernstein, who was chair of the council of economic advisers under Biden, said on MSNBC on Thursday that it was ludicrous for Trump to blame Biden for the first-quarter downturn. “I have never seen a more direct connection to what we’re seeing in the economy and stock market to the action of one person, which is to President Trump and his trade war,” Bernstein said.Many economists warn that the US economy may sink further in the second quarter due to Trump’s tariffs as some supply chains break down, some imports dry up, prices rise on many goods and many consumers and business pull back on spending due to all the uncertainty and anxiety.John Kasich, a Republican and former governor of Ohio, sneered at Trump’s efforts to weasel out of responsibility. “You can’t blame Biden,” he said. “It’s like saying the dog ate my homework.”

      Steven Greenhouse is a journalist and author focusing on labor and the workplace, as well as economic and legal issues More

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      Trump’s tariffs get one thing right: capitalism is changing | Avram C Alpert

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      Trying to understand Donald Trump’s across-the-board tariffs based solely on economic theory won’t work. As the US president himself said: “Chronic trade deficits are no longer merely an economic problem, they’re a national emergency that threatens our security and our very way of life.” That may be why, as many economists have pointed out, there’s simply no good economic case for his plans.But few commentators have understood that facts and figures aren’t the whole point of the tariffs. As always, economics is part of a broader political vision. The tariffs help Trump make his claim that a way of life is under threat and he alone can protect it.Indeed, the political meaning of Trump’s tariffs is in the idea itself: “protectionism”. He is not just telling people that he’s going to improve the economy. He’s signaling that he’s going to protect a way of life, even – or especially – if it hurts others, by creating, in theory, good-paying factory jobs that could sustain local communities. (Never mind that the key to any industry’s ability to sustain communities are the practices of labor organizing Trump opposes.) On the campaign trail, he said: “Whether the women like it or not, I’m going to protect them.” He’s now saying the same thing to the country as a whole.Such non-economic justifications for economic policy are nothing new. They are part of what the sociologist Max Weber called “the spirit of capitalism”. Weber argued that capitalists had to justify a claim unique in human history: profit is good. For millennia before, philosophers had argued the opposite. Jesus, for example, told his disciples that it was likelier for a camel to go through the eye of a needle than for a rich man to get into heaven.But with capitalism, the pursuit of profit became good. How did it justify this? Weber said that’s where “spirit” comes in. He pointed to notions of work as a holy value in Protestantism and Calvinist ideas about how monetary success proved you were among God’s chosen few. These spiritual views engendered a work ethic and made capitalist excess palatable. At least for a time.When capitalist greed becomes unpalatable, new spirits emerge. To understand Trump’s protectionist spirit, we have to understand this preceding history.After the Great Depression, people saw that they might lose everything no matter how hard they worked and so the work ethic spirit lost its power. In its place, social democratic states gave a new collectivist spirit to capitalism. Social democracy limited excess and provided a moral logic by offering stability to all through a linked system of jobs and life-long public services.This collectivist spirit began to break down in the 1960s under the pressures of stagflation, oil shocks, and criticisms of a conformist, consumerist lifestyle. In response, capitalism’s spirit transformed itself again. According to two scholars of this transitional period, Luc Boltanski and Ève Chiapello, it did so by ingeniously incorporating the criticisms: it became about nomads, connections, flexibility, creativity.It was no longer the staid cubicle office man; it was now the exciting creative entrepreneur who knows no allegiances and is at home in the chaos of disruption. Hence Silicon Valley. Hence the destroyed manufacturing bases where jobs were converted to low-wage poverty traps and where Trump now finds many of his most loyal supporters. Hence his protectionist vision of a new spirit of capitalism.There is some merit in this desire to help those who lost out, but, as Weber noted, the spirits of capitalism can mask more sinister desires. By also pushing massive tax breaks for the wealthy, Trump is hoping that tariffs can provide rhetorical appeal without radically changing the social order.The tariffs say: we will protect your community by hurting those who profited off your pain and became rich through globalization. That’s why Trump blamed “globalists” for the dip in the stock market after the tariffs were announced: “A lot of [those selling stocks] are globalist countries and companies that won’t be doing as well … Because we’re taking back things that have been taken from us many years ago.” But that ignores the real ways in which jobs have been lost and communities upended. What the tariffs leave unsaid is that they won’t address the real issues underlying today’s economic pain: gutting welfare, failing to retrain workers, under-utilizing technology, and letting inequality rise relentlessly.Trump is right that capitalism, in a period of untrammeled greed and injustice, needs a new spirit to show it the way. But the trouble with a protectivist spirit is that it implies that some get protected while others get hurt. That will just create new cycles of dismay – as we are already seeing with the tariff whiplash and draconian immigration policies.What we need is a democratizing spirit, one that isn’t about protecting some and hurting others, but instead guides us to work collectively to ensure that all people can lead decent and meaningful lives even in a chaotic world. There are economic policies for this, such as fair trade, meaningful industrial policy, more worker representation on corporate boards, and more cooperatively owned businesses.But Democrats also need to learn from Trump and emphasize the spirit. They need to show that their democratic vision is not just technocratic, but as powerful and affirming as the feeling of being protected.The desire for this spirit may be why the rallies of Bernie Sanders and Alexandria Ocasio-Cortez have drawn record crowds. Most attenders say they aren’t there to hear the policies, which they already know. They’re there for the “community”, and to experience the “closest thing to a version of America you actually want to live in”, one that works for all of us. If the Democratic party can catch that spirit, they will not only win elections; they might just bring an end to decades of destruction.

      Avram Alpert is a lecturer in the Princeton Writing Program. His most recent book is The Good-Enough Life More