A new $250 bill has been proposed to celebrate America's upcoming semi-quincentennial, and Donald Trump has a plan to put his face on it. This might be easy to dismiss as yet another example of his overblown ego. But that would be a mistake. If Trump goes ahead, it could undermine faith in what remains the world's reserve currency at the worst possible time.

Trump's allies in Congress have already introduced a law that allows for an exception to the existing rules that no living president can appear on American banknotes. Designs have apparently already been commissioned from the Bureau of Engraving and Printing, which designs dollar bills. There are still plenty of obstacles in the way. The legislation still has to be passed for one, which is never easy, even with a Republican majority in Congress. But even if it doesn't happen, or is delayed beyond the main celebrations, Trump has already decided to become the first living president to add his signature to the notes. What used to be American money is steadily being turned into Trump money.

Trump's $250 bill could undermine the dollar's credibility

That may seem harmless enough. Trump loves the limelight, and what's a few pictures on the banknotes? In Britain, we have always been happy to have the monarch on notes and coins, and the same is true in many other countries. It is not as if we use cash as much anymore, and it is hard to imagine many people will be using the $250 note regularly. But in reality, this is a symptom of something far more serious – a warning sign about the underlying strength of the dollar.

There is a reason central banks have always put weighty historical motifs on their notes. The British have the likes of Winston Churchill and the Duke of Wellington. The European Central Bank has never managed to agree on any real people or buildings – since one member or another would end up taking offence – but has done the best it can with synthesised images of historic building styles. The Bank of Japan has a selection of famous scientists from the country's history. All over the world, central banks choose an image everyone can feel proud of.

There is a logic to that. Paper money is basically a conjuring trick. It is only worth something because we all accept it is worth something, and we are willing to exchange it for goods and services. Reaching into a nation's past is one way of establishing its credibility. It gives paper money an air of tradition and solidity. Without that, there is a real risk people might start thinking it is just a few brightly coloured pieces of paper.

King Dollar is under attack

This is the worst possible time to start taking risks with the US currency. The challenges to the dollar have been growing stronger all the time. The US budget deficits are out of control, running at 6% of GDP even when the economy is doing well, and eventually the rest of the world will get tired of financing those. Central banks globally now hold more of their reserves in gold than they do in dollars, and while that is partly because the price of the precious metal has risen so much over the last year, it is also an illustration of how they are diversifying away from the dollar. China has already launched a digital yuan and is starting to promote it as a serious alternative for settling payments for cross-border trade. The cryptocurrencies led by Bitcoin have had a rough year, but there is little sign they are going away and with every year that passes, they become more established within the financial system, and were always designed as an alternative to the dollar.

The list goes on. On their own, none of those factors might be enough to knock the dollar from its throne as the world's most important currency. But when they all come together at the same time, the greenback is clearly at risk. Like a Latin American strongman, Trump is intent on personalising the government of the US and boosting his own reputation. But if he goes ahead, this may well turn into the moment when the world decides the dollar was not the rock-solid reserve currency any longer and decides to switch to something new. If that happens, the results won't be pretty for the US economy, and Trump may well come to regret his vanity project.

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New Fed chair Kevin Warsh takes the reins of the world's most powerful central bank at a difficult time, says Roger Ferguson for the Council on Foreign Relations think tank. Donald Trump wants easier money, saying, on swearing Warsh in, that “we want to stop inflation, but we don't want to stop greatness”. Trump openly criticised Jerome Powell, Kevin Warsh's predecessor, for failing to cut interest rates. But US inflation is running at 3.8% and has been above the Fed's 2% target for five years in a row. Cumulatively, the price level is nearly 25% higher now than it was in 2020.

Pricier petrol, the fallout of Trump's adventure in Iran, threatens to trigger a new inflation wave. Kevin Warsh may be “compelled to raise interest rates”, which is “precisely the opposite of what Trump had in mind”. Fireworks could lie ahead.

Kevin Warsh will have more elbow room when it comes to cutting the size of the Fed's balance sheet, says Colby Smith in The New York Times. He sees the institution's holdings of $6 trillion in government bonds and other securities as “emblematic of everything that has gone wrong” in central banking since the 2008 crisis. But drawing down the portfolio must be handled with great care. In 2019, a similar attempt to reduce the balance sheet too quickly gave markets a “near heart attack”.

Kevin Warsh must deal with ‘hot’ US inflation

Investors began the year expecting “at least one or two rate cuts”, says The Economist. Now, rate hikes are in the picture. US inflation is “hot”, and the cause is not just oil. Even the core measure, which excludes energy and food, rose at an annualised 3.2% during the three months to April. Central bankers are taught to “look through” energy shocks, which usually prove temporary, but broad-based signs of inflation are harder to ignore. Service prices are rising “uncomfortably fast”. And durable goods – for decades a source of disinflation – rose at an annualised 7.7% in the first quarter of the year. That reflects the effect of both tariffs and soaring prices for computer kit amid the AI boom.

The oil crisis has led to inevitable comparisons with the 1970s, says James Smith for ING Think. In some respects, the similarities are “striking”. Now as then, we face an energy shock emanating from Iran. Now as then, US government spending is unsustainably high. But in other ways we live in a quite different world. Per-capita oil consumption in the UK is 55% lower today than it was 50 years ago. In real terms, energy prices are well below the levels of the late 1970s, when they hit nearly $200 in today's money. Unionisation rates have collapsed since the 1970s and strike action is far rarer than it used to be, reducing the risks of a sustained inflationary surge.

Not that everything is rosy. In some respects, advanced economies face new sources of inflationary pressure that didn't exist in the 1970s. Populations are ageing and net migration is beginning to fall sharply because of stricter border policies. That threatens “shortages” of workers on a scale “with little precedent in the West”.

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The world is in the midst of an oil crisis. The war in Iran has thrown the markets into turmoil, with the price of oil soaring to around $100 a barrel.

The oil shock has repercussions that are far wider than just the price of petrol. In this episode of MoneyWeek Talks, editors Kalpana Fitzpatrick, Andrew Van Sickle, and Cris Sholto Heaton make sense of what is happening now, explain where the crisis could go next, and what you should do to protect your portfolio. Tune in now on YouTube or on most podcast platforms.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Elon Musk is an abrasive and frequently infuriating presence and is the focal point of loathing for the establishment. In the UK, members of the Labour cabinet view him as a threat to the administrative order. Yet he is a living example of the Great Man theory of history; “great” meaning a person of consequence, rather than good. The theory is that a single, determined will can move humanity more than the masses. The modern world would rather fiddle and legislate while Elon Musk seeks to act and solve civilisational challenges.

No number of committee meetings could conjure a Starship booster returning from the edge of orbit. This skyscraper-sized rocket fell through the sky only to be plucked to safety by mechanical chopsticks. A decade ago, this would have appeared only in science fiction, but today it is a reality. This is just one example of the way Musk's maniacal focus pushes the boundaries of the possible. Musk has many detractors, particularly in political circles. But politicians curate their personas to seek approval; people like Musk actually drive progress. History will record the man who caught the skyscraper-sized rocket long after his critics are forgotten.

Elon Musk is dedicated to human progress

Musk was already very rich by the age of 27 after netting $22 million from the sale of his first business, Zip2. The sale of PayPal a few years later made him another $180 million. He was barely 30 and possessed enough wealth to purchase a private island and vanish from public view. Instead, he chose to dedicate himself to “the mission” of human progress. He views wealth as fuel for missions rather than a reward for success.

He founded SpaceX and funded Tesla as attempts to solve humanity's challenges. He viewed the stagnation of aerospace and the slow development of electric cars as problems that required a focused, engineering-based response. By committing $100 million to rockets and $70 million to electric vehicles, he bet most of his wealth that he could solve the problems. He couldn't do this alone, but his willingness to bet big acted as a radical sorting mechanism for recruitment. Elite engineers joined because they recognised a founder willing to risk bankruptcy in the pursuit of a better future.

In 2008 the dream almost ended as both firms spiralled toward collapse. SpaceX had endured three launch failures and could afford one more failure before bankruptcy. Tesla was weeks away from exhausting its cash. Musk was borrowing money for rent while sleeping on factory floors to supervise production. Many would sacrifice one company to save the other, but he refused. Only a contract win from US space agency Nasa prevented liquidation. This helped create a culture in his companies that treats adversity as a mere stepping stone towards achieving the objective.

“Idiot Index”: the key to Elon Musk's success

The key to his success is to focus on what is possible, not what has been done before. Musk operates on the principle that “the only rules are the ones dictated by the laws of physics. Everything else is a recommendation”. His method is to strip a problem down to fundamental parts and then reason towards the goal. Most managers make incremental changes to existing models; Musk rejects precedent, believing the way things have always been done is irrelevant to the way they should be. He applies a metric known as the “Idiot Index” to maintain this discipline. This measures the ratio of a finished product's cost to the costs of its raw materials. A high ratio, such as is typical for space rockets, indicates an inefficient process. Musk expects his engineers to identify the best and worst parts of their systems through this lens at all times. This approach allowed Tesla to cut battery costs and manufacturing time by focusing on the component elements, not simply the price of the finished product.

He puts these principles into practice through five steps. First, question every step in the process and seek out flaws. Second, cut out any unnecessary part or process. Third, simplify or optimise, but only after part two is exhausted so as to avoid optimising a process that should not be there. Fourth, accelerate. Fifth and finally, automate. This sequence ensures engineers never waste effort on perfecting an irrelevance.

The Tesla Giga Press is an example. Traditionally, car manufacturers built underbodies by welding 70 or more separate parts together. Most accepted this complexity because they followed tradition. Musk looked at the simplicity of toy car manufacturing and wondered why full-sized vehicles were not cast as single pieces. He commissioned the creation of the largest casting machines in the world to produce a car underbody in one operation. This eliminated hundreds of robots from the production line and drastically improved structural rigidity. By scaling up the logic of a toy, he proved that a better, cheaper and stronger vehicle could be built more quickly and with fewer potential areas for failure.

Twitter layoffs illustrated Price's Law

The acquisition of Twitter (now called X) and the changes brought about there was an experiment in Price's Law. This states that in any productive domain, the square root of the total number of people involved produces 50% of the results. So in a firm of 10,000 people, 100 individuals would account for 50% of the total value. This suggests that most people in a large workforce are redundant. When Musk reduced the headcount at Twitter by 80%, critics predicted a collapse. They assume that productivity is a function of the number of hours worked by the average employee. Price's Law reveals that productivity is concentrated in a tiny elite.

Price's Law is a counter to Marxian economics, which assumes that the worth of a product derives from the labour time required to produce it, seeing progress as a collective process. Musk works on the idea that you should only employ the real talent. Even then, once an employee is no longer driving the mission forward, they are replaced by someone who will. In X, he maintained the output of the platform while shedding the bureaucratic weight that had stifled innovation. The results were a faster and more feature-rich platform.

The modern Western world is choked by layers of managers managing managers who contribute nothing useful. These individuals thrive on the belief that committees lead to better outcomes. In high-stakes engineering and innovation, however, the many are a burden on the few who actually build. This “special forces” model of management prioritises individual brilliance over collective averages. By identifying and motivating this core, Musk forces a level of productivity that bureaucracies can't replicate.

Elon Musk has achieved orbital hegemony

Musk is perhaps best known for his relationship with Donald Trump or his management of Tesla, but his most impressive achievement is SpaceX. SpaceX has achieved a global monopoly through sheer competence. By 2025, SpaceX was responsible for delivering about 90% of the total weight of usable cargo moved into space. Most of the rest was handled by China. Musk achieved this by refusing to accept the “aerospace welfare state” that had defined the industry. Since the 1960s, firms such as Boeing and Lockheed Martin operated under cost-plus contracts, a system that essentially rewarded inefficiency where the government reimburses all costs and adds a guaranteed fee for profit, ensuring that the longer a project overran, the more the contractor was paid.

Musk set SpaceX's engineers to build rockets that were not just functional, but also economically superior. The result was to go back to first principles on every conceivable part of a space rocket, from materials used, to complexity of design and, most notably, reusability. Before SpaceX, throwing away a multi-million-dollar rocket after a single flight was normal. Musk viewed this as an absurdity, akin to discarding a Boeing 747 after a one-way trip across the Atlantic. SpaceX pioneered the landing and reuse of boosters and has reduced the cost of access to space by an order of magnitude. The Pentagon estimates that this shift has already saved the US taxpayer more than $40 billion in procurement costs.

The difference between SpaceX's “special forces” engineering culture and Boeing's bureaucracy is clear when you compare their passenger spacecraft. Despite receiving billions more in funding, Boeing's programme was plagued by years of delays and emergency technical failures, while SpaceX's leaner team delivered a reliable service for 60% less cost per seat. This performance gap continues to widen. The introduction of the SpaceX Starship V3 is intended to enable full reusability. Each engine generates more thrust than a jumbo jet, while the system is designed to be flown, landed and relaunched with high frequency. Soon SpaceX might render traditional expendable rockets obsolete.

Elon Musk's superpower

Ten years ago, Elon Musk was influential but relatively uncontroversial; his alignment with Trump has since made him a more polarising figure. But this political foray too reflects an engineering mindset rather than a thirst for office. Musk views the US state as a legacy system suffering from bloat. He applied his management process to the federal bureaucracy with characteristic ruthlessness. An initial audit uncovered “zombie payments” worth hundreds of billions of dollars. These funds were being sent to individuals who were either deceased, or, according to government records, not born yet. This foray into public service was only ever temporary and he completed a 100-day contract. His reason for doing it was that he believed it was the right thing to do. He didn't care that alignment with Trump would draw fury.

Musk believes that one of his greatest powers is simply not caring what people think of him. This insulation stems from his neuro-atypicality. Musk, who has said he has Asperger syndrome, tends to prioritise data over social cues; ignoring consensus and focusing on physical constraints, often treating social norms as secondary to progress. In the UK, energy secretary Ed Miliband has branded Musk a “dangerous person” and told him to keep out of this country and its politics. The irony is that Miliband, a man who has spent his entire professional life in non-jobs and a zealous proponent of net-zero, is criticising the man who has done more for sustainable energy through Tesla and SolarCity (yet another of Musk's firms) than any person alive. British ministers talk about some better future, but it's people like Musk who are building it. Politicians can only legislate, they can't magic into existence space-based clean energy (another of Musk's missions).

Let history be the judge of Elon Musk

Musk is a difficult man. We should not expect him to be easy or agreeable, as such traits are rarely found in those who actually change the world. If it were not for people like him dreaming about what is over the next hill, humanity would still be a small group of cavemen huddled together in fear. History will judge Musk by the 250-tonne rocket he caught and the progress he forced, not by the social approval he never sought.

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Donald Trump has sworn in Kevin Warsh as the new chair of the US Federal Reserve, replacing Jerome Powell, in what was supposed to be the big monetary policy event of the year. Kevin Warsh, like all of Trump's preferred candidates for the Fed's board of governors, has sounded very keen to cut interest rates. Assuming that he was not simply paying lip service to the president's wishes in order to win the nomination, that would mean huge pressure in the Fed for aggressive easing. Yet it is no longer so clear that the change of chair will matter much.

The Middle East crisis has changed the calculation. Markets are now pricing in interest-rate rises rather than cuts, while longer-term bond yields are rising again. Of course, a central bank that is determined to slash short-term interest rates could ignore fears about inflation and cut regardless. It could also try to control long-term yields by buying up longer-dated bonds. But in this environment, it is far less likely that Trump's appointees will be able to shift consensus among other board members towards much looser policy. Nor is it obvious from his own record that Kevin Warsh will be quite so dovish for now, notwithstanding his frequently expressed view that AI will usher in productivity gains that justify structurally lower rates.

Interest rates are not Kevin Warsh's biggest problem

All else being equal, easier policy would have been even more bullish for already-exuberant stock markets, especially in the US. Yet investors have not been behaving as if policy was too restrictive anyway.

Note how strongly markets have risen with interest rates where they are. Short-term rates at around 4% and longer-term rates at around 5% only look high by the abnormal standards of the 2010s.

So the real risk to markets is not that interest-rate cuts don't come. Instead, it is the hard reality of where fears about inflation are coming from: the disruption to energy supplies. Every week, markets trade as if the crisis will be resolved; every week, we see no solid progress. If this finally starts to catch up with the real economy – which could happen in early June, some analysts reckon – the Fed's decision to tinker or not to tinker will quickly become irrelevant.

A date for your diary

The first of the twice-yearly Mello conferences for private investors takes place next month, on Tuesday 2 and Wednesday 3 June in West London. This event always features an interesting line-up of several dozen companies and funds presenting to existing and prospective investors: one of the highlights in last November's event was Seraphim Space, which has been the star of the investment-trust sector this year. Mello is offering MoneyWeek's readers a 25% discount on tickets – go to melloevents.com/mello2026 and use the code M26MW25 to book.

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What force will shape the world in the next 20 years? The answer is China's drive to financialise, according to Diana Choyleva, founder and chief economist at Enodo Economics.

In this episode of the podcast, Diana speaks to MoneyWeek's Cris Sholto Heaton about how the AI race differs in China versus the West, the transformation of the country's equity market, and the breakdown of globalisation.

You can watch this episode on our YouTube channel or subscribe to it on any podcast platform.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

What are prediction markets?

Prediction markets are online peer-to-peer exchanges that let users wager money not just on sports and politics, but on everything from the chances of a full US ground invasion in Iran to what colour tie Donald Trump will wear on a particular day. The two biggest sites, Polymarket and Kalshi, have exploded in popularity over the past two years, as US federal regulators have taken a far more relaxed approach.

Trading volumes on the two sites were $50 billion in 2025, up from $16 billion the year before, and are set to be many times that this year. According to analytics firm The Block, cited by The Wall Street Journal, trading volumes on the two leading platforms rocketed to $24.2 billion last month, up from $1.8 billion a year earlier. Donald Trump Jr is an adviser and investor in Polymarket, and Trump Sr's media company is planning its own site, Truth Predicts. Meanwhile, several US states are suing the firms on the grounds that they facilitate illegal gambling.

Are prediction markets risky?

Betting on events that might or might not happen is obviously wide open to people taking advantage of inside information and/or seeking to influence events. Last month, a US soldier was the first person to be charged with insider trading on prediction markets. Gannon Ken Van Dyke is charged with using classified information to place roughly 13 bets worth $33,034 on positions including “US Forces in Venezuela” and “Maduro out”.

The sites claim they serve an important wider function in terms of price and information discovery – indeed, the Federal Reserve, no less, recently published a paper finding that Kalshi's market participants did a usefully good job of predicting changes in interest rates and GDP. Polymarket says it “aggregates wisdom from informed users, often outperforming experts”. But if those users are too “informed”, it stacks the deck against the rest of the players. Exactly how “informed” a user is permitted to be before they are doing something illegal is a question that's certain to play out in the courts many times in forthcoming months and years.

Are prediction markets allowed in the UK?

In theory, both Polymarket and Kalshi are regarded as unlicensed gambling sites by UK authorities and are blocked to UK-based users. In practice, there are routes (involving VPNs and cryptowallets) available to those who wish to bet. This week, the site was offering 20 different markets related to the local and devolved government elections in the UK, including mayoral elections. Unless an awful lot of Americans have developed an unlikely expertise in Britain's local politics, it seems probable that the “informed users” in question are UK-based.

How do prediction markets work in practice?

The principle is similar to sports-betting exchanges, in that prediction markets involve peer-to-peer betting (or “trading” for those who fancy themselves as pros) rather than betting against a bookmaker. On Polymarket and its competitors, unlike a conventional bookmaker, the house doesn't set the odds: it facilitates a peer-to-peer exchange – all bets are binary Yes/ No – and takes a fee.

At the time of writing, Polymarket is offering a market on what the highest temperature will be in London on 7 May. A high temperature of 16˚C is priced at 39 cents, meaning the market of interested punters thinks that there's a 39% chance of that event happening. If you bet Yes – and get it right – you get a dollar, and have made 61 cents profit on each 39 cents you stumped up.

Can you trade your position?

Yes, you can sell out of either winning or losing positions before the event is resolved – and most users do just that. Say you buy Yes at 45%, and it moves to 55% as people think it's becoming more likely. You can cash out early and make a smaller profit of 10 cents. This is an important point in terms of market manipulation and abuse by insiders – you don't need to win your prediction to make money, you simply need to move market sentiment and cash out. On 9 April, for example, the official temperature recorded at Charles de Gaulle airport jumped suddenly before falling back. The spikes were due to suspected tampering with sensors and coincided with suspicious bets on Polymarket, with hundreds of thousands of dollars in play.

Do prediction markets facilitate corruption?

It appears so. According to analysis by the Anti-Corruption Data Collective, a non-profit research and advocacy group, more than half of “long-shot” bets on military action made on Polymarket – defined as wagers of $2,500 or more at odds of 35% or less – are successful. That suspiciously high average win rate (of 52%) compares with just 25% in politics and 14% for all long-shot markets. The day before the US attack on Iran on 28 February, 150 people made trades of at least $1,000 predicting an imminent strike.

The risks go beyond insider trading, says Sam Freedman on Substack. “The more lucrative these markets become, the more predictions about the future will affect decision-making and behaviour” – and the more public trust will erode as misinformation aimed at manipulating markets becomes widespread.

Should you have a punt?

For a bit of fun, maybe. As a way of making money, probably not. The Wall Street Journal finds that 70% of users lose money and that 67% of all profits on Polymarket go to just 0.1% of accounts. “Casual traders are bleeding cash while a small number of sophisticated pros – including trading firms with access to vast streams of data – eat their lunch.”

Separate analysis by Charles Martineau, a professor at Toronto, came up with similar results. His paper concluded that 69% of Polymarket customers lose money, while the top 1% captured three-quarters of the profits. On Kalshi, too, the large majority of users lose money, with 74% of accounts unprofitable over the past month (on the firm's own figures). Good luck beating those odds.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Charles Jillings, co-fund manager of Utilico Emerging Markets Trust, discusses the outlook for emerging markets and the long-term investment opportunities in infrastructure and utilities.

In this episode of MoneyWeek Talks, Andrew Van Sickle speaks to Charles about how emerging economies are dealing with Donald Trump's tariffs, the after-effects of the war in Iran, and why countries like Brazil and the Philippines are overlooked markets.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Is the US dollar still king?

Yes, the US dollar remains the world's de facto reserve currency and the unrivalled backbone of the global financial system: it accounts for 56% of global foreign-exchange reserves and is involved in 89% of all foreign-exchange market trades worldwide.

Although the US is responsible for less than a tenth of global trade, about 54% of it is still invoiced and settled in US dollars. About 60% of all international loans and deposits are denominated in dollars, as is 70% of international bond issuance. Even physical US banknotes are widely held abroad thanks to the dollar's broad acceptance in almost every country in the world and its perceived utility as a low-risk store of value. Indeed, the Federal Reserve estimates that over half of the more than $2 trillion of US banknotes in issue are currently held by foreigners.

Is that good for America?

Yes. The vast global demand for US dollars translates into an embedded premium for US assets and a discount for its debt – what France's former president Valery Giscard d'Estaing famously dubbed America's “exorbitant privilege”. It also puts the US in a uniquely strong position to damage the financial systems of other countries via the use of punitive sanctions.

Not everyone agrees that the privilege is all that exorbitant, however. Some US economists, including advisers to Donald Trump, argue that the costs of the US dollar's reserve status outweigh the benefits. It might make borrowing rates lower than otherwise, but (they argue) this discount is overstated, while reserve status also makes the US currency unduly strong, hurting US exporters.

From the rest of the world's perspective, though, controlling the world's most powerful and desired currency does seem like a very nice problem to have.

Why is the US dollar supreme?

The US dollar's strength rests on solid structural foundations: the size and openness of the US economy (accounting for about a quarter of global GDP), the liquidity of its financial markets, the rule of law and powerful network effects that are self-reinforcing. Put simply, says Paul Krugman on Substack, “the most powerful force behind the dollar's dominance is the fact that the dollar is already dominant. The very fact that everyone uses dollars as money makes it easier to use dollars than any other currency.”

The privilege this confers is often overstated, says Krugman, but it is real. Businesses and banks must often use the US banking system, meaning that US officials have the power to observe and, in some cases, block these transactions by, for example, imposing sanctions on adversaries and secondary sanctions on those who trade with them.

Is the US dollar's dominance declining?

Yes. Measured by central-bank reserve holdings, the US dollar's share has fallen from around 71% in 1999 to around 56% today. That's a meaningful shift, driven in large part by the creation of the euro at the turn of the century (it now has a 20% share). But that's scarcely a collapse. The dollar may well become less dominant as a unit of exchange, but it's unlikely to lose its crown as the global reserve currency, argue analysts at Charles Schwab, since there's no real alternative.

A reserve currency needs to be freely convertible and have deep and liquid bond markets to be considered safe for foreign central banks to hold – and there is no other national market that matches the US in terms of size and openness. The euro area's bond markets are far more fragmented. Japan's bond market is closely controlled by its central bank, which owns the bulk of its government debt. China has capital controls, excessive political risk and its currency isn't even freely convertible.

Is the US dollar safe?

It's more that “de-dollarisation” is likely to be gradual rather than imminent. Central banks are already diversifying holdings, buying gold (exceeding 1,000 tonnes annually, the highest in decades) and currencies that come without the geopolitical baggage of today's US (Canadian and Australian dollars, for example).

And there's been a proliferation of bilateral trade arrangements denominated in non-dollar currencies, particularly involving China – including agreements to settle energy trades in yuan, especially among countries (such as Iran) that are subject to, or wary of, US sanctions.

The “weaponisation” of the US dollar to impose sanctions following Russia's invasion of Ukraine gave new impetus to that trend. Yet to date, none of this amounts to a systemic shift. The yuan, despite China's economic heft, still accounts for only around 2% of global reserves. Yuan-denominated trade accounts for less than 4% of the global total; payment systems such as China's Cross-Border Interbank Payment System (CIPS) remain tiny relative to the dollar-based infrastructure centred on Swift.

How is Trump affecting the US dollar?

The turbulence of the second Trump presidency – from the tariff scares to the Iran war and oil shock – has ramped up talk of the US dollar's decline. Trump's unpredictability and apparent disdain for international order and traditional alliances sits uneasily with the dollar's putative role as a global public good.

The dollar slumped in the early months of the second Trump presidency, falling more than 8% in the first four months of 2025 as the world took fright at Trump's tariffs. Yet even from its peak in January 2025 (the start of Trump's current term), the dollar's fall still leaves the US currency near the high end of its 15-year range in trade-weighted terms.

Geopolitical shocks may well encourage hedging and experimentation with alternatives, and chip away at the dollar's aura of neutrality. Equally, economists will continue to worry about the sustainability of US deficits and its gigantic, growing debt pile ($39 trillion, or about 124% of GDP). But none of these factors, in themselves, create a viable successor. The dollar may decline, but there's no sign yet of its fall.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

US debt is getting out of control. Amid the fog of war, it would have been easy to overlook the latest deficit number coming out of Washington. According to figures from the Treasury Department, the US national debt is now more than $39 trillion. It is only five months since it went past $38 trillion.

US debt has doubled from only $19 trillion when Donald Trump was sworn in for his first term as president. The overall debt-to-GDP ratio is now more than 124%, and by the end of 2026, interest payments will be more than $1 trillion a year. The deficit is rising at a relentless pace and the Treasury is issuing more and more debt to stay afloat.

The US debt pile is going to get a lot bigger over the next few years. Firstly, the Iran war is going to prove hugely expensive. According to the Pentagon, the first six days alone cost $11 billion and the total bill is already more than $40 billion and going up all the time. The hi-tech missiles and bombs the US deploys to such lethal effect are very expensive and the arsenals will have to be restocked soon. If the war goes on, the bill will keep rising – and that is before looking at aid to rebuild a shattered country if the regime falls.

Tariffs won't reduce US debt

Secondly, the revenue from tariffs looks more and more uncertain. Putting levies on everything America imports was always going to be a problem for the economy, but at least it brought in significant new revenue. It was, in effect, a tax, and given the size of the deficit, perhaps that was just what the US needed. The federal government collected $280 billion in tariff revenue in 2025, triple the figure for 2024, and the levies were only fully implemented in September. In March, however, the US Supreme Court ruled that the way they were imposed was illegal and exceeded the powers of the presidency. Even worse, the ruling may mean the revenue has to be repaid. The result? We can forget about that extra money reducing US debt, and the repayments, if that is what happens, will have to be paid with yet more borrowing.

Thirdly, the Department of Government Efficiency (Doge), the ruthless cost-cutting machine established by Elon Musk to take a chainsaw to government spending, has achieved very little. Musk talked grandly of cutting hundreds of billions from the state machine and hired a bunch of whizz-kids to make it happen. As it turned out, however, it turned out to be a lot harder than cutting costs at Twitter (now X) or one of his other companies. Doge did have some success: it cut the number of Federal employees by 9%, the largest fall since the demobilisation after the end of the Korean War in the 1950s. Even so, the unit has now been effectively disbanded as a single entity.

In effect, the Trump administration has given up on the attempt to slash waste and inefficiency. It proved to be too hard and little progress was made. Indeed, with the watchdog out of the way, all the staff who were laid off will probably be quietly restored to the payroll.

Finally, the mid-term elections due later this year will be terrible for the Republicans. Trump was already falling in the opinion polls, and the war in Iran has made his ratings worse. If there is a deadlock between Congress and the White House, we can forget about any controls on spending, on tax rises, or any serious effort to balance the books. There may be periodic shutdowns as the two sides fail to agree on a budget, but that won't reduce spending – it will just make the state even less effective. In reality, the political machine has lost the ability to put any meaningful restraints on spending.

True, the US economy remains strong, certainly compared with a stagnant Europe. But the maths can't be ignored forever. The last president to balance the books was Bill Clinton back in the 1990s. We don't know yet how a fiscal crisis will play out. There may be a surge in inflation, tolerated by the Federal Reserve, to whittle it away in real terms. The dollar may collapse as investors lose faith and switch to alternative currencies, perhaps including the newly launched digital yuan, or else gold or bitcoin. Or there may be a long shutdown as the federal government simply runs out of cash. We will find out over the next few years. For investors the important point is surely this: the dollar is not nearly as strong as it looks. Sooner or later there will be a crash – and the only smart move is to diversify before it happens.

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Pershing Square Holdings (LSE: PSH) is an anomaly. The investment trust is trading at a discount of 25% to net asset value (NAV), despite having returned 101% over the five years to the end of 2025 and 14% over one year. Yet this is no obscure or illiquid fund or niche strategy: it is a large, liquid investment trust with a market value of nearly £8 billion investing in listed larger companies in the US, the world's largest and (until 2025) top-performing market.

Pershing Square Holdings, which was listed in London in 2014, is run by Pershing Square Capital Management, a US hedge fund founded in 2004 by Bill Ackman. The substantial majority of its portfolio is invested in eight to 12 core holdings (at present, a total of 15 holdings are currently listed, but the size of each position is not disclosed). These holdings consist of either undervalued growth or corporate turnarounds. In either case, Pershing Square is an activist investor, happy to get involved, advise, pressure and propose management changes.

This is a sufficiently small portfolio that one can easily go through them individually to see Ackman's thinking. As of December, 10% of capital was invested in Meta. “Pershing believes that market concerns around Meta's capex spending on AI-related projects is misplaced and that the market is underestimating Meta's long-term upside potential from AI,” says the annual report. An opportunistic investment in Amazon in April is performing well – Ackman does not believe that its multiple reflects sustainable earnings growth of 20%, attributable to declining unit shipping costs and a doubling in data centre capacity by 2027.

The valuation of Alphabet (Google's owner) is still “quite reasonable” with “high teens earnings growth achievable indefinitely”. PSH invested because they thought Google's leading position in AI was being under-estimated. Universal Music is trading strongly but the stock has been weak due to “technical factors”. Ackman believes an imminent US listing will lead to a rerating, with the shares currently trading at the lowest earnings multiple (around 20) for four years.

Meanwhile Restaurant Brands – the owner of Burger King – is “outperforming a tough market”, helped by new openings and consumers trading down. Hotel chain Hilton trades on “30 times next year's earnings” but earnings are growing strongly, helped by its capital-light franchising model, strong cost control, share buybacks of 5% per annum and growth in units around the world. Car-rental group Hertz is “making progress on its turn-around” with the potential to generate cash flow, currently zero, of $1 billion per annum.

Transport firm Uber is a new holding “on a mid-20s multiple, which is extremely cheap given a high rate of earnings growth”. Growth is accelerating and it is one of three players in the autonomous vehicles market. Financial group Brookfield “is poised for an excellent year” and has bought pensions and annuities firm Just Group in the UK.

Over the past year, Pershing Square has increased its stake in US property group Howard Hughes to 47%. Howard Hughes' speciality is creating new towns, such as one 35 miles from Las Vegas, retaining the commercial property but selling residential land to developers. There are two projects in Texas and one outside Phoenix, Arizona. However, the plan here is to use the group's cash to buy an insurance company, with the aim of mimicking Warren Buffett's Berkshire Hathaway by investing the cash flow from insurance.

On the downside, Ackman admits to having held on too long to the last 20% of the trust's holding in restaurant group Chipotle and to having underestimated the scale of the challenge of turning around Nike. Both holdings have been sold.

Pershing Square's bet on government-sponsored enterprises

This all adds up to a compelling investment story, but Ackman has a knack of adding significant value through investment coups, such as hedging the portfolio ahead of the pandemic shock in early 2020 and the acquisition of its stake in Universal Music at a low price in 2021. The latest is the bursting into life of positions bought in 2013 at around $1 a share in the Federal National Mortgage Association and the Federal Home Loan Corporation, generally known as “Fannie Mae” and “Freddie Mac”. These are government-sponsored enterprises (GSEs) whose purpose is to bundle mortgage loans into tradable securities with an implicit government guarantee. This enables lenders to reinvest in new mortgages, thereby expanding their availability.

In the run-up to the 2008 financial crisis, mortgage underwriting standards became very loose. Fannie Mae and Freddie Mac suffered large losses and were bailed out by the US government at a cost of $190 billion. Under the terms of the bailout, they had to pay a 10% cash dividend on preferred stock and grant warrants entitling the US Treasury to 80% of the ordinary shares. However, the pair kept having to borrow more from the Treasury to pay the 10% dividend. Hence in 2012, the Obama administration amended the terms so that the Treasury simply received 100% of quarterly profits.

This “net worth sweep” ended in 2019, with Fannie Mae and Freddie Mac then retaining their earnings to build up their capital. By that point, the Treasury had received $301 billion of dividends, giving it an 11.6% rate of return and $25 billion more than owed under the original plan for a 10% dividend.

The government's position is that it still owns the preferred stock (and the warrants for common stock) and is entitled to interest foregone since 2019. Ackman instead argues that the preferred stock should now be regarded as fully repaid. This would, in effect, leave the US Treasury with around 80% of the ordinary shares.

At present, the shares trade over the counter, but Trump, treasury secretary Scott Bessent and commerce secretary Howard Lutnick have signalled they believe it is time to re-list them on the New York Stock Exchange. The attraction for the administration may be partly ideological (in 2021, Trump described the sweep as the US government “steal[ing] money from its citizens”) but also because they could be worth a significant amount.

Ackman estimates that an 80% stake is already worth $300 billion and believes that could easily double or treble from here. So he argues that the Treasury's warrants should be exercised and the shares listed on the NYSE but “now is not the right time to sell” the government's stake. He also wants to see a continued “conservatorship” (ie, regulatory oversight) by the Treasury to keep the firms focused on guaranteeing mortgages without the past practice of taking on new lines of business, and advocates a requirement for significantly higher reserves than in the past.

Huge upside for Pershing Square

Why does this matter for shareholders in Pershing Square? Those Fannie Mae and Freddie Mac shares, which were bought for a pittance in 2013, appreciated 207% and 284% respectively in 2024. At that point, Ackman estimated “an upside of five or six times in two to three years”. From the disclosed portfolio attribution for 2024, it is possible to estimate that the holdings accounted for between 5% and 6% of the portfolio. They have since nearly doubled. Net of performance fees and taking account of the appreciation of the rest of the portfolio, the two holdings are likely to account for nearly 10% of the portfolio today.

Ackman estimated late last year that they were trading on just 3.5 and 2.5 times next year's earnings. At his “illustrative” post-listing target of over $40 a share each (earnings multiples of 16 and 13), those holdings would quintuple in value from their current share prices. Net of the manager's profit share, that would add at least 25% to PSH's NAV. With the rest of the portfolio also contributing and the discount likely to fall sharply on such a coup, the upside to the share price would be significantly greater.

Shares in Fannie Mae and Freddie Mac peaked at a 17-year high in September, but have retreated as the Trump administration appears to be focused on other priorities. Still, it is surely not going to look a gift horse in the mouth. If and when it decides to re-list Fannie Mae and Freddie Mac, Pershing Square Holdings's shares are likely to jump.

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It was the moment the governments of the Gulf hoped would never arrive. When US president Donald Trump launched coordinated American and Israeli strikes on Iran, the Islamic Republic responded by raining drones and missiles down on Dubai and the rest of the Gulf statelets. Over last weekend, the five-star Fairmont hotel was set ablaze, drones hit a series of sites across the city and the airport was closed, leaving tens of thousands stranded, and the estimated 240,000 British citizens living and working there unable to get out.

The states of the United Arab Emirates are all key allies of the US, so to the Iranian regime at least they must look like legitimate targets. But the attacks are a disaster for Brand Dubai. The city-state has boomed over the last 25 years as a low-tax hub for the world's wealthy and its most ambitious entrepreneurs. It had dozens of sleek new office buildings, luxury apartments, glitzy shopping centres and some of the most luxurious real estate in the world. Along with the rest of the Gulf, it has turned into an engine of prosperity. A GDP of $16 billion in 2000 had by last year grown to $96 billion. As Britain, in particular, imposed higher taxes, it became the preferred refuge for the rich.

Those expatriates were not looking to move to a war zone, of course. The conflict may be resolved quickly and everything may get back to normal very rapidly. But if the conflict drags on for months, it will start to do very real damage. Dubai does not have the experience of defending itself from missiles and drone attacks in the way that Israel does. Its entrepreneurial population is by definition very footloose. It is made up of people who have already decided they have no special attachment to the country they were born in, and you can't expect them to have any greater attachment to the place where they have temporarily resettled. None of them will want to get caught up in a regional war. As soon as it is safe to do so, they will be off.

Malta: the next Dubai?

That means there is now a huge market for a low-tax mini-state to replace Dubai. The Caribbean is one obvious potential beneficiary – the Bahamas, the British Virgin Islands and the Cayman Islands are already significant offshore centres. Some of the smaller states of central America have already started to turn themselves into low-tax hubs. El Salvador, which has made bitcoin a legal currency, is one obvious example.

There could be candidates coming forward in Europe. Malta already has lowish taxes and generous deals for expatriates. Albania and Montenegro are rapidly developing offshore industries. Italy has already captured much of the top end of the market with its flat-tax deal. Even Gaza, with its peace plan overseen by Tony Blair and Jared Kushner, may emerge as a viable alternative, especially if it has committed military protection from Israel and the US.

There is a long list of countries eager to capture some of the wealth Dubai was generating. None have Dubai's infrastructure or critical mass yet. But they could build it quickly. The template is already there. It will just take political leadership to grab the opportunity.

The low-tax mini-state is one of the key innovations of the century so far. Digital communications have made it easier than ever to move from one place to another. There are few barriers to trade, so people can do business from anywhere. And relentless rising welfare bills and ageing populations mean the tax burden is constantly going up across most of the developed world, creating more incentives for people to get out. Dubai captured that market brilliantly. The war has created a huge gap in the market.

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I must admit to being rather disappointed that Donald Trump has chosen the wrong Kevin to be the next chair of the Federal Reserve. For many months, Kevin Hassett – who investors with long memories may know as the author of the laughable Dow 36,000 – sat in pole position. Appointing him would not have been good for the Federal Reserve’s credibility, but his obsequious enthusiasm for cutting interest rates promised to be very entertaining. Sadly, Trump changed his mind, and we have been robbed of the central bank boss that our peculiar times deserve.

Still, any idea that Kevin Warsh will be some kind of interest-rate hawk does not sound plausible, regardless of his position when he was last at the Federal Reserve 15 years ago. He appears to be in favour of cutting short-term rates aggressively, if not quite as aggressively as Hassett. At the same time, he also wants to shrink the Fed’s bond holdings. The latter course of action should, in theory, mean higher long-term yields, since the Fed will no longer be mopping up so many longer-dated bonds, and a steeper yield curve. How that squares with treasury secretary Scott Bessent’s desire to cap longer-term yields is unclear, to say the least. All told, the outlook could get quite confusing.

The Federal Reserve is an institution that Republicans still seem to care about

Of course, this assumes Warsh is confirmed as chair and manages to get enough of the Fed governors on his side, which is by no means certain. One of the few US institutions the Supreme Court and Republican senators still seem to care about shielding from presidential whim is the cargo cult of modern central banking. Trump has been able to get away with extreme levels of overreach in practically every sphere, but giving him free rein over the panel of technocrats who can supposedly guide the direction of a $30trillion economy by tinkering with interest rates is apparently a step too far. Nonetheless, past experience suggests he will more or less get his way. If so, Warsh’s statements seem consistent with how our asset-allocation portfolio is positioned. We remain concerned that longer-term bonds offer too little compensation for the risk of higher yields and higher inflation (not just in the US but in the UK and elsewhere) and so we are sticking to short-term bonds.

Part of our protection against central banks getting it badly wrong is our 10% allocation to gold. I am doubtful that the rapid sell-off in gold at the end of last week had much to do with Warsh’s appointment, even though that explanation has been widely quoted. Metals had rocketed the previous week with clear signs of speculative excess; a pull-back was overdue. Huge moves in data and digital companies that might – or might not – be affected by AI point to a twitchy and volatile market in any case.

We are not making any changes to our holdings, but investors who have held gold for a while may find that it now accounts for a much larger share of their portfolio than originally intended. If you find that you are now heavily overweight, you may want to trim a bit back to target. We will do this in our regular rebalance at the end of the tax year.

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Donald Trump has picked Kevin Warsh as the new chairman of the Federal Reserve, the US central bank, after months of very public arguments. The markets liked the choice. Equities rose on the news and gold tumbled as investors decided they no longer needed to hedge against the collapse of the dollar. Warsh is an experienced banker and policy-maker, but he is also close to the Trump circle, and in the past has advocated bold reforms of the way monetary policy is set. Given that Trump could easily have appointed Elon Musk, or one of his children, or even Melania, Warsh is seen as a relatively safe pair of hands.

Still, the challenges Warsh faces are daunting. First, he will have to re-establish the independence of the central bank. Trump has very clearly been trying to bring the Fed under political control, pushing it to cut interest rates even though it is far from certain that inflation is not going to start rising again. The incumbent, Jerome Powell, is facing legal action for overspending on the Fed’s new headquarters. The markets are not going to trust a Trump stooge and especially one who looks willing to start printing money to finance the president’s lavish spending and tax cuts. At some point, Kevin Warsh will have to make it clear that he is in charge, not the president. If he doesn’t, and if he seems to be conceding to Trump’s demand to juice the economy, especially ahead of the mid-term elections due later this year, the sell-off of the dollar, and Treasury bills, will start up all over again, and perhaps more savagely.

Next, Warsh needs to persuade both the White House and Congress that the deficit genuinely matters. The US economy is in robust health, but the budget deficit is still running at more than 5% of GDP and there are no plans to bring it under control. The US state has become addicted to borrowing to finance its spending. The last president to actually balance the books was Bill Clinton at the start of the century. The US has managed to get away with it so far, racking up bigger and bigger debts with every year that passes. But it has benefited from its reserve currency status, and it has been able to mop up huge amounts of Chinese savings. None of that will necessarily last forever. Warsh needs to find a way of getting the Senate, Congress and White House to control spending and, if necessary, raise taxes. The US can’t run deficits forever without risking ruinous inflation.

Thirdly, the new Fed chair needs to reinvent the dollar for a post-globalisation world. Trump has made it clear he does not want the US to finance the global trading system, that he is determined to bring free trade under control, and he wants to put America first. That is why he has ripped up the free-trade consensus and imposed the steepest tariffs since the 1930s. Whether the dollar can remain the global reserve currency in those circumstances is far from clear. Indeed, there is already evidence that central banks around the world are diversifying into gold and even bitcoin. The European Central Bank is too weak to influence anything, but China is carving out a global role for the yuan, and that is only going to grow in significance. What is the role of the Fed in all of that? Warsh will need answers, or else be left floundering as the world changes around him.

Kevin Warsh will need to calm the AI bubble

Finally, Kevin Warsh needs to calm an AI and tech bubble that has run out of control. AI is clearly a major new technology, and will create huge business opportunities, but it is also clear that investors have driven valuations far too high, just as they did at the height of the first internet boom a quarter of a century ago. Likewise, a handful of leading tech stocks have dominated the global markets. Sure, it will be great for the US economy that so much money is invested in the technology, with more than $100 billion poured into data centres and start-ups over the last year. It will pay off eventually in terms of new products and higher productivity, and it is a lot more impressive than anything that is happening in Europe. Even so, a crash will derail that, and once it starts may easily run out of control. The trick for Warsh will be to curb what one of his predecessors, Alan Greenspan, described as “irrational exuberance” without the entire market collapsing. It will not be easy. But he will have to try all the same. If the bubble carries on for another year, it will be too late.

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Is Canada worried about Donald Trump?

Yes, Canada is very worried. The advent of Donald Trump’s second term as US president a year ago – accompanied by presidential threats about seeking to make Canada the 51st state – dramatically transformed Canadian politics. The poll ratings of the Conservatives, led by Trump-aligned Pierre Poilievre, slumped. And the Liberals, under their new leader Mark Carney – who campaigned on a platform of hard-headed patriotism and economic nous – surged to an unlikely victory in last April’s election. Just hours after winning his own mandate as PM, Carney delivered an extraordinary warning about how his nation’s powerful neighbour and long-time closest ally was becoming its greatest threat. “America wants our land, our resources, our water, our country,” he told supporters. “President Trump is trying to break us so that America can own us. That will never ever happen.”

How has US-Canada's relationship been?

Up and down, with signs of some grudging respect for Carney in the White House, and some accommodations by the Canadian PM that belie his more robust rhetoric. Tariffs have been imposed, and sometimes walked back. Economically, the worst has not happened. But there has been permanent strategic damage done, and no Nato member has been as assertive as Carney in standing up to Trump’s talk of hemispheric dominance and threats to his neighbours’ sovereignty. In the case of Canada, as in Greenland, that threat is real, not imagined. Last month, US Treasury secretary Scott Bessent encouraged the secessionist movement in the western resource-rich province of Alberta, saying the region should “come on down” and join the US – astonishing talk from a supposed ally. Last month in Davos, Carney won a rare standing ovation from politicians and business leaders after warning of a “rupture” in the world order, and pledged that Canada would take on “the world as it is, not wait around for a world as we wish it to be”.

How intertwined are US and Canada?

Exports account for a third of Canada’s GDP and more than 75% of them go south to the US. By contrast, exports account for about a tenth of America’s GDP, and only around 16% of them go north to Canada. So the imbalance and dependent relationship is stark. While Canada’s exports to the US account for about 25% of its economic output, the US’s exports to Canada make up a tiny sliver (roughly 1.6%) of its national GDP. Moreover, many of the two countries’ biggest industrial sectors, including automotive and energy, are “almost irreversibly interwoven”, says Emily Stewart in Business Insider. For that reason, Carney is treading an exceptionally fine and difficult line between standing up for Canada’s interests and making things worse by angering Trump. In some ways, a more economically assertive Canada has been necessary for a while. From Bush’s “You’re with us or against us” mentality post-9/11 to Obama’s “Buy America” push to Biden’s industrial policy, the US “has been acting like a less friendly friend for a while”, says Stewart. Under Trump, there’s been a radical shift – most recently with his threat of a 100% tariff on Canadian goods if Ottawa follows through on a trade deal with China in the face of US opposition.

How effective is Trump's tariff threat on Canada?

Currently, about 85% of Canada’s trade with the US is exempt from tariffs under the 2020 US-Canada-Mexico free-trade agreement, known as USMCA. Even so, Trump’s mercantilist trade policies have had a sharp impact on vital sectors of Canada’s economy, in particular the automotive industry, steel and aluminium, and softwood forestry – all of which have suffered significant job cuts as the result of US tariffs. The trade agreement is up for renegotiation later this year, adding to the peril for Canada. Understandably, the Carney government is now working at speed to cut its dependency on the US and boost trading ties with other nations. About three-quarters of Canada’s exports go to the US; the aim is to reduce this to half.

What is Canada doing to that end?

Carney has launched a “nation-building” infrastructure agenda, including high-speed rail and port expansions that will be used to transport abundant natural resources to new markets. In addition, his government has announced plans for more (small modular) nuclear reactors and wind power, a doubling of liquefied natural gas production and faster extraction of critical minerals. To that end, Ottawa is embracing a “more active industrial policy” alongside a streamlined bureaucracy to “try and direct the economy and reduce red tape”, says Ilya Gridneff in the Financial Times. Besides, Trump does not hold all the cards. Most of the oil imported by the US comes from Canada. Canada’s biggest export is oil and gas piped to US refineries through networks that would cost billions to replace. The USMCA is too successful to fail. And the second biggest export sector – cars, vehicle parts and metals – have been built into a cross-border supply chain since the 1960s.

Are markets worried?

They’re pretty sanguine. Fiscally, Canada is in reasonable shape. Royal Bank of Canada expects an overall budget deficit for this year of 3.3% of GDP, not excessive compared with the US’s near-6%. The Canadian dollar has strengthened against the US currency during Trump’s second term and the benchmark TSX Composite index has been hitting record highs – it’s up 30% over the past 12 months, almost twice as much as the S&P 500. The main reason, says Lex in the FT, is that about half of Canada’s stockmarket is accounted for by natural resources – where prices reflect global trends and which the US needs in large quantities – and finance, which is outside the tariff net. In the US, those sectors account for about 15% of the equity market. “Canada is my biggest overweight among developed markets,” says Marko Papic, a chief strategist at BCA Research. “Carney knows exactly what he’s doing.”

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What is enshittification?

“Enshittification” is a term coined by the British-Canadian technology critic and author Cory Doctorow in 2022 to describe how the digital services that increasingly dominate our lives – Meta, Amazon, Alphabet and the rest – all turned to crud at the same time. Not everyone is as comfortable with vulgarity as Doctorow. When speaking about the phenomenon in public forums, the author plumps for “enpoopification”, employing a more decorous euphemism – poop – that dates from the mid-18th century. Here, though, we ask readers to tolerate a word that has been in continuous usage in England for about a millennium and which has only been considered rude for the past four centuries or so. “Sometimes a term is so apt, its meaning so clear and so relevant to our circumstances, that it becomes more than just a useful buzzword and grows to define an entire moment,” said Kyle Chayka in The New Yorker. Enshittification is the only word that does justice to what is going on.

What are some examples of enshittification?

This (Generation X) MoneyWeek writer no longer chats pleasurably with old university friends on Facebook because the platform has become so unashamedly crap. Ten years ago, a Facebook feed was made up of friends’ news, views and recommended articles. Now it’s an incomprehensible cesspit of advertisements and pathetic videos. For a while, you wondered if it was just you suffering. Then you realise it’s everybody. That’s enshittification. Or remember when Twitter gave you instant access to your own curated pick of the best journalism, insight and a “livestream feed of smart people on the ground at the most pressing events of the day, not to mention the wisecracks and insights of your friends”? Now, says Charles Barbour on The Conversation, it’s rammed with “ads, gore, porn, toxicity, AI slop and scams of all variety”. That, too, is enshittification. “Facebook, Instagram, TikTok, Amazon, Google, Apple, Uber, Spotify: everything turns to shit. And no one is able to escape.”

Will switching digital platforms stop the enshittification?

That won’t necessarily help. Enshittification is not the result of a business failure that risks driving customers to other platforms. It’s about intentionally letting your platform get crappier once customers are locked in, whether by their own commercial imperatives or by network effects. Enshittification is a strategy, not an accident. In Doctorow’s conception – in numerous essays and laid out more fully in his recent book Enshittification: Why Everything Suddenly Got Worse and What to Do About It – the process of enshittification has three distinct phases. At first, products are great for end users: they let old chums reconnect for free, say, with no surveillance and no “boosted” slop. Next, they abuse those end users to benefit their business customers. They find ways to lock end users in – switching costs, network effects, contracts, digital rights management – and once users are stuck, the company makes the product worse for them to extract more value.

What's the third stage of enshittification?

Finally, platforms use their surpluses to woo business customers (advertisers, sellers, creators), lock them in and start making the product worse for the business side, too. This is the highest form of enshittification: when platforms abuse their business customers, and a lack of meaningful competition and regulation means they can still increase profits. The defining feature of the process is not “things got worse”: it’s “things got worse and we stayed”. For example, in 2019, Google had a 90% market share in search, but growth had stalled, so a strategy was pitched to make search worse so that users would have to run multiple queries and see more advertisements. “That’s enshittification in a nutshell – and we all kept using Google anyway.”

Is this a sustainable model for companies?

The assumption that enshittified companies are doomed to die may be optimistic, says Henry Mance in the Financial Times. Today on Amazon, the top search results are more expensive and sometimes fraudulent. The product you want is, on average, 17th in the results – yet Amazon is thriving. Apple surveils its users as much as Facebook, and refuses to let companies sell refurbished iPhone parts. It lured customers “into its walled garden, which was then revealed to be a prison”, says Doctorow. Now, car firms such as Tesla charge drivers monthly subscriptions for features they have already bought. Indeed, Doctorow’s concept is so “brilliant” it should be applied more broadly, says Paul Krugman in his blog on Substack – a platform that recently pulled off a fundraising round that valued it at $1.1billion, raising fears about its own future path. The logic of enshittification “applies to any business characterised by network effects. It may go under different names such as ‘penetration pricing’, but the logic is the same.” Others go even further, positing Donald Trump, for example, as the “enshittifier-in-chief” of US politics.

Is there a way to combat enshittification?

Doctorow’s book is less convincing on solutions than on entertainingly setting out the problems. But the combination of Trump’s tariffs (undercutting US trade threats) and Brexit (restoring regulatory autonomy) provides a striking opportunity to gain back control of our digital lives, Doctorow argues in The Guardian. Outside the EU, Britain could choose to legalise reverse-engineering for interoperability and user benefit, thus allowing UK firms to modify and improve US tech products, and undercut the rent-extraction models of US platforms. Such a move would attract talent and capital spooked by Trump, reclaim digital sovereignty, and build a profitable tech sector focused on “disenshittifying” platforms. The opportunity is narrow and fraught with political and economic risk. But, says Doctorow, it is “the most exciting proposition in decades”.

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What's going on between Greenland and the US?

No one is sure what is going on between Greenland and the US and many are too shocked to try and work it out. But the events of the past week look and sound awfully like the shattering of the 80-year-old Atlantic alliance. For having the temerity to oppose US annexation of Greenland – an autonomous Danish territory whose 60,000 or so residents are Danish and EU citizens – the US president announced 10% tariffs on eight European nations, including Denmark and the UK. By not accepting the need for US sovereignty over the world’s largest island, first settled by Norse explorers more than a millennium ago, America’s Nato allies had created “a very dangerous situation for the Safety, Security, and Survival of our Planet”, Trump wrote. He said the 10% import taxes would rise to 25% in June and continue “until such time as a Deal is reached for the Complete and Total purchase of Greenland”.

Is Greenland for sale?

No, Greenland is not for sale, but this is at least the fourth time Washington has tried to buy it, which is geographically part of North America. In 1868, US secretary of state William Seward pursued the acquisition of both Greenland and Iceland (which didn’t gain full independence from Denmark until 1944) for a reported $5.5million (about $130million today). It followed the successful purchase of Alaska from Russia the previous year for $7.2million. The talks stalled, and there were similar failed negotiations in 1910. It wasn’t until 1917 that the US formally recognised Denmark’s sovereignty over Greenland, in exchange for the US purchase of the Danish West Indies (now the US Virgin Islands).

Why does Trump want Greenland?

Location, natural resources and prestige – but it’s not clear in what order. After World War II, when the US occupied Greenland with Danish consent, president Harry Truman offered $100million (about $1.7billion today) to buy the island. That, too, was turned down, but a 1951 US-Denmark defence pact once again recognised Danish sovereignty, while giving free rein to the US to build military bases there. For decades, under the Nato umbrella during the Cold War, the US made the most of that right, principally at the Thule air base, on the northeast coast 750 miles north of the Arctic Circle. At its peak, the base (now renamed the Pituffik Space Base) was home to 6,000 US military personnel, with another 4,000 across the island. Today, there are fewer than 200.

Is Greenland not exactly a strategic priority?

Quite. But the world’s heating climate has changed that sanguine calculus. Global warming is opening up Arctic sea routes, making the exploitation of Greenland’s mineral resources more plausible and conceivably increasing the threat to the US from Russia or China via the polar region. But when it comes to resources – Greenland has 39 of the 50 minerals classed by the US as critical to national security – the economic case doesn’t add up. Greenland is an island the size of Saudi Arabia with just 100 miles of paved roads in total, and most of the territory is covered by an ice sheet up to a mile deep. “The harsh environment, enormous financial investments, and massive infrastructure and workforce buildout required to create an economic engine could cost at least $1trillion over two decades [and makes] little to no economic sense,” says Jordan Blum in Fortune. There’s oil, but the last, unsuccessful drilling bid was abandoned in 2011. Neither of the active mines extract the desired rare earth metals essential to computer, vehicle and military equipment. Moreover, Greenland is already open for exploitation, and sovereignty would add nothing.

What about the security argument?

Greenland is on the fastest routes between the US and Russia. Existing defence treaties with Denmark give Washington all of the necessary military access for “Golden Dome” bases and naval patrols. But Trump is on a drive for hemispheric dominance and – perhaps – personal prestige. His administration increasingly sees the world in terms of 19th-century Great Power politics, with the Monroe Doctrine of US hemispheric hegemony – and its new “Trump Corollary” – specifically at its centre. In 1848, the British foreign secretary Lord Palmerston observed that England has no “eternal allies or perpetual enemies” – only eternal and perpetual interests, and “those interests it is our duty to follow”. For the 19th-century hegemon, Great Britain, read Trump’s America today. Trump believes the Atlantic alliance is ineffectual, so it doesn’t matter to him that the US could achieve all of its national security and economic objectives without annexing Greenland. Trump’s “eternal interest” is in safeguarding the security of the US in perpetuity, and he appears to have determined that acquiring sovereignty over Greenland is vital to that end.

What can Europe do?

Protect its own interests. European governments and investors own around $8trillion of US bonds and equities – almost twice as much as the rest of the world combined. But pulling that investment back is likely to be a slow process, with investors wary of overreacting. If Trump’s tariffs had gone ahead on 1 February, then Brussels would almost certainly not ratify last year’s EU-US trade deal, and retaliatory tariffs would be on the table. The nuclear option for Europe would be the EU’s Anti-Coercion Instrument, a law that allows the EU to respond punitively to economic blackmail from non-EU countries interfering in the “legitimate, sovereign choices” of the EU or its member states. Measures include tariffs, import and export restrictions, curbs on trade in services as well as reduced access to banking and capital markets – and blocking access to most of the single market while ignoring existing international treaties. It’s a nuclear option as it would wreak major economic damage on Europe itself, and is designed more as a deterrent – bringing offenders to the negotiating table – than as an offensive one. Let’s hope it isn’t needed.

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It is a bizarre legal action. Jerome Powell, the chairman of the Federal Reserve, the US central bank, has been prosecuted over renovations of the Fed’s headquarters and may now face criminal charges. Given that it manages an economy worth $30trillion and the world’s reserve currency, it is hard to see that the $2.5billion spent on improving the Fed’s offices really matters much. Even so, Donald Trump has clearly decided to use it as a weapon for a full-scale assault on a Fed chairman he would prefer to get rid of.

Powell himself was clear that the legal attack was just a way of bringing the Fed to heel. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preference of the president,” he said in a statement. In other words, it is a political attack on the Fed and an attempt to allow the president to control monetary policy. If Powell is removed from office by the courts, whoever is appointed to replace him will clearly be taking instructions directly from the White House.

That is a dramatic and dangerous development. This is not to deny that independent central banks are worthy of criticism. Over the past 30 years, they have become too powerful, too confident in their own abilities and too quick to print money. You can make a case that, instead of ensuring greater stability, which is what they were meant to do, independent banks have inflated a series of asset bubbles, indulged spendthrift politicians and prioritised trendy causes while allowing industry to be hollowed out. There is a case for reform. Still, there is a big difference between that and a power grab to hand the right to set rates to the White House.

There are two big problems with that. First, it looks as if Trump is determined to control interest rates himself, either directly, or else through a tame proxy at the Fed. That is not without precedent. In Britain, interest rates used to be set by the chancellor, but the result was that the UK had one of the worst records on inflation in the world before Gordon Brown made the Bank of England independent in 1997. And it is hard to think of a worse person to set rates than Trump. He is temperamental, he constantly changes his mind, he doesn’t listen to advice, and his falling approval ratings mean he will constantly try to cut rates to boost short-term demand. Even more seriously, if the president acquires the right to set rates, it’s hard to see how it will ever be given up. It is too major a power to surrender. The US will have a politicised monetary policy permanently.

How bad will it get under Trump?

Everything else the president is doing appears designed to stop the free market working and drive up prices. The US has already imposed the steepest tariffs since the 1930s, with an average levy on imports of 18%. Closing off its markets to global competition will only drive prices higher and quality down. Only last weekend, Trump promised to cap credit-card interest at 10%, the kind of populist policy you would expect from the far left. Trump has also started capping corporate investment in the housing market. He is directing the oil companies to invest in Venezuela regardless of whether there is an investment case for it or not (with oil at $50 a barrel, there probably isn’t). There does not appear to be a coherent plan, but a whole series of interventions to create markets rigged by the government. State-controlled economies always end up with higher prices.

Add it all up, and one thing is clear – sooner or later the US will see a major rise in inflation. How bad will it get? There is no way of knowing for certain, and it will depend on what else is happening in the global economy. But once prices start to rise we know they are very hard to bring under control again. And if US prices rise, that will drive global prices higher. We can expect inflation to spread to Britain and the rest of Europe very quickly. Investors are already positioning themselves for that, with the price of gold hitting record highs every week. Prices of defensive assets will inevitably go a lot higher.

Almost exactly a year ago, Nicolás Maduro and his wife Cilia Flores arrived in triumph at Venezuela’s National Assembly in Caracas for his third presidential swearing-in ceremony. After being plucked from their beds by US commandos, and deposited in one of New York’s toughest jails, they will have plenty of time to ponder the difference 12 months can make. Yet Maduro “put on a remarkable display of insouciance” right until the last, says The Times. As US military forces assembled off the coast, he donned a sombrero and was seen dancing on stage with supporters and attending Christmas tree lightings.

For all his apparent buffoonery, Maduro, 63, is “known to be a cunning and ruthless operator” who relished “playing the role of David to the US Goliath”, says the Financial Times. Until now, he’s always been a survivor. In 2018 he dodged a drone attack at a military parade; in 2020 he withstood a botched mercenary incursion. Maduro had an unlikely rise to power, assuming “the revolutionary mantle” of his mentor, the leftist strongman Hugo Chavez, following his death from cancer in 2013.

But against predictions, he hung on to power – even as Venezuela’s economy collapsed under his regime’s mismanagement – by viciously crushing dissent, subordinating courts and freely dispensing patronage to consolidate his power. Elections were held, notes The Times, “but outcomes were rarely in doubt”. Under Maduro’s rule, Venezuela – which has the world’s biggest proven oil reserves – suffered one of the stiffest contractions ever suffered by an economy, anywhere. Since 2013, GDP has shrunk by almost 80% and corruption, trafficking and violent crime has flourished amid a growing scarcity of basic commodities. The result has been an “unprecedented” exodus. As many as eight million Venezuelans, or a third of the population, have fled the country, according to UN figures.

Who is Nicolás Maduro?

Born in 1962, and raised in El Valle, a blue-collar suburb of Caracas, Maduro was “steeped in left-wing activism from an early age”, says The Telegraph. He began his political career as president of his high school’s student union – though records show he never graduated. A keen baseball player, Maduro travelled to Cuba in 1986 “to receive a year of ideologic instruction”, notes Fortune, eventually returning to Caracas to work as a bus driver and union activist. He became a Chavez supporter after “El Comandante” was jailed for a failed coup in 1992, and rose rapidly through the ranks of the ruling party when Chavez took office in 1999. Nonetheless, the latter’s deathbed anointment of Maduro as his successor “stunned supporters and detractors alike”.

Soon after Chavez’s death, Maduro went on TV to claim the spirit of the late revolutionary had “reappeared to him as a tiny songbird” while he was praying in a chapel, says The Telegraph. This was in marked contrast to the reality of the “heavily armed militias of motorcycle-riding Chavista supporters” he deployed “to terrorise opponents”. The US alleges that Maduro and his wife Cilia – whom he called the “first combatant” instead of first lady – were involved in a drug-trafficking network run by Venezuelan military officials called the “Cartel de los Soles” (Cartel of the Suns), responsible for transporting thousands of tons of cocaine into the US.

Most Venezuelans are rejoicing at the dictator’s removal even as they fear what might happen next. For Maduro, the future looks bleak – he will “soon face the full wrath of American justice on American soil”, said attorney-general Pam Bondi, though Maduro is a man who is always thinking of how to get what he wants out of any situation, says one former associate. Right now, that looks quite a challenge.

What does this mean for Venezuelan opposition figure María Corina Machado?

With Nicolás Maduro deposed, this “should be María Corina Machado’s moment”, says the Financial Times. But Venezuela’s main opposition leader, who has been living in hiding for many years, faced difficult choices. Having left the country to accept the Nobel Peace Prize in Oslo in December, should she return to her homeland? Or call her supporters onto the streets to push for regime change?

Machado, 58, has been on a “roller coaster”. An industrial engineer from Caracas, her political career peaked with a resounding victory in the opposition’s primary election in 2023. A subsequent ban on holding public office forced a retreat into hiding. She then won the Nobel Peace Prize, only to hit a new low with the “humiliation” of a snub from Donald Trump. Despite her warm comments about the US president and his actions in her country, Trump decided she lacked sufficient “support or respect” in Venezuela to be the leader. Trump is instead working with Maduro’s deputy, Delcy Rodríguez, who is now Venezuela’s acting president.

The reason for the snub, according to The Wall Street Journal, is that Trump was warned by CIA analysts that Machado, and her presidential candidate, Edmundo González Urrutia, would struggle to gain legitimacy and face resistance from pro-regime security services, drug trafficking networks and political opponents.

The Washington Post thinks the decision may be more personal – Trump is simply irritated she accepted the Nobel Peace Prize. “If she had turned it down and said ‘I can’t accept it because it’s Donald Trump’s’, she’d be the president of Venezuela today,” a source told the newspaper.

Trump has talked of a democratic transition after the oil industry has been rebuilt, something he says could take 18 months, but which could take longer, giving the regime opportunities to thwart the opposition or “simply outlast Trump”, says The Economist. The best hope for Machado is to “try to speed things up”.

Machado appeared on Fox News on 5 January and thanked Trump for his “courageous actions”, promising she could turn Venezuela into an energy hub, “suggesting sweet talk is still her method”. “Machado has proved remarkably resilient and canny. But her biggest challenges lie ahead.”

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Zohran Mamdani: A socialist takes New York

“We cannot have a socialist” running “the greatest capitalist city in the world”, observed one Wall Street financier just before November’s mayoral election. Get used to it, said The New Yorker. On New Year’s Day, Zohran Mamdani will become the first avowedly socialist mayor of New York, and its first Muslim leader to boot, following a meteoric rise. A year ago, most had never heard of the youthful Assembly member from Queens. But Mamdani’s rising star – on a platform of soaking the rich to fund rent freezes, free bus travel and universal child care – has proved unstoppable.

Donald Trump, who once called Mamdani a “100% Communist lunatic” and threatened to deport him, changed his tune when he met him, staging a surreally chummy press conference with his charismatic fellow populist. “As well as coming from nowhere” to win New York, Mamdani has “succeeded in setting” America’s domestic economic agenda in 2025, making the issue of “affordability” the watchword of his slick TikTok campaign. Born in Uganda, Mamdani, 34, arrived in New York aged seven. His unremarkable CV since might suggest he’ll struggle to run a city with “the economy of a medium-sized nation”, says The Economist. And his hands are tied: the state legislature seems unlikely to pass his full $9 billion package of tax hikes. But the city’s fate ultimately depends on whether Mamdani shows “a pragmatic streak”, says The Wall Street Journal – or views “his mission” as “creating a socialist lab experiment”.

Javier Milei: El Loco stands at a crossroads

Argentina’s chainsaw-waving “libertarian firebrand” Javier Milei narrowly escaped financial meltdown this year – helped by a $20 billion lifeline from the Trump administration to avert a currency crisis and “Make Argentina Great Again” – before pulling off a surprising landslide in the country’s midterm elections, says Bloomberg.

Nicknamed “El Loco” (The Madman) as a teenage goalkeeper, Milei has often seemed determined “to perpetuate this reputation with his egotistical boasts and brutal attacks on critics”, notes The Washington Post – not to mention “his crazy hair, cloned dogs and claims of expertise at tantric sex”. Yet since coming to power in 2023, the results of his far-reaching free-market reforms have been impressive, says The Economist. Inflation is down from 211% to around 30%, the poverty rate has fallen and “the budget has been wrestled under control”. Milei is now moving towards a floating peso and removing most capital controls. The process has been painful, but voters have kept faith with his vow “to jolt” Argentina “out of more than a century of statism and stagnation”. Markets, in turn, have celebrated, judging the prospect of Milei’s re-election next year now more likely. “Rev up the chainsaw!”

Much could yet go wrong. Milei is now at a crossroads, Carlos Malamud, a Latin America specialist at Madrid’s Real Instituto Elcano, told the Financial Times. “He has everything he needs, if he gets it right… to lead a deep transformation of Argentina.” But if “arrogance gets the better of him again”, all bets are off.

Sanae Takaichi: Japan’s Iron Lady

The new Japanese premier, who made history in October when she became the country’s first female PM, has proved a gift for headline writers. Known for her love of hard rock and motorbikes – and citing Margaret Thatcher as an inspiration – Sanae Takaichi has gone “from Iron Maiden to the Iron Lady”, says Sky News. But she has taken a battering at the hands of bond markets. Since taking power, and shocking investors with a “low quality” fiscal expansion of $135 billion – “including such gems as rice vouchers and subsidies for fossil fuels” – yields on Japanese debt have “spiked wildly across the maturity curve”, says The Telegraph. The risk that this could escalate into a major crisis in Japan’s historically sedate $12 trillion bond market “has sent tremors” through the markets.

When it comes to dealing with Donald Trump, she appears to have learned from her mentor, the late Shinzo Abe, that “flattery, deference” and golf-related “gold-plated gifts” were the way to go. “Takaichi’s smorgasbord of giveaways” may make a “mockery of Thatcherism”, but she does share some traits with her heroine. “Like the late Iron Lady, she has little patience for other career women,” says The Telegraph. She belongs to Nippon Kaigi, “a nationalist nostalgia movement that fights feminism and harks back to the Samurai ideal of women as the anchor of home and family”. Still, unless she is careful with bond-market vigilantes, Takaichi runs the risk of comparison with another UK Conservative prime minister – Liz Truss.

Liang Wenfeng: The hedgie who shook the world

The entrepreneur behind DeepSeek began 2025 with a shot that rang around the world, says Fortune. Billions of dollars were wiped off the value of Silicon Valley’s AI titans in January when the unknown Chinese start-up revealed its prowess at developing cutting-edge AI at a fraction of the cost – raising doubts, that have lingered all year, about the gargantuan sums being spent in the West. “Whether by chance or design”, the launch of DeepSeek’s R1 coincided with Donald Trump’s inauguration, says Time, creating “a powerful narrative” that China had “matched America’s best with just a fraction of the computing power”. It was hardly the best start in Washington to a year of tight trade negotiations.

Liang Wenfeng, 40, who hails from a village in southern China, isn’t a computer whizz so much as a financier. After graduating from Zhejiang University, he co-founded the quantitative hedge fund High-Flyer in 2016 – originally using AI as a trading strategy to predict market trends and help make investment decisions. In 2021, says the Financial Times, Liang began buying thousands of Nvidia chips as “an AI side project”. At the time, local business partners viewed this as “a quirky hobby”. But when he started DeepSeek in 2023 – and began challenging local rivals ByteDance and Alibaba – they sat up. DeepSeek has spent its short corporate life having to work around successive US bans on the export of vital chips to China. The upshot, says the South China Morning Post, is that Liang has become one of the most forceful drivers of China’s push for technological self-sufficiency.

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The way that central banks responded to the global financial crisis almost 20 years ago is often derided as “printing money” and “debasement”. This shorthand is odd. Whereas a Roman emperor might debase a coin by reducing its precious metals content or a Weimar chancellor might print banknotes, now money creation is digital. That’s because in a modern economy, money takes the form of bank deposits stored electronically.

Unlike banknotes, which are printed on polymers with holograms and foil patches to prevent forgery, electronic money is replicable. Anything digital can be copied ad infinitum. An album on Spotify or a video on YouTube can be streamed all over the world at close to zero marginal cost. For most digital assets this doesn’t matter – millions of people can own the same album. But for digital money to hold its value, different people can’t simultaneously use the same asset.

To prevent double-spending, bankers adopted centralised electronic ledgers, recording transactions between counterparties, verifying and confirming the change in balances between the two account holders. Centralised ledgers form the backbone of the financial system, handling trillions of transactions. Then around 20 years ago, crypto enthusiasts invented an alternative to centralised ledgers – distributed ledger technology (DLT), where a DLT is maintained across a network of computers rather than being held by a central authority such as the central bank.

It’s not entirely clear what problem the innovators thought this was solving. Yes, bitcoin’s value has increased exponentially, to such an extent that the 10,000 bitcoins used to buy two pizzas in the first real-world transaction in 2010 would now be worth a billion US dollars. Yet despite this, bitcoin has failed to achieve the original ambition set out by the pseudonymous Satoshi Nakamoto in his or her original white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System.

To take one telling example, a bitcoin conference in Miami had to stop accepting bitcoin payments for tickets due to network congestion, high transaction fees and the manual processing required. Organisers admitted the cryptocurrency was simply too impractical for everyday transactions like selling tickets. Similarly, Tesla began accepting bitcoin as payment for cars in 2021, yet Elon Musk reversed this decision within a couple of months, ostensibly for environmental reasons, as the process was so energy intensive.

Stablecoins: A “trading bridge” to crypto markets

Now a new kind of distributed ledger innovation is starting to occupy the spotlight: stablecoins. There are now more than $250 billion of stablecoins, up 59% year on year. These tokens are not designed for speculation: they are built for stability and transactions and are far more energy efficient than bitcoin.

A stablecoin is a cryptocurrency that aims to maintain a stable value relative to another asset, such as the US dollar. They were originally developed as a “trading bridge” to crypto markets. Investors use them to park profits from selling bitcoin and other cryptocurrencies, without having to convert back into money held within the traditional banking system.

Banks and neo-banks such as Revolut and N26 allow customers to buy crypto, but they will often block accounts that transfer in large sums of crypto from unidentified sources due to anti-money laundering (AML) requirements. As stablecoins operate on public blockchains, their compliance model is fundamentally different. They generally do not do know your customer (KYC) processes for their individual users. Instead they rely on crypto exchanges such as Binance, Coinbase or Kraken to do the KYC.

Much of the momentum for stablecoins has come from acceptance by financial regulators, particularly the Trump administration’s Genius Act. Financial institutions can now treat stablecoins like cash on their balance sheet, pegged to the value of the US dollar. Growing acceptance mean they are being plumbed into the pipes of the financial system.

For instance BlackRock, the world’s largest asset manager with over $10 trillion assets under management (AUM), announced a partnership with cryptocurrency exchange Circle that aims to enable USDC (Circle’s dollar-pegged stablecoin) to function as a form of programmable digital cash on the internet. BlackRock’s role is to provide an underlying cash-reserve investment, similar to a money market fund that invests in short-term government debt.

Tether’s money machine

Tether, the largest stablecoin with close to $180 billion in circulation, is 75%-backed by holdings in US government debt. In effect, Tether is able to borrow huge amounts from customers, pay no interest, invest the money in safe assets yielding 4% and keep 100% of the returns, amounting to annual interest of $7 billion.

This is an amazingly lucrative business model , yet somehow it is not enough, since Tether is already deploying 25% of its deposits elsewhere. This includes bitcoin and over 100 tonnes of gold – the growing popularity of gold reflects that “the world is going toward darkness”, according to CEO Paolo Ardoino.

A week ago, Tether made an all-cash proposal to buy Juventus Football Club. The press release does not make it clear whether it is using its own accumulated profits or customer deposits to fund the purchase – hopefully the former. Earlier in December, Tether Investments (the arm of the business that deploys its profits) announced it was taking part in a funding round for an Italian robotics company.

Still, regardless of where some of Tether’s deposits are going, it has become a meaningful player in US Treasuries, with its purchases offsetting the amount of US government debt that China has sold over the past three years. US Treasury secretary Scott Bessent has explicitly signalled that he expects stablecoins to become an even larger source of deficit funding for the US government. The US administration believes that dollar-backed stablecoins could appeal most to savers in countries such as Argentina, Egypt or Turkey, where trust in domestic financial institutions is low and people prefer to hold US currency.

Countries with a relatively high adoption of stablecoins already include Ukraine, Turkey and Nigeria – in effect, the population of these countries are funding US deficit spending. Conversely, non-US governments that hope to issue stablecoins in local currency may have missed a crucial point – the underlying demand is for stable US dollar exposure rather than the stablecoin itself.

How will stablecoins work in practice?

While stablecoins seem to be a “safe” asset, they have the potential to threaten financial instability. If billions leave the banking system to fund governments directly, this could raise the cost of funding for banks. No doubt banks would pass on higher funding costs to their borrowers – corporates and households.

Banks may respond to the threat to their deposit businesses by issuing their own stablecoins. They have also lobbied US politicians to prevent non-bank issuers from paying interest to customers or offering other incentives. Ardoino has told The Peg, a stablecoin newsletter, that this would be short-lived. “I’m not sweating at all. Many of these new stablecoins will fail,” he said. “If JPMorgan creates a stablecoin, they will offer the stablecoin to their account holders, who are exactly the people that don’t need a stablecoin.”

There remain several puzzles about how stablecoins will work in practice. Are stablecoins for non-bank customers simply a work-around of AML and KYC regulations? How will issuers like Tether and Circle maintain confidence in the peg to the dollar during a crisis? What constraints limit the supply of stablecoins?

It’s also unclear what problems stablecoins solve for ordinary savers who aren’t interested in using them as a bridge to speculate in cryptocurrencies. Obvious uses include cross-border payments that bypass the traditional bank-based payments system with its high fees. Yet this has already been solved by transfer firms such as Wise.

Stablecoins that pass on interest from their bonds (unlike Tether, at present) could mean that savers earn higher interest rates. However, investment platforms such as AJ Bell, Fidelity and Interactive Investor already report that their most popular products are short-term money market funds that invest directly in government debt.

So with the obvious applications in the developed world already met elsewhere, the demand for stablecoins appears to be coming from unstable parts of the world, as an alternative to keeping physical dollars under the mattress.

Is Tether worth half a trillion dollars?

Tether is seeking to raise $15 billion-$20 billion in funding by selling a 3% stake at an eyebrow-raising $500 billion valuation. The group has signalled net profits for 2025 of roughly $15 billion, so that would imply a price/earnings (p/e) ratio of over 30 times. Tether’s closest rival, Circle, which listed in New York in June, is valued at less than $20 billion, having fallen 70% from its June peak. Nonetheless, it trades on a p/e of almost 70 times forecast earnings for 2026.

UK banks trade on less than 10 times. Arguably, stablecoin issuers offer lower risk than banks, as they don’t take credit risk (ie, they don’t lend to customers) or do maturity transformation (use short-term deposits to make long-term loans). Yet Tether – which is domiciled in El Salvador and operates from the Swiss town of Lugano – does not match its stablecoin one-to-one with US Treasuries. This does not inspire confidence.

We’ve already seen one stablecoin – Terra – collapse, albeit with a different business model to Circle and Tether. Terra was not backed by Treasuries, but instead based on a poorly understood trading algorithm that created a death spiral. Do Kwon, the co-founder of Terra, was last week sentenced to 15 years in prison, with the judge saying he had committed “fraud on an epic, generational scale”.

Given that no bankers in the UK or US faced jail after the financial crisis, perhaps regulators holding management to account is one innovation that could be replicated from stablecoins groups to traditional finance.

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In September, reports began circulating in Kyiv that a high-profile and controversial American was sniffing around for business. “Military hawks and defence privateers” described how Erik Prince – founder of the now defunct mercenary company Blackwater – had been “aggressively pitching his services” and was on a “hunt to acquire drone-makers with a footprint in Ukraine”, noted The Guardian. The rumours tallied with reports that the Trump administration may be lining up US private military contractors to operate in post-war Ukraine.

Prince has also been preparing the ground in Venezuela, where Trump has just imposed a no-fly zone and issued an ultimatum for the president, Nicolas Maduro, to relinquish power. He was in the country last year, spearheading a local fundraising campaign to oust the leftist strongman. By his standards, that action was quite mild, observes The Times of India. Prince’s more “controversial” recent operations include “advising on a drone assassination programme” in Haiti.

Suddenly it seems “America’s most notorious mercenary is everywhere”, says The Economist – at the heart of a resurgence of private military companies, his services “more in demand than ever”. Prince’s “worldview” has certainly never chimed better with those holding power in America. Unlike most mercenaries, he does not shy away from publicity. “Cocksure and combative,” he brims with “machismo” and is lauded by his friend, US secretary of war Pete Hegseth, for his “warrior ethos”.

A former US Navy Seal, Prince, 56, was born into a family of Michigan industrialists, renowned for their god-fearing ways and political activism – and had “an intensely conservative upbringing”. After leaving school, Prince joined the US Naval Academy, reportedly quitting after three semesters because “he found the place too liberal”, says The Economist.

He interned in George H.W. Bush’s White House before joining the Seals, serving in the Balkans, Haiti and the Middle East. The death of his father in 1995 brought him home. Prince sold the family business for $1.35 billion, using some of the proceeds to set up Blackwater. Quickly expanding its services, the company became internationally infamous for its activities during the Iraq and Afghanistan wars and was “blacklisted” in 2007 following a “massacre” in Baghdad. Four security guards were later convicted of murdering 14 Iraqi contractors. In 2020, Trump pardoned them.

In 2009, Prince sold the remnants of Blackwater and moved to the UAE, establishing a string of new companies. The most prominent, says the Financial Times, was Frontier Services Group – a Hong Kong-listed firm, backed by China’s state-owned investment house Citic, which ran logistics for mining and energy companies in Africa. This pivot, from “Bush-era military adventures” to Chinese “Silk Road” fixer, raised eyebrows in Washington. Indeed, Prince’s attempts to re-establish himself during Trump’s first term ultimately failed, says CNN, even though his sister, Betsy DeVos was serving in the administration. “Banned from inside the Pentagon and CIA” by officials concerned his outfit “brought unwanted scrutiny and pushed the boundaries of legality”, he went on to be investigated by the UN for alleged arms trafficking to Libya.

What will Erik Prince do next?

With a more untrammelled Trump back in office and in need of on-the-ground operators, “the former pariah… has newly reestablished himself”, says CNN, doing what he does best – spotting opportunity in chaos. Prince’s return is a sign of the times, says The Economist: a world in which “private firms with private firepower” – specialising in “bringing order” – are deemed the only alternative to “total anarchy” in some countries.

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Donald Trump’s attempt to hammer out a truce between Russia and Ukraine remains in the balance, but defence shares are already slipping at the prospect of the three years of bitter fighting finally coming to an end. It is not hard to understand why. Defence has been one of the few stars in a generally dismal European economy, with shares soaring on expectations that governments across the continent would spend a lot of money in the years ahead on rebuilding their armed forces.

The big German defence contractors were the stand-out performers on the back of the huge increases in borrowing and spending, much of it directed to the military. Rheinmetall shares were up 170% over the last year, before the latest sell off. Yet with the European Union also planning a €150 billion common defence fund, all the continent’s major companies were expected to get a lot of lucrative contracts. So Italy’s Leonardo had doubled, while France’s Thales was up by more than 70%. Even environmental, social and governance (ESG) funds were starting to invest in the sector.

A ceasefire in Ukraine could change all of that very quickly. Trump is pushing hard for a deal and it will prove hard for Ukraine to hold out against that. The war has reached what looks like a stalemate, with huge losses on both sides. Sure, it would be better if Ukraine could achieve a victory and Vladimir Putin were removed from power in Russia. But there does not seem to be much chance of that happening. An end to fighting would save a lot of lives and might be the best option available. And so investors are right to reassess.

If there is a peace deal, governments across Western Europe may very quickly go back to spending more money on welfare, or trying to bring their deficits under control and keep the bond markets happy. If there is no security emergency on their doorsteps, it will be hard to persuade voters to keep spending money on defence that could be spent on healthcare, social security or infrastructure instead. That is what they did after the Cold War ended, and it is very easy to think that the same thing will happen again. If it does, the defence giants may find their order books starting to dry up very quickly.

Peace in Ukraine would not end the need to rearm

Even so, there are two reasons why this is not the most likely outcome. To start with, any peace deal will almost certainly include some security guarantees for Ukraine. It is not likely to be allowed to join Nato, but there may well be a peacekeeping force that is drawn from Europe, as well as help for restoring its own armed forces so it can defend itself from further attacks. All of that will mean that money has to be spent on kit for the soldiers who will be keeping an eye on the new border between Russia and its neighbour.

Next, and more importantly, if the Ukraine war is settled, at least for now, then the US will inevitably accelerate its withdrawal from Europe. This had already started under previous presidents, but Trump has made it very clear that the US does not intend carry on paying for the defence of the continent. Trump wants all the major countries to commit to spending 3% or more of their GDP on their armed forces, while the US turns its attention elsewhere. The war in Ukraine has kept America engaged in Europe for the past three years, but without that emergency, it will focus instead on the far larger contest with China for the dominant role in the Pacific. The result? Europe will have to carry on paying much more for its own defence. It won’t have any other choice. Russia will remain a hostile, threatening opponent, and with less support from America, Europe will have to remain in a high state of alert.

European governments, including of course the UK, might want to cut spending – there will be plenty of demand for more spending elsewhere. If the peace holds between Russia and Ukraine, it will be very tempting to make savings. But in reality, that won’t be possible. Military spending will have to keep rising – and that means the boom in defence shares will carry on for many more years to come.

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In 2024, Jared Isaacman became the first non-professional astronaut to walk in space. Within months, the daring payments billionaire – a close ally of Elon Musk – leapt closer to another personal goal by becoming Donald Trump’s top pick to head US space agency NASA. He was briefly out of favour when Trump and Musk fell out, but the stars have realigned for Isaacman. Trump has renominated Isaacman, saying he’s the ideal candidate to drive the agency’s “mission of discovery and inspiration”.

Within NASA, there are hopes that the appointment will draw a line under “weeks of drama” over who will lead the agency, says Bloomberg. Isaacman, 42 – who founded his company Shift4 at just 16 – is a political neophyte. But Trump highlighted his business achievements; and there’s no doubting his passion for extraterrestrial travel and derring-do, says Time. A former stunt pilot, he bankrolled last year’s three-day Polaris Dawn space mission, reportedly paying $200 million to Musk for all four seats aboard the SpaceX craft. Isaacman has tied himself closely to SpaceX since 2021, says Bloomberg, spending undisclosed sums on multiple missions and helping fund research and development. “A staunch supporter of the commercial space industry,” he’s expected to increase NASA’s use of private companies if confirmed for the top job. Conflict of interest is a worry.

“Dropping out of high school isn’t usually a good idea, but it sure paid off for one New Jersey kid,” noted a 2011 profile in Business Jet Traveler charting Isaacman’s meteoric rise. His parents, who earned a precarious living, worried when the self-described “horrible student” quit school, but Isaacman already had a business plan. During school holidays, he’d done IT work for Merchant Services Inc – “early e-commerce stuff” – and got a feel for the credit-card industry where he saw “a lot of opportunity for improvement”. In 1999, he founded United Bank Card from his parents’ basement: “Assets were limited to $10,000 in stock certificates that he’d received from his grandfather.”

The young firm flourished. Isaacman’s father, Don, who joined as a salesman, later said “he was within a year of losing his house” when the company (rebranded Shift4 in 2017) started, crediting his offspring with “saving the family”. There was no silver bullet, says Isaacman: no “one technology or patent”. He simply focused on streamlining the then labyrinthine business of processing credit cards, moving quickly into new technologies and often offering customers (typically restaurants and shops) free kit in order to win their accounts. Within a few years, the firm made Inc magazine’s annual list of America’s fastest-growing small businesses and Isaacman was runner-up to Mark Zuckerberg in the list of “30 top entrepreneurs under 30”. By 2011, he was running one of the US’s largest payment processors.

Can Jared Isaacman lead NASA?

Success gave Isaacman free rein to indulge his passion for flying. An avid collector of vintage planes, he became an aerobatics whizz, performing at air-shows. In 2009, says Fortune, he “set a world record for circumnavigating the globe”. Isaacman parlayed his love of aviation into a business, founding Draken International, a defence firm specialising in military aircraft and training pilots. In 2019, he sold a majority stake to Blackstone, launching himself into billionaire status. Isaacman is “a thrill seeker”, says Forbes. But that’s partly “to unwind from the non-stop… 80-plus-hour weeks” he works. NASA's staff can expect an intense regime of slashed meetings, cost-cutting and liberation from “inefficiencies”. Isaacman has said he wants to “foster a culture of urgent execution” in his quest to kick-start America’s new space age. “NASA’s Game of Thrones is finally over,” observed Politico. There’s quite a firebrand in the hotseat.

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After World War II, America and its allies put in place a set of alliances, institutions and power structures to rebuild war-ravaged countries, create geopolitical stability and generate global economic growth. This post-war order has endured – with one important change – for much of the following eight decades.

The fall of the Berlin Wall and the dissolution of the Soviet Union seemingly marked the end of any alternative to Western capitalism and liberal democracy as the main global economic system. However, in recent years, it has become increasingly obvious that the ties holding this US-dominated system together are fraying and are likely to break.

We are heading into a new world that is likely to be more unstable. In a symbol of this change, on 5 September this year, US president Donald Trump signed an executive order renaming the Department of Defence as the Department of War. This restores the name that it carried from 1789 until 1947 and points to the rising risks of conflict in the years ahead.

So how should investors position themselves for what comes next? What areas that are currently under-represented in most portfolios should they consider for diversification and protection?

Rivalry and conflict between the US and China

The main question is how the shift from a single superpower to two contending nations – the US and China – will affect global supply, demand and the efficiencies of comparative advantage. Free trade has generated huge gains since the end of the Second World War, and even more so since the end of the Cold War. This is now clearly under threat.

With the end of the post-war order comes the new “Great Game”. This name was originally given to the struggle between Britain and Russia for influence in Central Asia (Afghanistan and Persia). This time, the strategic rivalry and political conflict is between the US and China. Paradoxically, it is America that is now pursuing a more inward-looking strategy under Trump’s Make America Great Again (MAGA) banner, while China aims to build economic and political alliances through its Belt and Road (BRI) and Global Development Initiative (GDI) projects.

While America strives to bring its manufacturing base back onshore, Europe is now having to divert budgets from social welfare to rearmament. Both are now in stiff competition with China to electrify the planet and build digital infrastructures. This will inevitably lead to global competition for resources across energy, metals and critical minerals.

This is leading the two superpowers to weaponise their core strategic advantages. For America, this is the US dollar, still the world’s global reserve currency. For China, it is a stranglehold on rare earth elements and critical minerals.

China needs an alternative to the dollar

Freezing and confiscation of assets and denial of access to global payments systems is forcing non-US aligned countries to look for an alternative store of wealth and means of exchange. Herein lies the potential significance of the Brics+, the informal name for the original group of five key emerging-market powers – Brazil, Russia, India, China, South Africa – plus other countries that have begun joining them for summits and policy coordination. Some see this group as a counterpart to the G7 group of developed economies. Initiatives by the Brics+ members so far include work on a development bank, central-bank cooperation and an international payment messaging system.

Any alternative to the dollar looks increasingly likely to be a form of tokenised, asset-backed digital currency. This explains why many central banks closely aligned with the Brics+ nations have been large buyers of gold and other precious metals.

If the creation of a new currency system seems far-fetched, it is worth a quick review of the genesis of the post-war order: the Bretton Woods Agreement of 1944. China is a great student of history, and this agreement provides an template for how new world orders are created. While World War II was still raging, more than 700 delegates from 44 countries met at Bretton Woods in New Hampshire in the US to work on a new global monetary system. The goal was to create a globally efficient foreign exchange market, prevent competitive currency devaluations and promote global economic growth.

John Maynard Keynes, one of the principal economists at the meeting, proposed creating a new international reserve currency called the “bancor” and setting up a global central bank called the “Clearing Union”. However, these proposals were eventually watered down by the US Treasury in favour of a more prominent role for the US dollar, whereby the dollar would be pegged to the price of gold, and other participating currencies would be pegged to the dollar. The agreement was fully implemented in 1958, pegging the US dollar to gold at $35 per ounce.

This system functioned until the early 1970s when it became evident that US gold reserves were not adequate to sustain the peg. This caused a run on gold, forcing first a temporary suspension of the dollar’s convertibility into gold followed by complete collapse of the agreement in 1973. US president Richard Nixon also imposed a 10% tariff on all dutiable imports to force its major trading partners to adjust their currencies upwards and trade barriers downwards. Does this sound familiar?

China has already taken the strategic initiative to convene the Brics+ group of nations. It has established the Shanghai Gold Exchange – and associated physical storage – and now holds a significant percentage of its reserves in gold. It has shown little desire to replace the dollar with its own currency – internalisation of the renminbi would erode the ability to operate capital controls – but it and its allies need an alternative to the dollar.

Given China’s embrace of technology and advanced domestic digital-currency adoption, it does not feel far-fetched to envisage it launching a Bretton Woods-style gold-backed digital currency for those unable or unwilling to access the US dollar system. Crypto tokenisation is the vehicle, not the asset.

China's control of strategic resources

China’s strongest bargaining chip lies in its control of rare-earth elements (which are used in magnets, electrification, lasers and optical devices, catalysts and emission controls and radar/guidance systems), as well as critical minerals, that have broader energy, industrial and defence applications.

China has this control because, while the West focused on the comparative advantage of outsourcing its production to countries with lowest costs, China focused on building an end-to-end supply chain comprised of exploration, mining, refining and industrial manufacturing. With its looser environmental controls, it has come to dominate the global supply of these critical minerals.

In the tit-for-tat game of tariffs and sanctions, China is able to leverage its position in the one area where the US is completely vulnerable. So just as China and its allies have no alternative but to develop a competitor to the US dollar as a store of wealth and means of exchange, the US and Europe now see they have no choice but to develop alternative sources for mining and processing capacity to break this reliance. Exacerbating the situation, America’s prioritisation of its own MAGA agenda over historical alliances has left Europe and other previously US-aligned countries to build their own rather than collective resources.

If investors believe the post-war order is irretrievably compromised, they should consider investments that give exposure to these themes. Gold and precious metals for hard assets. Tokenisation and chips to enable digitalisation. Energy and power generation, rare earth elements and critical minerals, which will be in demand as both sides try to secure supply chains. And US and European defence stocks as the West joins in the new arms race.

Investors have many ways to access these ideas, including individual stocks, thematic exchange-traded funds (ETFs) or exchange-traded commodities (ETCs) that hold physical metals. Listed commodity futures and options are also becoming increasingly accessible, as major exchanges such as the Chicago Mercantile Exchange (CME) roll out mini and even micro contracts, which are 1/10 or 1/100 of the size of standard contracts and require less up-front capital. Such instruments are only suitable for experienced investors, but they offer a way to quickly add hedges or speculative positions to a portfolio – something that will become more valuable in a fast-changing world.

James Proudlock is managing director of OptionsDesk.

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Paramount’s new boss is adamant he intends to keep “politics at arm’s length”. Good luck with that, says Vanity Fair. After this summer’s $8 billion takeover by Skydance, David Ellison, 42, is in “the hot seat” of an impassioned national debate about the future of the media juggernaut and whether it has been captured by Donald Trump.

As CEO of the newly formed Paramount Skydance Corporation, Ellison’s first big appointment has fanned the flames. In a controversial acqui-hire, he is paying $150 million to buy Bari Weiss’s news site, The Free Press, and installing the journalist entrepreneur as editor-in-chief of CBS News. Her pro-Israel and anti-woke views have fuelled speculation that she’ll act as an “ideological commissar” at CBS, helping to “enforce compliance” with the White House line.

This is certainly an “almost existential” moment for the near 100-year-old network, whose new owners have been accused of “kowtowing” to the president after settling a vexatious $16 million lawsuit to get the deal over the line, and cancelling comedian Stephen Colbert when he described it as a “big, fat bribe”.

Ellison is hardly the patsy “nepo baby” of a Maga-leaning patriarch he’s sometimes portrayed as. Described as modest, well-mannered and popular, he’s the opposite in temperament to his volatile, irascible father, Larry – who bankrolled Skydance’s takeover, and last month briefly became the world’s richest man thanks to the soaring share price of his company, Oracle. But he has inherited the latter’s drive – credited in Hollywood for building Skydance, which he founded in 2010, into one of the industry’s strongest independents. “I don’t know his plan, but I would bet on that kid any day of the week,” former Paramount Pictures president Adam Goodman told The Los Angeles Times. He has “an institutional knowledge and appreciation for the studio’s history, and a real love of movies”.

Born in 1983, to Larry Ellison and his third wife Barbara Boothe, David grew up on a horse farm in the San Francisco Bay area and was an intern at Oracle during high school. He eventually enrolled at the University of Southern California’s School of Cinematic Arts, dropping out to act in a $60 million movie about World War I pilots, Flyboys, part-financed by his father, which spectacularly flopped.

There’s no question Ellison “was gifted a head start”, says Bloomberg. Not many young Hollywood wannabes get to raise $350 million from JPMorgan for a production company. But it’s what he did with the cash that counts. He got a taste of success right at the start with the release of the Coen brothers’ True Grit, which grossed more than $252 million globally, following that up with several other blockbusters.

Still, the huge Paramount deal takes things to a new level. To secure it, Ellison had to wrestle with the Redstone family and their shareholders – while trying to prevent Trump from derailing the deal. “The reward for his patience is a company in decade-long decline,” stuffed with ancient networks and a “withered” film studio.

David Ellison is gunning for Warner Bros

Less than two months after swallowing one ailing media giant, Ellison is now looking to take down a much bigger one. Nothing captures his ambition better than his interest in Warner Bros. If he wins the $50 billion giant, the combined behemoth would boast the largest share of the national TV advertising market, the biggest movie studio output and a pair of streaming services (Paramount+ and HBO Max) that together sell more US subscriptions than even Netflix, says The Economist. Add CNN to CBS – and throw in Larry Ellison’s interest in the US operations of TikTok – and the family will become a mighty force in both old and new media. The question is what they do with that power.

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They say health is wealth, but healthcare investors might disagree. The sector has had a tough time over the past few years. Policy noise in the US has been a major headwind recently, but even before that investors’ focus was drawn elsewhere as areas such as technology raced ahead. “For the 30-year period from 1989-2019, the US healthcare sector closely tracked technology returns, and with considerably lower volatility,” notes Michael Cembalest in a research paper for JPMorgan. “Things have changed since then.”

The MSCI World Health Care index has delivered five-year annualised returns of less than 6%, lagging the broader MSCI World index at 13%. The MSCI World Information Technology index has delivered 17% over the same period. Sentiment about the sector has soured further in 2025 – and it is easy to understand why. The US is the world’s largest healthcare market and when Donald Trump was inaugurated in January, he promptly appointed a vaccine-sceptic as his health secretary. This set the tone for what was to follow.

There are three key threats: efforts to control drug pricing, tariffs and possible tax changes. There is little doubt the sector is trading cheaply. The question is whether it offers good value in light of the risks.

Three big, beautiful policy risks

Donald Trump thinks US customers are being ripped off when it comes to drug pricing. He told reporters that a friend in London pays $88 for a weight-loss treatment that costs $1,300 in New York. So earlier this year, he published an executive order demanding “most-favoured nation” prices for US customers – an attempt to bring US prices in line with the lowest costs offered elsewhere. Pharmaceutical companies have been threatened with “every tool in the federal government’s arsenal” if they refuse to step up. The threat is vague, but has nevertheless created nervousness.

The majority of global pharmaceutical profits come from the US market – around 70%, according to the University of Southern California. Rather than cutting prices in the US, companies could simply decide to pull out of less lucrative markets, reducing access to drugs for patients and denting pharmaceuticals’ profits.

The second threat is tariffs. Trump is keen to boost US manufacturing and is using tariffs as a way of doing so. He has announced a 100% levy on imports of branded or patented drugs from 1 October, although manufacturers that are building a site in America will be exempt. Tariffs aren’t the only tax investors need to consider either. The Trump administration also has an eye on corporate income-tax loopholes that pharmaceutical companies have been exploiting. Pfizer paid zero in federal taxes in 2019 despite selling $20 billion of drugs in the US, according to an investigation from the US Senate Finance Committee. This was due to round-tripping – a mechanism whereby income from US sales is treated as foreign for tax purposes. Ways of achieving this can include using offshore manufacturing or shifting intellectual property rights to tax havens. “We’re going to try and fix a whole bunch of these tax scams,” said commerce secretary Howard Lutnick, speaking on a podcast in March.

Is this all as bad as it sounds?

Some of the risks might have been overstated. Look at “most-favoured nation” pricing. There is scepticism about whether Trump will actually be able to implement it on any kind of scale. In his first term, he tried to control the price of a handful of drugs covered by Medicare, but was blocked by a federal judge. Wide-sweeping price controls this time would almost certainly require the support of Congress – something Congress doesn’t seem to have the appetite for.

Meanwhile, pharma companies have been making moves to try and get ahead of tariffs. The measures that kick in from the start of October only affect companies that aren’t building a site in the US. In recent months, scores of companies have been making commitments. In July, Swiss and UK giants Roche and AstraZeneca both pledged $50 billion in investments in the US over the next five years, building and expanding research and development and manufacturing sites. AstraZeneca said its goal is for 50% of revenue to be generated in the US by this date.

US pharma companies have also made big commitments to domestic manufacturing. Earlier this year, Eli Lilly pledged an additional $27 billion for four new plants, and Johnson & Johnson announced a $55 billion investment over the next four years.

While this will help the industry navigate tariffs, it is possible that some companies will lose tax advantages by moving their manufacturing facilities to the US. Karen Andersen, research director at Morningstar, says analysts have been building a ramp up in tax rates into their models over the next few years as the reorganisation goes through.

Healthcare stocks are going cheap

Headwinds in the sector mean valuations look cheap. The MSCI World Health Care index is trading at around 16 times its forecast earnings, compared with 20 times for the MSCI World index. Individual names are trading on lower multiples. “Pharma stalwarts such as Merck, Pfizer and Bristol Myers Squibb trade at forward price/earnings (p/e) ratios of just eight to nine times, and biotech trades at one of the largest valuation discounts in the market,” notes Cembalest. The question is whether it is worth it given the risks.

On the one hand, we are starting to get a better sense of how Trump works. Recent stockmarket reactions have been less pronounced as a result. In July, Trump sent letters to 17 pharmaceutical companies threatening repercussions if they didn’t adopt most-favoured nation pricing. Investors largely shrugged off the news. Markets have also taken the latest tariff announcement in their stride. “Investors see more bark than bite,” says Lale Akoner, global market analyst at investment platform eToro. The objective of tariffs is to force supply chains onshore in the US – not to raise prices at the pharmacy counter. “European pharma gets nudged to localise, while US firms gain a policy tailwind.” That said, valuations are likely to remain suppressed for as long as the policy outlook is uncertain. Consider most-favoured nation pricing. Trump’s plan sounds overly ambitious, but “the problem is that the impact is so big that it’s a difficult risk for the market to ignore, no matter how unlikely it might be,” says Andersen.

Is investing in healthcare stocks worth the risk?

One fund manager who has been investing in the field for 25 years told me that every time there is nervousness around pricing in the US, the sector underperforms. “Before buying more of this stuff, investors need clarity on the earnings forecast,” says Gareth Powell, head of healthcare at Polar Capital. We could get more certainty over the coming months. The deadline given to pharma giants for complying with Trump’s price demands was 29 September. Further detail on tariffs has already emerged, but there are still questions about how regions with pre-existing trade deals will be treated.

“Headlines about the imposition of 100% tariffs on branded drugs appear to contradict the previously discussed 15% cap for European firms,” say Ailsa Craig and Marek Poszepczynski, co-managers of the International Biotechnology Trust. Until these pieces of the puzzle fall into place, bargain-hunting in the sector requires bravery.

On the plus side, there have been some bright spots. Biotech investors point to pro-industry noise from the FDA regulator, including a pilot programme to reduce the review time on new drugs and therapies from 10 to 12 months to just one to two, if they meet certain criteria. This is a marked improvement from earlier this year when investors were worried that mass firings at the FDA would result in a slower approval processes.

Active investors can also adjust their portfolios to manage the risk associated with policy threats. “The way I would look at it is on a case-by-case basis,” says Andersen. Is the company particularly reliant on government reimbursement for one of its key products? Does it have a significant manufacturing footprint outside of the US? One way the International Biotechnology Trust is managing the risk is by tilting into rare diseases, with more than 30% of the portfolio allocated to this theme. “This tends to be much more similar in price in both Europe and the US,” says Craig, meaning therapies should be less exposed to Trump’s interference with drug pricing.

Where to invest

If you are looking for broad exposure to the sector, the Polar Capital Global Healthcare Trust (LSE: PCGH) is one to consider. The trust has large overweight positions in healthcare equipment and biotechnology. It is underweight on pharmaceuticals relative to the benchmark – a position driven by concerns about the impact of Trump’s pricing threats on mega-cap pharma companies. Those who prefer passive exposure could look at the Xtrackers MSCI World Health Care ETF (LSE: XDWH), although today’s volatile policy backdrop could better lend itself to active stockpickers.

The area that looks most interesting in my view is biotech. This is where most of the innovation happens, with big pharmaceutical companies swooping in to acquire biotech firms that are developing a promising drug. We should see more merger and acquisition (M&A) activity over the coming years as a significant patent cliff-edge is looming for big pharma. Drugs worth $180 billion in annual revenue (equivalent to 12% of the global market) will be coming off patent in 2027 and 2028, according to figures cited in the Financial Times. This is putting pressure on pharma companies to shop around for new products in the biotech sector.

The International Biotechnology Trust (LSE: IBT) gives exposure to this part of the market. The managers have had strong success identifying acquisition targets, with 30 portfolio holdings having been snapped up through M&A since 2020. Investing in biotech is a risky business, but the trust is heavily weighted towards companies with drugs in late-stage clinical trials, as well as those that have completed trials already and are waiting for approval from the regulator. This makes it a good pick.

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Since World War II, the two landmark events in the evolution of money were Bretton Woods in 1944, when the dollar became the de facto global reserve currency, and then the Nixon Shock of 1971, when the US abandoned the last vestiges of its gold standard. There is a shift currently taking place in the global financial landscape, the ramifications of which might, I suggest, prove equally significant.

You might feel it is unimportant. You might feel it is hugely significant. Either way, before making your mind up, you need to understand what is taking place, so that you can position yourself and your family, if you deem it appropriate. You may even be able to profit handsomely from the transition. Here I explain US dollar policy: what is going on and, more importantly, where it is all heading.

Donald Trump solves Triffin’s Dilemma

The US government, as we know, wants to bring manufacturing back on shore. President Donald Trump has said it repeatedly, his vice-president, J.D. Vance, has said it, and so has his Treasury secretary, Scott Bessent, who keeps reminding us that it is now time to prioritise Main Street over Wall Street.

Part of the reshoring of US manufacturing involves tariffs, as we now know all too well. Part of it involves weakening the US dollar to make US exports more competitive. Again Trump, Vance and Bessent have all said this. However, there is a problem, and that problem has a name: Triffin’s Dilemma, named after Robert Triffin, the Belgian-American economist who first identified the paradox in the 1960s.

You might think it’s an advantage to issue the global reserve currency. You can issue dollars. Everyone else has to work for them. The French called it “America’s exorbitant privilege”. But this was a status the US engineered for itself during the Bretton Woods Agreement that determined the monetary order at the end of World War II. What has happened, however, is that it has made the US fat and lazy, especially since 1971 when the US abandoned the ties of the dollar to gold.

To supply the world with dollars, the US must run trade deficits. That is to say it must buy more than it sells in order that US dollars can make their way out into the world. Persistent trade deficits have, over time, eroded its industrial base. Factories and jobs have gone offshore. Foreign nations have used their profits to invest in US capital markets and its debt. At the same time, financial markets – aka Wall Street – have grown and grown. Part of this process was the financialisation of America.

The Trump administration gets this in a way its predecessors did not. Vance has actually called the dollar’s reserve status a “tax” on American producers. What’s more, as this process has continued, more and more the credibility of the dollar itself is being cast into doubt. This tension forces the US to choose between its own domestic economic needs and the stability of the international monetary system. This is Triffin’s Dilemma. Trump wants to revitalise America’s “rust belt”. But there is more to it than that.

The Covid pandemic pulled back the curtains and revealed the extent to which the US has been operating with its trousers down: an excessive dependence on China and its supply chains for too many strategically essential products, especially those related to health, technology and the military. Then, during the Ukraine conflict, Nato found itself unable to match Russian munitions production. The US, in short, is struggling to produce critical goods. It’s why Trump keeps harping on about rare-earth metals. It is vulnerable.

Moving away from dollar towards gold and bitcoin

The answer is to engineer a “managed decline” of the dollar and reduce its role as a global reserve asset. This was already happening organically. China, for example, has been reducing its holdings of US Treasuries for 10 years now – quite gradually – although its US dollar holdings remain above $3 trillion. Meanwhile, China – and many other countries along the Silk Road besides – have been increasing their gold holdings, and quite dramatically. (In my view China has at least four times as much gold as it says it does. You can read more on this in my book, The Secret History of Gold: Myth, Money, Politics & Power.) The process is known as dedollarisation. Just a few months ago, gold overtook the euro to become the second most-held asset by central banks; the dollar itself fell beneath 50% for the first time this century. In fact, gold has just overtaken US Treasuries as a percentage of central-bank holdings worldwide.

We are not seeing a move towards any other national currency as global reserve. There is not one that could take up the role, despite what the bureaucrats in Brussels might try to tell you about the euro. The move is towards the neutral but universal asset that is gold. That suits all the main players. Gold is neutral and both the US (assuming it has all the 261 million ounces of gold that it says it does) and China have lots of it. (US gold has not been audited in over 60 years, hence the doubts.) Indeed, a gold revaluation would be a “win-win” for both China and the US. A higher gold price would strengthen US fiscal flexibility while boosting Chinese consumers’ wealth, encouraging domestic consumption and reducing trade imbalances. (China has been encouraging its citizens to buy gold since 2007.)

There is the potential to leverage the US’s 261 million ounces (8,133 tonnes) of gold reserves, currently marked to market at just $42/oz. There are two ways this might be done. Economist Judy Shelton has proposed issuing Treasuries that are in part backed by gold to offset the inflation/debasement risk to make them more attractive to buyers. The other possibility (which has gone from, as Bessent put it, “we are not doing this” to “we are not doing this yet”) is to revalue the gold from $42 to the current price of $3,400/oz, which would create more than $850 billion of reserves without having to incur any extra debt. That would help with the US’s current fiscal challenges: true interest expenses (including entitlements and veterans’ affairs) currently exceed 100% of Treasury receipts. In short, the US administration is leaning into a weaker dollar and the neutral reserve asset that is gold to rebalance trade and rebuild domestic industry, even at the cost of short-term economic pain.

A showdown between gold and bitcoin

Bitcoin, as the world’s best neutral digital currency, is going to have a role to play in all of this as well. The US is quite happy with that, too, as evidenced by its pro-Bitcoin rhetoric. At the national, corporate and individual levels the US has a lot of Bitcoin. The US itself has 198,000 coins, the most of any nation; Strategy (NYSE: MSTR) has 630,000 and many other companies besides also hold the asset; and 15%-20% of US citizens are thought to own some Bitcoin. Of the eventual 21 million supply, probably 15% has been lost and another 1.3 million are locked up by Satoshi Nakamoto and will likely never appear (he is almost certainly dead) – a hefty chunk one way or the other.

Which brings us to the recent Genius Act. This effectively nixed central bank digital currencies (CBDCs): the Federal Reserve Bank is now not allowed to issue them just as, irony of ironies, the EU’s Christine Lagarde was planning to phase them in. However, the act supported stablecoins (that is, coins backed by dollars) as a private-sector alternative. The more bitcoin grows, the more the stablecoin market will grow. Today, roughly half the entire US dollar stablecoin market, estimated at $250 billion, is invested in US Treasuries (maybe 2% of the overall Treasuries market). Tether is the world’s seventh-largest buyer. As the stablecoin market grows, so will its demand for Treasuries.

The market is small, but growing rapidly. Projections of its growth range from $500 billion in 2035 (JPMorgan’s guess) to $2 trillion (Standard Chartered) and $4 trillion (Bernstein). “If the stablecoin market meets these growth projections,” says the Kansas City Fed, “it could lead to a substantial redistribution of funds within the financial system.” In other words the stablecoin market is going to help the US fund its debt, just as other nations move away from Treasuries to gold and bitcoin. Gold might suit the US as a neutral currency, but bitcoin suits it better, especially if there are complications surrounding the Fort Knox gold, which it seems there are. Why no audit yet?

It’s likely a few years from now, there is going to be some sort of showdown between gold and bitcoin in the battle for primary reserve asset status. It’s unlikely to be both. Governments will favour gold, as they have lots of it. Tradition is on their side. Eternal gold has a track record that is unrivalled. But it is an analogue asset in a digital world. Bitcoin is much more practical. Which will win out? Practical digital or impractical analogue? This is a contest that is still a way off. For now all roads lead to gold and bitcoin as the world dedollarises. Own both is what I say.

Britain left behind on both gold and bitcoin

Needless to say the UK is absolutely clueless in all of this. The government sold two-thirds of its gold in 1999 and the Financial Conduct Authority regulator has made it near impossible for UK citizens to buy bitcoin. Word is that the chancellor is now planning to sell the country’s bitcoin holdings – though as these are confiscated this is legally problematic. The UK has recently overtaken China to become the largest holder of US Treasuries in the world after Japan, just as everybody else is dumping them. It is making no attempt to buy any gold either. We really have clueless clowns running the show.

Meanwhile, with the threat of AI and automation to America’s jobs – especially in jobs that involve driving, where millions work – there is the risk of mass unemployment coming quite quickly, and with it plentiful defaults on mortgages and loans. This could force the US to print money, driving inflation and providing yet another reason to own gold and bitcoin, which cannot be debased.

In short, the dollar will weaken significantly over the next three years. The pound is a basket case. National currencies are not stores of wealth. Gold and bitcoin are. Own both as the Trump administration addresses Triffin’s Dilemma through a managed dollar decline. They will use gold and potentially bitcoin to restore US industrial and military strength. This is the shift that is taking place.

Dominic Frisby writes the investment newsletter The Flying Frisby.

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Trump’s EU deal will help blue-collar workers.” So believes Nicole Russell, a columnist for USA Today, “Critics can hate Trump’s personality all they want,” she says, “but the president’s ability to forge trade deals that favour American workers shouldn’t be discounted.” The gist of Russell’s argument is that the deal includes requirements for Europe to buy energy and military equipment from the US. This kind of stuff is made by people wearing hard hats or wielding power tools – that is, by “blue collar” workers.

Russell must not have much free time. If she had, she might have thought this through a bit further. In the first place, why should US government policy favour one group of workers (blue collar) over another group (white collar)? In the second place, the tariffic negotiations also favour very big businesses – oil and defence. How is that a plus for the guys who mostly work for small businesses?

In the third place, the same policies that will supposedly favour US industry output with a 15% tariff on imports also call for taxes of 50% on steel and aluminium, which must be paid by US carmakers and ultimately by car buyers. What good does that do the guy who needs wheels to get to work?

In the fourth place, who does she think pays for the tariffs? Tariffs are essentially a tax, paid by American importers – and then passed along to US consumers. White collar, blue collar or no collar at all – they’re all going to pay. Who else would? Dogs don’t pay tariffs. Inanimate objects don’t. In the end, all government revenues must come from the people.

Has Trump "achieved the remarkable"?

None of it makes sense. The US is running a $2 trillion deficit and heading for a financial crisis. But the trade deals are seen as a political “win” for Trump.

Trump has, says The Wall Street Journal, “achieved the remarkable: raising tariffs by more than the notorious Smoot-Hawley Tariff Act of 1930, while – it appears – avoiding the destructive trade war that followed”. Including the deal struck with the EU, the US will impose an effective tariff rate of about 15% on its trading partners, by far the highest since the 1930s, according to JPMorgan Chase.

But will the deals stick? Trump’s big trade deal with Japan is already falling apart, says The New Republic. A report from the Financial Times shows that US and Japanese officials aren’t seeing eye-to-eye on what exactly was agreed. Mireya Solís of the Brookings Institution told the FT “both sides made promises we can’t be sure will be kept” and “there are no guarantees on what the actual level of investments from Japan will be”. It’s not exactly a done deal with Europe either. Fred Hutchison, CEO of LNG export group LNG Allies, told Energy Intel that both sides can do a lot to encourage additional commercial deals in the LNG sector, but “neither government has any control over what happens commercially”.

Trump got his deals thanks to leverage over other countries’ deep economic and security ties to the US, says the WSJ. But in the coming years, “that leverage will wane as those countries cultivate markets elsewhere and build up their own militaries. The resulting international system will be less dependent on the US – and less stable.”

The markets are less stable too. Already teetering at the tippy-top of their trading range, stocks have become even more overvalued. More importantly, Trump has raised the cost of trading with the US. He must also have increased the desire not to trade with it at all.

For more from Bill, see bonnerprivateresearch.com

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What’s the beef between Jerome Powell and Donald Trump?

US president Donald Trump wants a looser monetary policy – lower interest rates – to get the economy growing and mitigate the impact of the ballooning US federal debt. Jerome Powell, the chairman of the Federal Reserve, the US central bank, sees his job as to resist that political pressure and is determined to carry on targeting inflation as the best way of ensuring long-term economic stability and growth. It’s an age-old (or at least decades-old) story of tension between elected leaders and “independent” central bankers. But in the case of Trump and Powell, there’s genuine animus and the stakes are exceptionally high. Trump himself appointed Powell (a Republican ex-investment banker) to the job as Federal Reserve chairman in his first term in 2018. But Trump quickly regretted his decision due to Powell’s refusal to bow to political pressure. Within months, the president was publicly attacking Powell as “crazy” for continuing to gradually raise interest rates and unwind America’s quantitative easing.

Why not sack Jerome Powell?

A president can’t sack a Fed chair over differences on monetary policy. He can only sack them “for cause” – meaning malfeasance of some kind. Powell’s term as the Fed governor (though not as a board member, should he choose to stay on) ends in May next year, at which point Trump will no doubt try to find someone more malleable. In the meantime, Trump’s undermining of Powell has become toxic. The Fed has kept borrowing costs on hold at between 4.25% and 4.5% this year, even as other central banks have cut. That’s partly, by Powell’s own account, due to April’s “liberation day” tariffs and their upward impact on US inflation forecasts. Were it not for that fresh negative factor, the Fed “would probably have cut rates [again] by now”, said Powell last month. In response, Trump has become increasingly abusive – attacking Powell as a “numbskull”and “complete moron”.

Why is Trump so angry?

Because the political stakes are unusually high, the US federal debt is unusually high and Trump is an unusual president. “It’s pretty universal having a president who wants lower rates,” says Don Kohn, a former Fed vice-chair. “What’s unprecedented is [Trump] doesn’t want lower rates to goose the economy, [for him] it’s about lowering the cost of the debt. That’s worrisome because keying monetary policy to relieving budget pressures is a sure track towards higher inflation.” Last month, Trump claimed Powell’s reluctance to cut rates – “at least three points too high”, says Trump – was “costing the US $360 billion a percentage point in refinancing costs”. That’s a trillion dollars worth of anger, which has expressed itself in mounting public frustration, including presidential musings on whether to fire Powell, and a tense on-camera spat over the cost of Fed renovations – as Trump apparently hunts for a just “cause” to replace the governor.

Why does all this matter?

Because it has undermined market confidence in the independence of the Fed and the stability of US policymaking – sending the dollar sharply lower this year and making a bond-market crisis more likely, as investors (fearing their loans would be repaid in a depreciated currency) demand higher interest rates. Last week, in a rare rebuke – albeit one that didn’t name the US, its biggest shareholder – the International Monetary Fund warned that undermining central-bank independence risked triggering a debt crisis and that independent monetary policy is “a cornerstone of macroeconomic, monetary and financial stability”. In the case of the US, that matters to all of us. An increase in US credit risk due to concerns regarding fiscal sustainability could make financial markets excessively volatile.

Are central banks independent?

Over the past half-century it’s become the norm for central banks to be at least nominally independent in rich-world economies. The idea is that politicians can’t be trusted to run monetary policy because they are too influenced by short-term political considerations. Giving the Bank of England independence was first mooted by Nigel Lawson in the 1980s and finally happened in 1997 under Gordon Brown. By contrast, Germany’s Bundesbank, the first central bank to gain full operational independence (in 1957), was central to the Federal Republic’s relative price stability and economic outperformance. In the US, the Fed has notionally been independent since 1951. But the institution remains haunted by the blunder of chairman Arthur Burns, who was pressured by president Richard Nixon to cut interest rates in the run-up to the 1972 election – ultimately leading to disastrous “stagflation”.

Independence is better, then?

It’s simply a means to deliver superior price stability and economic performance. There is historic evidence, dating from the 1980s onwards, that independent central banks tend to foster greater price stability. But the charge that independence removes democratic accountability became more potent in the wake of the 2007-2008 financial crisis, as banks became more powerful and pursued highly politicised and contentious strategies such as quantitative easing. There has also been much less consensus over the purpose of monetary policy in an era of low inflation and low growth. Why target inflation when the real issue is stagnation? Central banks also struggled to cope with the post-pandemic inflationary shock, further undermining faith in their technocratic omniscience.

So Trump is right?

As with many of his views, there’s a kernel of truth. But any attempt to curb the Federal Reserve’s independence – especially when it comes to rate-setting – would be very bad news for financial markets. As John Authers puts it on Bloomberg, “Independence may be the worst form of central banking – except for all the others.”

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We were probably wrong about tariffs. Yes, of course, they were always a bad idea and still are. Anything that interferes with our ability to freely trade with each other will make us poorer, with less choice and lower quality goods and services. After the Trump administration’s “reciprocal” tariff bomb blew up in its face, in April, we thought tariffs would quietly go away, like a man who just made a fool of himself at a party. That’s about what happened with Canada during Donald’s first term. His team squawked about “unfair” trade with Canada and tore up the North American Free Trade Agreement (Nafta). Then, after protracted negotiations, it ended up with something very close to Nafta, and trade went on much as before.

We thought the negotiations with other countries would go the same way. But no. Even before the 1 August hikes, tariffs are at a 70-year high. And going higher. The details change by the day, but it’s clear who will pay: American companies and consumers. Yale University researchers project that Trump’s tariff strategy will raise costs for US families by $2,400 this year.

Tariffs can be used in a variety of vain and foolish ways – to promote foreign-policy goals, to influence other countries’ internal politics, to raise drug cartels’ profits, to pay off big political donors, and generally to make a mess of the economy. They can also be used to enrich those who impose them. An investigation by ProPublica has revealed that federal officials across multiple agencies sold stocks before Trump’s tariff announcements caused major market declines.

Long-term impact of Trump's tariffs

Tariffs are a tax and taxes are supposed to be “fair”, which is to say, you’re not supposed to tax a Republican more than a Democrat or a plumber more than a carpenter. True, tax loopholes and credits have been used for decades to reward friends, punish enemies and drive the money where the feds want it to go. Want people to buy electric cars? Give them a tax subsidy. Want them to stop smoking? Impose a tax on cigarettes. But at least Congress – the people's parliament – has a say in who is taxed and how. Not so with tariffs. The president can tariff individual countries and give different rates to different nations. He can also target individual industries, regions and, like the bills of attainder that the US constitution tried to avoid, he can single out specific products and individual companies.

Washington has, for example, just imposed a 17% tariff on US imports of tomatoes, almost all of which come from Mexico. As Bloomberg notes, the move comes just days after Trump unveiled plans to impose a 30% tariff, beginning 1 August, on many Mexican products that don’t fall under the USMCA trade agreement he negotiated in his first term.

Neither Democrats nor Republicans will want to give up this kind of arbitrary power. So, tariffs may become a more-or-less permanent part of the US’s end-of-empire finances – a sneaky consumption tax, which gives the feds more money to spend, more opportunities for corruption, and another cudgel with which to beat anyone who stands in their way. Whatever fiscal benefit the feds get from higher tariff taxes – $300 billion is expected this year – is likely to be offset by lower GDP growth and lower tax receipts elsewhere. And over time, shackled with tariffs, the US economy will become less and less competitive.

For more from Bill, see bonnerprivateresearch.com

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Matthew Partridge: In your new book, The Economic Consequences of Mr Trump: What the Trade War Means for the World, you posit that president Donald Trump’s threats over tariffs are real, rather than a bluff, and represent a major threat to both the US and world economies.

Philip Coggan: Yes. Many investors seem to be assuming that Trump will ultimately back down from his threats of swingeing tariffs; markets have recovered from the collapse that took place in April when they were first announced. However, while there is still a chance that this could be correct, this attitude seems complacent.

Ironically, the assumption that Trump is bluffing may end up increasing the risk of tariffs, both because it means that Trump won’t get the concessions that he’s looking for, and because he thinks that the muted market reaction means they aren’t that economically damaging.

Matthew Partridge: What are Trump’s aims, then?

Philip Coggan: In my book, I argue that trying to understand Trump is like trying to nail jelly to the wall. However, I do think that he genuinely doesn’t understand economics and thinks that America’s trade deficit is a sign that America is being “robbed” – the type of mercantilism that was debunked by Adam Smith 250 years ago. He also thinks that returning manufacturing jobs to the United States will help boost his public support.

Matthew Partridge: There has been a wide range of reaction to Trump’s tariffs, from China simply imposing their own tariffs in response to prime minister Keir Starmer agreeing to cut the UK’s import levies. Which road do you see the EU, Canada and Japan going down?

Philip Coggan: I think you can understand the UK and Chinese differences in terms of the strength of their respective negotiating positions. China is a big economy that produces things the US really wants, like the rare-earth materials, as well as cheap goods that help keep down prices.

As a result, China can cause serious pain for the US economy if it wants to. The UK, however, is not only a smaller economy, but depends on the US for its defence. This makes Britain’s negotiating position much weaker; hence the more conciliatory response.

The EU, while economically bigger than the UK, is in a similarly weak position. Firstly, the need to get all 27 countries to agree to any response makes it harder to impose any major across-the-board tariffs, especially when you have countries like Hungary, whose leaders don’t want to antagonise Trump. As with the UK, there is also the security angle. That explains why the EU folded and agreed to what looks like a one-sided deal.

The Japanese faced the problem that many of Trump’s demands didn’t make sense, or were based on things that don’t exist. Take the “bowling-ball test” (the myth that Japanese regulators require imported cars to be able to withstand the impact of a bowling ball dropped from a certain height). The Japanese agreed a deal to protect their carmakers. It is worth noting that importers of Japanese cars will face a 15% tariff but US car producers will have to pay 50% tariffs on raw materials like steel and aluminium.

Furthermore, while both the EU and Japan made vague promises to invest hundreds of billions in the US, there is no sign of legally binding texts, and such promises have been unfulfilled in the past. They may be hoping to wait out Trump’s term before the money becomes due.

Matthew Partridge: If investors are too complacent, what will it take to convince them to take Trump’s threats seriously?

Philip Coggan: One obvious trigger point is the deadline that Trump has imposed at the start of August for concessions from other countries. So, if that deadline passes and Trump decides to go through with the planned tariff hikes, then markets will see that we’re looking at something more than just a 10% tariff on all goods that are imported to the US. Another trigger point could be if he follows through on rumours that he will impose huge tariffs on imported drugs.

Who will suffer most from tariffs?

Matthew Partridge: Are the big losers from Trump’s tariffs likely to be large global firms or smaller domestic firms?

Philip Coggan: It certainly makes sense that big global multinationals will be much more negatively affected than those producing and sourcing inside the US. However, US firms that depend on imported raw materials will also feel some pain, as most larger companies have global supply chains, even if they consider themselves primarily domestic.

Nearly half of all US imports involve either raw materials or components. So, if you depend on imported steel, copper or aluminium, your costs are going to go up quite a lot, which will hurt your profits.

Matthew Partridge: Outside the US, which countries are set to suffer?

Philip Coggan: Well, it depends on how all the tariffs settle down, but I think the biggest losers are going to be those in emerging markets, which have been suppliers to the US in sectors like apparel. You can expect countries like Vietnam, Cambodia and Laos to struggle to find alternative markets for their goods.

The EU is another big loser, and could see at least 1% shaved off its GDP growth, which given the bloc’s mediocre economic growth performance could be quite serious. After all, even with relatively low tariffs, the UK economy is not really growing.

Matthew Partridge: Could Trump’s tariffs cause a global recession?

Philip Coggan: I don’t see the main threat as being some sort of immediate global recession, because these things take time to feed through. But we are already seeing companies cutting, or even completely pausing, their international investment, because they don’t know what the final tariff rate will be.

However, even if there isn’t a crash, tariffs and protectionism make the global economy less efficient at a time when it is already growing rather slowly. It’s important to realise that a lot of the growth during the last 15 years came from China, which is finally slowing thanks to its ageing population. So rather than cause some big implosion, Trump’s tariffs could just speed up the process of global economic entropy.

Will tariffs be a lasting legacy?

Matthew Partridge: Assuming that Trump leaves office in January 2029 (or earlier), do you think his protectionist legacy will endure, or is he just an aberration?

Philip Coggan: Trump’s populism is certainly a very long way away from the free-trade Republicanism of George H.W. Bush, which now seems to be extinct. What’s more, the Democrats are pretty protectionist themselves. During his four years in office, Biden kept most of the Trump tariffs and imposed export restrictions on chips to China (restrictions that Trump has ironically loosened).

So, while you should see a bit more “normality” under a Democratic administration – as they are unlikely to impose blanket tariffs that cover America’s traditional allies or even remote islands populated by penguins in the Antarctic – they may not be as different as you might think.

Matthew Partridge: Are Trump’s trade policies the only thing that could damage the US economy?

Philip Coggan: The tax cuts and spending contained in his so-called Big Beautiful Bill certainly undermines the US fiscal position, which will inevitably lead to both higher interest rates and a weaker dollar.

In the very long run, it could also imperil the greenback’s position as a global reserve currency (the currency in which most global trade takes place), though this may take time, as there isn’t an obvious alternative at present.

More generally, his economic policies, such as cutting federal research budgets and launching an attack on universities, are destroying everything that is great about the US. China is catching up quickly with the US on research spending, and Chinese academics are going home rather than staying in America.

Moreover, a record number of American academics are looking to work abroad.

And these are not things that have a one- or two-quarter impact on economic growth, but could seriously reduce it five or so years down the line. Note that the development of the new generation of weight-loss drugs, which are now generating tens of billions in sales, came from investigating the Gila monster (a type of lizard), which is exactly the sort of basic research that Trump is slashing.

Matthew Partridge: On a more optimistic note, if the US does remain protectionist, could other countries take up the mantle of promoting global free trade?

Philip Coggan: Well, I very much hope they do. The US represents less than 10%-15% of global trade (depending on how you measure it), so if you can keep the other 85%-90% going under WTO rules, then that would reduce the impact. The negotiations over the trade deal between the EU and Latin America’s Mercosur is a really positive sign.

However, since the past 80 years of trade liberalisation has been driven mainly by the US, the withdrawal of the US (and its soft power) from the world stage is very worrying. When the US retreated into isolationism after World War I, it took only 10 years for the global order to start to collapse.

The Economic Consequences of Mr Trump: What the Trade War Means for the World is published by Profile Books (£6.99).

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Following a trip in May to a US investment conference to meet with company bosses, James Harries, the manager of STS Global Trust, reported that, “as ever one cannot fail to be impressed by the sheer scale, dynamism and competitive zeal of US corporates and the wider economy. There was widespread angst relating to tariffs, the unpredictability of policymaking and the stress on the consumer, but this had yet to show up in end demand.” Perhaps most remarkably, “not one company mentioned the word ‘Trump’”. At the time, it seemed that business leaders, fund managers and pundits in the UK were talking about little else. The consensus that had prevailed at least since his inauguration, if not well before, that Trump was mad, bad and dangerous, is being slowly transformed into a more measured analysis.

Jonathan Sumption, a former senior judge on the UK’s Supreme Court, remains firmly in the critics’ camp. He has warned that Trump’s bullying tactics, intolerance of even mild dissent, readiness to use presidential prerogative to drive through his agenda and vocal threats to those who stand in his way bear all the marks of an aspiring dictator. The checks and balances of the US constitution, with its division of power between the executive, Congress and the Supreme Court, and between federal, state and local government, has been steadily undermined, says Sumption. The muted opposition to all his proposals must mean that opponents and sceptics have been cowered into submission – that Trump has captured the Republican Party and has made himself unaccountable. The approval of presidential appointments, including cabinet positions, is just a rubber-stamping exercise.

Donald Trump is not Adolf Hitler

This view is echoed by Filipe Campante and Ray Fisman, writing for Bloomberg. “The second Trump administration has undertaken a sweeping expansion of presidential power,” they write. “The White House is attempting to usurp some of Congress’s spending powers and to reclassify civil servants so as to make them easier for the president to fire. He deployed the National Guard on California over the governor’s objections under the auspices of responding to a rebellion.” Campante and Fisman argue that the power of the courts is being challenged, students detained and universities bullied into submission. “The system that is currently under threat has endured periods of remarkable stress but democracy survived and thrived by responding to these challenges. This track record led to an understandable and almost unshakable belief that American democracy was unassailable.”

Now, however, the two-party system has turned from being a barrier to extremism (as voters converge to the centre) into a trap, say Campante and Fisman. “If extremist or anti-democratic forces somehow manage to capture one of the two major parties, the system would switch from being a barrier to extremism into an accelerant. Helped by the rise in partisanship, which keeps voters loyal, Trump and his loyal proxies can credibly threaten every Republican elected official with the destruction of their political career.”

Niall Ferguson, the author and historian, takes a very different view. “People on this side of the Atlantic don’t remotely understand him,” he says. “He is not Mussolini, much less Hitler. It is enormously stupid to compare Berlin in the 1930s, when everyone was in uniform, militarism was rife and lawlessness everywhere, with America now. Trump is recognisably in the American tradition of populism, with tariff policy deeply rooted in the late-19th-century politics of president William McKinley.”

As for the idea that the US is teetering on the brink of authoritarianism, forget it: Trump’s use of executive orders is comparable with that of F.D. Roosevelt in 1933. Trump owes a large debt to Richard Nixon, who first took him seriously as a political figure. Nixon shocked the world in 1972 by meeting Mao Tse-tung, severing the dollar’s link to gold a month later, and by introducing a general 10% tariff.

Ferguson also compares Trump to Reagan in his restoration of military deterrence and the use of surgical strikes. “It reminds people of the superiority of the US military” and that “will have shocked Putin”. The bombing of Iran showed that Russian air defences are useless. German rearmament – precipitated by vice-president J.D. Vance telling Europe that if it doesn’t do something about its defence, Nato was over – is also a disaster for Putin. “Russian attacks on civilians are a sign of desperation as it can’t hit military targets. Putin has overplayed his hand and a war of attrition is unsustainable.”

These developments also make confronting the US a worse idea for China than it was just a few weeks ago, says Ferguson. A Taiwan crisis is still a strong probability, but Xi Jinping “is not a well man and doesn’t have long”. Trump’s successor may not be as amenable to a deal as Trump is, so “the stand-off will reach a culmination in the next three years”. Ferguson believes that China is more likely to blockade Taiwan than invade. After all, “when did the PLA last fight”? “Ukraine would be the last place in the world where I would want to get into a pub fight,” he says. “Taiwan would be my first choice.”

Trump’s tariff masterstroke

As for Trump’s widely derided tariffs, Torsten Slok, chief economist at Apollo Global Management, wonders if Trump hasn’t outsmarted the world with his tariff plan by keeping tariffs below his threatened rates to ease uncertainty while still producing $400 billion of annual revenue for US taxpayers. “This would seem like a victory to the world; trade partners will be happy with tariffs of only 10%.”

Dr Pippa Malmgren, a former US presidential adviser, gives Trump a mark of nine out of 10 for how well he’s doing. “His electoral base loves the changing of the power structure around tariffs, the fact that its succeeding in compelling other governments to negotiate not just on trade but on a variety of other issues.” It might seem as though his attempt to control the budget deficit and hence government indebtedness is failing, with Elon Musk disillusioned about the administration’s failure to slash public spending. Malmgren, however, says that “getting spending under control, will take many decades but the commencement of the process has gone incredibly well. This means addressing the issues of why money is being spent, what it is being spent on and whether it should be. His base is also very happy with his decisiveness on illegal immigration.” This has increased 50% year on year in the UK; attempted crossings of the US-Mexico border have dropped by more than 90%.

Trump’s critics are expecting (or is it hoping for?) a US debt crisis, particularly after the extension of the temporary tax cuts enacted in 2017. In Argentina, Javier Milei’s drastic cutting of public spending has turned an unsustainable deficit into a primary surplus (before finance costs) and is now being rewarded with an economic boom. That was never possible in the US. But it is far too soon to say that Trump has given up on cutting government expenditure; a 10-year US Treasury yield below 4.4% does not suggest that the bond vigilantes are particularly worried. As Ludovic Subran, chief economist and investment officer of Allianz, says, “it’s quite impressive to see how much the market is pricing in the pragmatism of President Trump. A lot of the uncertainty that was really peaking in April and May is now fading away.” You may not like Trump personally, but he is proving effective and markets are responding.

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When Donald Trump began unveiling his tariff plans in April, investors feared we were entering a sharp and sudden bear market. Stocks dropped sharply around the world, with the US down 10% in two days. Yet the plunge was short-lived: stocks rallied as abruptly as they had dropped. The US and other major global markets have gone on to new highs. So did investors get rattled too easily – or are they too sanguine now?

On the optimistic side, the deals that the US is striking with trading partners look less damaging than everybody feared in April. Yes, tariffs are unwelcome. They bring complexity and friction to global trade and add costs. Those costs will be borne to varying extents by the entire supply chain between foreign exporters and US consumers. Yet these deals still reduce the risks of a wider and more damaging trade war.

The pessimistic take is that America’s views on the rest of the world have changed. It is backing away from principles that it has championed for decades to become insular and mercantilist. Policymaking is more arbitrary and unpredictable. We can’t even be confident that these deals – which are still broad frameworks – will be honoured, let alone what might come in the next three-and-a-half years and beyond.

US stocks vs the world

So the rest of the world is reacting in a rational way. Countries are striking deals with the US to minimise immediate disruption, but over the longer term they will have to recognise that the world is changing. Trade patterns and alliances will shift. CEOs are also trying to flatter Trump by announcing large investments in the US to avoid being targeted – we are seeing plenty of this from pharma firms in an effort to ward off threats of high tariffs on imported drugs. Yet it remains to be seen how much will be puffing up investment that was already in the pipeline and how much actually materialises.

We will be looking at how all this could play out at Turmoil, Tariffs and Trump 2.0, our next annual MoneyWeek Wealth Summit on 7 November (tickets have just gone on sale at moneyweekwealthsummit.co.uk/2025). However, in stock market terms, there is one obvious idea for managing these risks.

US stocks have so far outstripped the rest of the world over the past 15 years that they now make up 60%-70% of the global market, depending on which index you track. This has been driven by superior earnings growth, but valuations have also diverged much more than many investors realise.

The MSCI USA trades on 23 times forecast earnings, while the MSCI Europe is on 14. Look back to mid 2016 – about the time the divergence accelerated – and the MSCI USA was on 17 times forward earnings, while the MSCI Europe was on 15 times. So striking a better balance between the US and the rest of the world than a typical global tracker fund doesn’t need to be a bet on whether Trump’s policies will ultimately hurt the US. Doing so is increasingly justified by the growing gulf in valuations.

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Markets made a tumultuous start to the week on 23 February following fresh tariff turmoil over the weekend.

On 20 February the US Supreme Court ruled that the basis for most of the sweeping tariffs that Donald Trump imposed on US imports last year is unsound. Trump had bypassed a Congressional vote (which he might well have lost) on his flagship tariff policy by invoking the International Emergency Economic Powers Act (IEEPA).

But the Supreme Court’s ruling confirmed that the IEEPA doesn’t give the president powers to impose tariffs unilaterally.

Following his defeat in the Supreme Court, Trump quickly invoked an obscure piece of legislation – Section 122 of the 1974 Trade Act – which gives the president the authority to impose tariffs of up to 15% for up to 150 days without Congressional approval.

Initially, this was used to impose 10% tariffs on all imports to the US. On Saturday 21 January, Trump announced via his Truth Social platform that he would raise the blanket rate to 15%.

“As investors become increasingly wary about US economic policy, the dollar has suffered fresh falls against a basket of currencies, with the dollar index down 0.35%,” said Susannah Streeter, chief investment strategist at Wealth Club. “Uneasiness is set to spread on Wall Street, with futures markets indicating a retreat when trading resumes later.”

How the latest tariff turmoil could affect your investments

The latest developments look to be bad news for US stocks. Despite initially rising immediately following the Supreme Court’s ruling, the S&P 500 looks to have fallen over the weekend, with S&P 500 futures down on the morning of Monday 23 February.

The FTSE 100 fell during early trading on the same day, but by 9.30am it had rallied to recover most of those losses.

The index “remains resilient amid the headwinds,” said Streeter, adding that it is “up by more than 8% year to date, with mining stocks continuing to benefit from a march higher in metals prices”.

Japan’s flagship stock market index, the Nikkei 225, fell 1.1% on 23 February, though Chinese stocks fared better with the Hang Seng index gaining 2.5%.

The price of gold opened 1.2% higher on 23 February compared to where it closed the previous week, with further geopolitical tension in Iran also helping to return the yellow metal to three-week highs.

“The precious metal climbed back above $5,160 an ounce earlier, a three-week high, before retreating slightly,” said Streeter. “The American military build-up in the Gulf has continued, with Iran so far resisting pressure from the US to restrict its nuclear development programme.”

How do the latest tariff twists impact global trade?

The short-term impact of the back and forth on tariffs over the weekend is that there is much more uncertainty over global trade.

What had looked initially like a simplification is clearly more complex given Trump’s 10% and 15% tariffs could override previously-agreed trade agreements, such as the 10% levy that goods imported from the UK were subject to following an agreement reached in May 2025.

This has prompted markets to consider how global trade will shake out in the wake of this latest disruption.

Some US trading partners are also pushing back against the new blanket tariffs.

“Bilateral deals reached through tortuous negotiations have been thrown up in the air again, creating a cloud of uncertainty,” said Streeter. “Countries are already preparing to retaliate, with the European Union looking set to halt the ratification of a deal with the US and India also postponing its negotiations to finalise an agreement.”.

In a statement, the EU Commission said “A deal is a deal. As the United States’ largest trading partner, the EU expects the US to honor its commitments set out in the Joint Statement – just as the EU stands by its commitments” in response to Trump’s threats to impose 15% tariffs.

The long-term impact of the latest tariff news for the US is also unclear.

“Trump’s Republicans only hold a narrow majority in Congress, and many of them are staunch free-traders,” said Kallum Pickering, chief economist at investment bank Peel Hunt. “It is thus not obvious that Trump will be able to rely on Congress to pass legislation to extend the new tariffs beyond 150 days.”

The Supreme Court defeat also potentially opens the door for the US government to have to repay hundreds of billions of dollars in IEEPA tariffs to importers who paid the now-defunct levies. While this could spark “potential legal battles and administrative chaos”, Pickering also believes it could support US domestic demand by transferring profits and revenues back to US businesses.

If so, that could theoretically benefit more domestically-focused US small cap stocks.

Steel and aluminium imports coming into the US will face additional tariffs from this Wednesday (4 June), after Donald Trump announced the levy would be doubled from 25% to 50%. It looks like the UK will be impacted by the policy, despite recently agreeing a trade deal with the US to reduce existing metal tariffs to zero.

The US-UK trade deal was announced on 8 May, but the original 25% metal tariff has been kept in place while full details are worked out. Trade secretary Jonathan Reynolds is expected to meet with his US counterpart Jamieson Greer this week to determine a timeline for lifting the tariffs on the UK.

Car tariffs are also likely to form part of the conversation, after the US agreed to reduce these from 25% to 10% on a quota of up to 100,000 cars.

“The announcement that US steel tariffs could jump up to 50% on Wednesday is yet another body blow for all UK steelmakers in this torrid time,” said Gareth Stace, director general at trade group UK Steel. “UK steel companies are this morning fearful that orders will now be cancelled, some of which are likely being shipped across the Atlantic as we speak.”

The US is the UK’s second most important export market for steel, according to the industry body, worth around £400 million and totalling 9% by value of exports. The Aluminium Federation has also expressed alarm at the announcement and is seeking clarity from the Department for Business and Trade.

The UK steel and aluminium industries are small compared to other areas of manufacturing, but the tariffs will still cause disruption.

The steel industry’s output was £1.7 billion last year, according to the Office for National Statistics, equivalent to 0.1% of the UK economy. The aluminium industry contributes around £1.9 billion, according to estimates from the Aluminium Federation and the University of Strathclyde.

Tariffs on the car industry could have a greater impact given the sector contributed £21 billion to the UK economy last year, equivalent to 0.9% of economic output. The US is the UK’s largest export partner for cars, accounting for 27% of total exports last year, equivalent to £9 billion.

Data from the Society of Motor Manufacturers and Traders (SMMT) shows the number of vehicles manufactured in the UK plunged 16% in April as US tariffs hit production. Just over 59,200 vehicles were made – the lowest April output figure for more than 70 years, excluding 2020 when the first Covid lockdown hit manufacturing.

Responding to the latest tariff announcements, a government spokesperson told MoneyWeek: “The UK was the first country to secure a trade deal with the US earlier this month and we remain committed to protecting British business and jobs across key sectors, including steel.

“We are engaging with the US on the implications of the latest tariff announcement and to provide clarity for industry.”

What do the latest tariff announcements mean for markets?

Equity markets dipped on Monday morning in response to the latest tariff announcements. This was partly driven by heightened rhetoric between the US and China, as well as the higher metal tariffs.

Tensions between the two countries briefly deescalated in May following a meeting in Geneva, with the US reducing tariffs against China from 145% to 30%, and China cutting retaliatory tariffs from 125% to 10%, both for an initial 90-day period.

However, Trump has since accused China of “totally violating” its agreement with the US. The president did not provide any further details, but US trade representative Jamieson Greer said China had not removed other non-tariff barriers as agreed.

China responded by demanding that the US “immediately correct its erroneous actions, cease discriminatory restrictions against China and jointly uphold the consensus reached at the high-level talks in Geneva”.

Commenting on the implications for markets, Russ Mould, investment director at platform AJ Bell, said: “Doubling import taxes on steel and aluminium and aggravating China once again means we face a situation where uncertainty prevails. Trump’s continuous moving of the goal posts is frustrating for businesses, governments, consumers and investors.”

Despite this, investors are getting used to rapid policy shifts from the US president, with Wall Street even coining a new theory known as the TACO trade. This stands for “Trump Always Chickens Out”. So far, the pattern has been one of aggressive policy statements which are gradually rolled back into something more manageable.

“We’re back in a situation of one step forward, two steps back, but there do appear to be expectations that more concessions will be struck,” said Susannah Streeter, head of money and markets at platform Hargreaves Lansdown.

The legal basis underpinning Trump’s tariffs has also been deemed unlawful by the US Court of International Trade, in a decision ruled on 29 May. The announcement lifted markets last week. Trump’s administration has indicated that it will appeal the decision. The appeals process could run on for some time and potentially go all the way to the Supreme Court.

It is no secret that US president Donald Trump is not a fan of Jerome “Jay” Powell, the chairman of the US Federal Reserve (Fed). Last Thursday, 17 April, he took his criticism up a notch when he threatened to fire Powell, saying his “termination” could not come “fast enough”.

The move constituted a significant overstep. The Fed is independent, meaning it sets interest rates without interference from the White House or Congress. Politicians generally respect this.

The main thing irking Trump is Powell’s refusal to lower interest rates quickly. On the campaign trail, Trump promised to relieve pressure on households by reducing borrowing costs – a decision that lies outside of the president’s power.

Markets responded negatively to Trump’s comments when they opened after the Easter weekend. The S&P 500 closed 2.4% lower on Monday, while the Nasdaq 100 fell 2.5%. The dollar also weakened, while gold and long-term Treasury yields rose.

Trump quickly backtracked on Tuesday, 22 April, telling reporters that he has “no intention” of firing Powell. “I would like to see him be a little more active in terms of his idea to lower interest rates,” he added. Markets jumped on the news.

As well as Trump’s comments on Powell, the rebound was partly driven by the suggestion that the US might come to an agreement with China, after Treasury secretary Scott Bessent said the trade war was unsustainable.

“These comments have given markets a sense of optimism that recent chaos might have peaked and we’re heading towards calmer waters. It almost suggests that someone has taken Trump to one side and told him it’s time to be more responsible with his words and actions,” said Russ Mould, investment director at AJ Bell.

While a temporary sense of calm has been restored, the episode raises questions about the Fed’s independence and how much power the president has over the US central bank. Can Trump fire Powell – and what would it mean for markets?

Can Trump fire the chair of the Fed?

The chairman of the US Federal Reserve is nominated by the US president and confirmed by the Senate, however it is an independent role. The chair serves a four-year term and can be reappointed several times.

Powell was originally nominated by Trump in 2017 during his first term as president, before relations between the two soured. He was nominated for a second term by Biden in 2022.

Speaking in Chicago last week, Powell said the Fed’s independence is “very widely understood and supported in Washington and in Congress where it really matters”. He added that the central bank was “never going to be influenced” by political pressure. “We will only make our decisions based on our best thinking… our best analysis of the data.”

Despite this, lawyers recently told the Supreme Court that the Fed’s independence could be left vulnerable, should Trump’s recent firing of two Democrats be allowed to stand. Cathy Harris and Gwynne Wilcox were dismissed from two federal labour boards before their terms expired.

The implication is that this could set a dangerous precedent for other independent agencies.

What’s behind Trump’s criticism of Powell?

Trump’s argument with Powell goes back to the fact that he wants interest rates to fall more quickly.

The Fed has cut interest rates three times from their peak, bringing the federal funds rate to a range of 4.25-4.5%. The first cut was a large one at 50 basis points (September), with two 25 basis-point cuts after that (August and December).

At the latest rate-setting meeting in March, Powell suggested two more 25 basis-point cuts could be in store this year, however he also pointed to “heightened uncertainty” in the US economy, driven by the Trump administration.

“The new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy,” he said.

“While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their effects on the economic outlook is high.”

Writing on his social media platform Truth Social on Thursday, Trump said: “The [European Central Bank] is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’

“Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now.”

Most economists disagree with Trump’s argument that tariffs will make Americans “rich”. Tariffs are essentially an import tax, paid by businesses and passed on to consumers in the form of higher prices.

If US inflation rises as a result of Trump’s trade policy, it could delay further interest rate cuts rather than opening the door to them.

The alternative scenario is that tariffs prove so damaging to economic growth that the Fed is forced to cut rates to support the economy – but for the wrong reasons (recessionary risks) rather than the right ones (slowing inflation).

In its latest economic outlook, the International Monetary Fund (IMF) has projected a “significant slowdown” in the US economy. It now expects growth to come in at 1.8% in 2025, down from its previous forecast of 2.7%.

While the institution is not currently forecasting a recession, it says the risk of one occurring has increased from odds of 25% to around 40%.

Why does central bank independence matter?

The Fed has a dual mandate – to promote maximum employment and price stability. To successfully achieve this, it needs to take a view that is both long-term and impartial.

Squashing inflation out of the economy, for example, has involved painful decisions. Many households and businesses are still struggling to pay off mortgages and debts as a result of higher interest rates. Someone courting public opinion may have struggled to make the necessary moves.

“The critical thing is to make sure that inflation expectations remain anchored; that everyone remains convinced that central banks will do what is necessary to bring inflation back to central bank targets in an orderly manner,” said Pierre-Olivier Gourinchas, economic counsellor at the IMF.

“Central banks have the instruments to do this. They have their interest rate instruments. They have various instruments of monetary policy. But one critical aspect of what they do comes from their credibility. So central banks need to remain credible. And part of that credibility is built upon central bank independence.”

What do Trump’s threats mean for investors?

Any threats to central bank independence are bad news for investors and the wider US economy.

Firstly, interference from the president would damage central bank credibility, adding to the risk of persistently higher inflation and therefore interest rates. In other words, Trump could end up undermining his own objectives.

Furthermore, lower short-term interest rates would probably come at the expense of a jump in longer-term Treasury yields, according to Samuel Tombs, chief US economist at Pantheon Macroeconomics. He points out that these matter more for the real economy.

Tombs suggests investors would “bake in a greater risk premium”, anticipating “more inflation and hence the need for tighter monetary policy in the future”.

Meanwhile, “higher corporate bond yields and lower stock prices would make financing more, rather than less, expensive for many private companies, offset only in part by the boost to exports from a weaker dollar”.

Monday’s “ugly moves” in financial markets are just “a taste of what would follow if Trump aggressively attacked the Fed’s independence”, according to Tombs. Investors will be breathing a sigh of relief now that Trump has backed down – and hoping he stays there.

The consensus among mainstream economists and policymakers is that tariffs are bad for the economy and ultimately self-defeating. Slapping charges on imports to make them more expensive and thus protect industries at home leads to economic inefficiencies, reduced competition and hence innovation, and a higher cost for imported goods, which leads to price rises for consumers and sparks retaliatory tariffs from other countries that harm exporters and fuel counterproductive trade wars. But if that is all so obvious to everyone, then why is Donald Trump’s administration in the US so determinedly beating a path in the opposite direction? What is Trump thinking?

A profound shift

It is to be hoped that he is in fact thinking, for there is a lot at stake, as that bastion of right-thinking, The Economist, explains. Trump had already raised the average tariff on America’s imports by about twice as much as he did in his first stint in the White House before his “Liberation Day” blitzkrieg. Confidence in the prospects for the American economy had already been “sapped” as a result, and financial markets had swooned. Inflation expectations were edging upwards. Investors were losing faith in the administration’s ability to steer the economy.

And despite the tariffs, which should if all else were equal, have strengthened the currency, the dollar had been sliding, suggesting an “act of grave self-harm” – that the overall “hit” to the US economy from Trump’s policies was more than outweighing the direct impact of rising tariffs. Investors and businesses were unsure how much worse things would get, explaining why surveys were showing an “alarming” fall in planned capital expenditure, foreshadowing slower growth. And then, Trump dropped a further bombshell, jacking up tariffs on all countries and “erecting a wall of protection around the US economy akin to that of the late 1800s”.

Businesses, investors, diplomats and economic forecasters are still trying to think through the details and the consequences. But to get bogged down in the detail risks missing the bigger picture, says Simon Nixon on Substack. Trump’s “Liberation Day” announcement represents the “end of the economic world as we knew it” and the consequences will not be limited to trade. Trump has blown up what was left of the “global rules-based trading system”, and the predictable result will be “chaos”.

America’s average tariff is now estimated to be between 25% and 30%, far above the 20% level it reached in the 1930s following the introduction of the infamous Smoot- Hawley tariffs. Those tariffs, and the retaliation they invited, were sufficiently damaging to lead to a 60% reduction in global trade, deepening the Great Depression and “fuelling what turned into economic and political disaster in Europe”, says Nixon. Trump’s tariffs represent a far larger and more rapid hike, and apply to pretty much everything (the Smoot-Hawley measures were limited to certain goods).

Just how damaging all this will prove to be to global growth is hard to say, not least because it all hinges on how the rest of the world, particularly China and the EU, responds. (China has already announced large retaliatory tariffs.) But few investors realise how closely global trade and capital flows are linked, says Nixon.

If Trump’s tariffs lead to lower cross-border capital flows, that could have huge consequences for the global financial system. Nearly the whole of Wall Street and the City has been “spectacularly wrong-footed” by the scale of all this, and they have “consistently misjudged” Trump’s agenda since his election in November, assuming his tariff threats were all about leverage. The reality is that we are seeing a “profound ideological shift in American economic strategy”. The market turmoil last week was a sign that investors are finally waking up to the reality.

Don’t underestimate Trump

Trump may walk like a buffoon, talk like a buffoon and look like one, as Yanis Varoufakis said in an interview with The Times, but it’s a profound mistake to think that he is one and hence to underestimate him. Trump is surrounded by a serious and intelligent economic team who have very clear ideas about what they are doing.

Which is what? Nothing less than the “controlled disintegration of the world economy by means of a devastating blow”, as Varoufakis explains on Unherd. Despite the outrage about that, it wouldn’t be the first time America has inflicted such a blow. The words just quoted were actually uttered by president Richard Nixon’s treasury secretary, John Connally, who succeeded in convincing Nixon to unleash the famous “Nixon shock” – a series of economic measures including wage and price freezes, tariffs on imports and ending the convertibility of the dollar into gold.

That shock was more devastating than Trump’s, especially for Europeans, but the US didn’t care, says Varoufakis. Its aim was to ensure that “US hegemony grew alongside America’s twin (trade and government) deficits” by seeking an alternative to belt-tightening, which would have risked a recession and curtailed US military might.

The idea was essentially to boost the US trade deficit and make foreign capitalists pay for it, and the result over decades was the construction of the international system of finance, trade and commerce that Trump has just blown up. Connally explained the rationale: “It is tempting to look at the market as an impartial arbiter. But balancing the requirements of a stable international system against the desirability of retaining freedom of action for national policy, a number of countries, including the US, opted for the latter”. Trump has different goals, but the same basic idea.

What are Trump’s goals? Why topple the global trading system that America took such pains to create in the first place and has profited from so handsomely, both economically and in terms of world dominance? There are actually some very good, indeed urgent, reasons, says Juliet Samuel in The Times. For more than a generation, the US economy has been “dragged hideously out of shape by a massive financial distortion” caused by the way investors use the dollar. This has been long been a feature of the world economy, but the US is only now “waking up to the threat” this poses to the country’s industrial base and therefore its security.

In the world financial system, US dollars are used not only by foreigners who want to trade with Americans but by any country that wants to save the proceeds from exports without putting them at risk in their own small or corrupt systems or because they want to avoid moving their own exchange rates. They hoard it instead by buying US Treasury bonds.

When the US was by far the world’s biggest economy, that didn’t affect Americans much. In fact, it gave America “exceptional power to sanction foreigners and to borrow seemingly without limit”. But over decades, and especially since China joined the world trading system, the US economy has become smaller and smaller relative to the rest of the world. This has inflated the value of the dollar to the point where it is “pricing American exporters out of the game”.

As Varoufakis has put it, Trump is trying to correct this by pulling off a tricky balancing act – to weaken the dollar to address this issue, and to rebuild America’s industrial might, while yet retaining the dollar’s global hegemony (his introduction of a cryptocurrency reserve may be another plank in his plan here). The fear is that if nothing had changed, then when US deficits exceeded some threshold, foreigners would have panicked, sold their dollar-denominated assets and found some other currency to hoard. Americans would then have been left “amid international chaos with a wrecked manufacturing sector, derelict financial markets and an insolvent government”.

Tariffs alone are unlikely to work to fix this, but there is, says Samuel, a “grand strategy” at play, outlined by the chairman of Trump’s Council of Economic Advisers, Stephen Miran, in a paper last year entitled A User’s Guide to Restructuring the Global Trading System. The upshot is that the tariffs are but an “opening salvo in a struggle to fix the US trading position and to sort allies from enemies in doing so”. “Start with tariffs on everyone, let them feel the pain, then offer relief to those willing to help gradually deflate the dollar by slowly selling down Treasuries, opening up their own markets to US goods and agreeing to impose a tariff wall on China.”

The right response

This is, to say the least, a risky and dangerous operation, and lots could go wrong. Indeed, internal opposition to it, even among Republicans in Congress, is starting to take shape. Trump may walk back his tariffs when he gets what he wants from other countries, or under other political or economic pressure. Geopolitical realignments may not work out in the way Trump intends. We simply don’t know what will happen and can’t control what does. All we can control is what we do in response – which should be what?

As a country, the best response may be to sit on our hands. Tariffs mostly hurt the people in the country imposing them, so the rush to impose “retaliatory” tariffs makes no sense, at least not economically, as Julian Jessop points out on CapX. “The best response to someone else doing something stupid… is unlikely to include doing the same stupid thing yourself.”

In fact, Britain should go in the opposite direction and reduce tariffs on imports from the US. Regardless of how Trump responds to that, “British consumers would be better off”. It may not have much impact on the bigger picture, and all major economies will be hurt by a global trade war. But the UK “can at least try” to sit out the war, “rather than rush to join in”.

As the world “hurtles towards mercantilist madness”, the UK should “stride unconditionally and without delay towards the opposite path of enlightenment”, says Harry Phibbs for ConservativeHome. Last year, we “used our Brexit freedoms” to lift tariffs on orange juice, almonds and tofu, among other things. We could go much further, regardless of what others do. “A unilateralist embrace of free trade is in our country’s interest.”

As investors, the key thing is not to rush to action. Assuming you already had a clear idea of your investment goals and a well-balanced portfolio, at times like these “it is usually best to keep a clear head, stick to your investing plan and keep focused on the fact that sharp short-term moves should pale into insignificance over multiple years and decades”, as Rob Morgan, chief analyst for Charles Stanley, points out. “It’s rather like avoiding sea sickness by keeping your eyes on the horizon rather than the rolling waves below.”

If you are investing for the long-term, time spent in the market is far more important than timing the market. Selling out in fear can be the worst thing to do, as large falls can be followed by big rises, so you risk missing out on both sides – selling when prices are depressed and not buying in until they have moved higher. “In the absence of a crystal ball, keeping invested is often the best strategy, no matter how uncomfortable.” Don’t panic, then, but brace for turbulence.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

“The post-World War II… world economic order” is finished, says Reshma Kapadia in Barron’s.

On Wednesday, 9 April, sweeping US import charges on most countries in the world came into effect, including tariffs of 20% on the EU and 104% in the case of China. As during the pandemic, ultra-efficient global supply chains are being disrupted, raising inflationary pressure. The latest tariffs, which Donald Trump unveiled on Wednesday 2 April in an event dubbed “Liberation Day”, take the average US tariff rate from 2.5% last year to 22% now, according to calculations by Fitch Ratings. That is the highest level since 1910.

Is the US headed for stagflation?

Investors have gone into tariff shock. The US S&P 500 dropped 12% in the four trading days following Trump's "Liberation Day" tariff announcement. Down 18% since Trump’s inauguration, American stocks sit on the cusp of a bear market. Germany’s Dax was off 9% since “Liberation Day”, with the FTSE 100 falling 8%, correct at the time of writing. Asia has been hit especially hard. Trading has been exceptionally volatile, with the Vix index – known as the stock market’s fear gauge – spiking to its highest level since the 2020 Covid crash.

“Wall Street blew it,” says James Surowiecki in The Atlantic. For months, US stock investors have been in denial that Trump was actually going to do what he said he was going to do. Trump’s beliefs about trade – “deficits are horrible, and tariffs are great” – have been “strikingly consistent” for almost 40 years. Markets have been guilty of “wilful blindness”.

The stock plunge heralds “a severe economic slowdown”, says The Economist. JPMorgan Chase’s analysts put the chances of a global recession this year at 60%. While the US has been hardest hit, the selloff across other major bourses has been almost as bad, suggesting that tariff pain will be widely felt.

The tariffs amount to a $600 billion tax hike on the cost of living that will hurt consumers, says Bill Dudley on Bloomberg. In the past, the Federal Reserve has ridden to the rescue of a weaker economy. Don’t expect a repeat this time. Annualised US inflation is likely to reach nearly 5% over the coming months, reducing the space for interest-rate cuts. “All told, stagflation is the optimistic scenario. More likely, the US will end up in a full-blown recession.”

The S&P is on the verge of its 13th bear market – defined as a 20% fall from the peak – since 1950, says Russ Mould of AJ Bell. The average post-war bear market lasted 381 days and knocked a third off stock valuations. “The bigger the prior bull-market gain, the bigger the post-party hangover” tends to be – not reassuring, given how overheated US markets became in 2024. Eventually, stocks sell off so much that they become a good deal, but the US market has a long way to fall before that becomes the case. On 19 times forward 2025 earnings, valuations are “still not cheap” by historic standards. And remember that those valuations bake in forecasts of strong corporate profit growth this year – forecasts that are likely to be cut as the trade war bites into the bottom line.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Donald Trump’s net worth has skyrocketed since he was elected president for the second time during the 2024 US elections.

According to TheStreet, Trump is the richest US president of all time (after previous presidents’ wealth is adjusted for inflation), and the only billionaire to live in the White House.

So, how rich is he? Forbes estimates that Donald Trump’s net worth currently stands at around $7.3 billion.

Though still far from matching the wealth of billionaire Elon Musk, the US president’s fortune cements his status among the richest people in the world.

We take a deeper dive into what Trump owns and how much it's worth.

What makes up the majority of Donald Trump's net worth?

By far, the lion's share of Trump's net worth comes from cryptocurrency and liquid assets, according to Forbes. Trump is flush with cash thanks to his cryptocurrency sales, which have added around $2 billion to his wealth in the past ten months.

Second to stablecoins and memecoins, Trump’s social-media venture has made him billions. Trump Media & Technology Group Corp (NASDAQ: DJT), the parent company of his social network, Truth Social, generated sales of just $3.6 million last year, but due to noise around Trump on a daily basis, shares in his company remain highly priced, leaving him with billions. The media company went public via a merger with the special purpose acquisition company (SPAC) Digital World Acquisition Company in March 2024.

Trump's booming real estate empire

A chunk of Trump's net worth also comes from real estate. Forbes estimates this to be worth $1.2 billion.

This includes his 30% stake in 1290 Avenue of the Americas in New York and 555 California Street in San Francisco, both valued at $1.4 billion and $1.6 billion, respectively.

Among Trump's other properties are Trump Tower ($215 million) in New York, 17 condos in Trump Park Avenue in New York ($94 million), Trump Winery ($44 million) in Virginia, and four homes in Florida, which are worth around $92 million.

He also owns an 11,000-square-foot Trump Tower penthouse in New York, several residential lots in California worth $50 million, and Seven Springs — a $30 million private estate in Bedford, New York.

Trump’s golf clubs and resorts are valued at $1.3 billion. The operating profits at his ten golf courses in six different states boomed from $19 million in 2020 to $66 million in 2024. He also owns three European golf properties – one in Ireland, two in Scotland – both valued at $118 million. The Trump Organization declared losses of over $100 million at these resorts, but business seems to have picked up in recent months, according to Forbes.

He owns several resorts, including the private club Mar-a-Lago in Palm Beach worth $490 million, and the Trump National Doral Miami, worth $390 million.

According to Time, Trump also received £3 million in income from Bibles sold on musician Lee Greenwood’s website. Greenwood is a close ally of Trump. The president also brought in $2.8 million from Trump watches and $2.5 million from Trump sneakers and fragrances.

Other assets held by Trump include $11 million for a helicopter and aeroplane, $5 million in loans made to his children, and a licensing and management business worth $501 million. Trump’s pensions are worth $2 million.

How much have Trump's legal problems cost?

What lies in the debit column, detracting from Trump's net worth? Forbes estimated his legal liabilities at $95 million. This comes after a New York appeals court threw out a $500 million civil fraud penalty case against Trump, bringing down how much he needed to shell out. The judges stated that while Trump was liable for fraud, paying nearly half a billion dollars was excessive and couldn’t be justified.

How Donald Trump's net worth has fluctuated over time

Forbes estimated Donald Trump's net worth to be around $200 million back in 1982, rising to $1.7 billion by 1989. However, his net worth plunged in the 1990s, and he fell off the Forbes 400 list for the first half of the decade.

In 1996, he was worth about $450 million. From there, Trump's net worth gradually rose over time, and by 2007 it was $3 billion before tumbling again in 2009, at the end of the Great Recession (December 2007 to June 2009).

In 2009, Trump began building his billions again, reaching $4.5 billion in 2015. Trump's net worth began to decline again in 2016, falling to $3.7 billion before bottoming out during the pandemic at $2.5 billion in 2020 and 2021, likely in part because of closures that shuttered his clubs and resorts.

In 2022, Trump's net worth was $3.2 billion but dropped again, to $2.6 billion, in 2023. In early 2024, he grew his wealth to over $6 billion after Trump Media went public, per the Bloomberg Billionaires Index.

In 2025, a report by State Democracy Defenders Action estimated that his crypto holdings, namely $TRUMP and $MELANIA meme coins and a stake in World Liberty Financial (a Decentralised finance, or DeFi, tied to his family) were nearly 40% of his net worth – approximately $2.9 billion.

After Trump returned to office, his net worth jumped to $7.3 billion, up from $3.9 billion in 2024.

“No amount of blood or political rancour” can shake the market’s positive mood, says The Economist. From global wars to an escalating trade conflict with China to an assassination attempt, signs of political instability are multiplying. 

Yet stocks are “at, or close to, all-time highs in America, the eurozone and Japan”. The widespread belief on Wall Street is that a second Trump presidency will be good for investors. 

True, proposed tax cuts and looser public spending might boost profits, but if Trump abandons Nato or initiates “total decoupling from China”, then stocks will not be spared from the resulting “economic chaos”. With stock valuations already “sky-high”, an unambiguously protectionist president would be “a recipe for a crash”.

How are markets reacting to Donald Trump's presidency run? 

Investors have been piling into assets expected to benefit from a second Trump presidency ever since Joe Biden's disastrous debate performance last month, say Liz Capo McCormick and Natalia Kniazhevich on Bloomberg. Bitcoin and gold have rallied, while US bond yields have climbed on expectations of higher inflation under a Trump presidency. 

But Biden’s withdrawal has thrown “a wild card” into the race, which could spell more volatile trading ahead. Investors should always be careful when betting on politics, says Jon Sindreu in The Wall Street Journal. 

With the exception of bitcoin, most of the current “Trump trades” are similar to those that investors tried following Trump’s 2016 victory – sell the Mexican peso and buy “smaller, domestically oriented” stocks in “old economy” industries. That approach didn’t really work last time. “Small-caps performed badly” during Trump’s first term, while “industrials, energy and banks” lagged tech. Indeed, there is a good argument that it is not small US companies, but Big Tech – bruised by the Biden White House’s “antitrust zeal” – that would fare best under Trump.

Investors are also hoping for a repeat of Trump’s 2017 tax cuts, which triggered a corporate earnings bonanza. But scope for further reductions is limited, not least given America’s already yawning budget deficit. As Rabobank analysts put it, investors who are confident they know how a second Trump presidency will play out risk seeing their “Trump trade” turn into a “chump trade”, says Katie Martin in the Financial Times. 

The one near-certainty is that “Trump 2.0” would be inflationary because of a “huge increase in trade tariffs” and a “volley” of new unfunded tax cuts. The dynamic US economy might manage to sail on, but assets in allies in Europe and Asia could be in for a rockier ride. 

And then there is the “reddest of red lines” – hints that Trump may interfere with the independence of the Federal Reserve, the US central bank. Fed independence has been compromised before, says Ernie Tedeschi in the Financial Times. In the early 1970s, Richard Nixon leaned on the Fed to “keep monetary policy easy during his re-election bid”. That left the door wide open to crushing, prolonged stagflation when the 1973 oil crisis hit the following year. Rising US political risk “is likely being underpriced by markets”.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

If you’ve been keeping a close eye on share tips 2026, then don’t miss this weekly round-up of the top stocks to consider for your portfolio.

The MoneyWeek share tips 2026 guide pulls together some of the most popular stocks from top share tipsters around.

As well as the UK financial pages, we look at publications across the pond for investors who want to diversify their holdings internationally.

Investors will undoubtedly want to refresh their finances this year – we look at dividend heroes, what's happening with gold prices and the best way to invest. If you're new to investing, here's how to start.

This list is updated weekly.

Share tips 2026: top stock picks of the week

Stocks to buy

1. Tapestry (NYSE: TPR)
Barron's
Tapestry's luxury leather-goods brand, Coach, is popular with younger consumers as it is more affordable than European ultra-luxury brands. The US group has upgraded its annual sales-growth guidance and its gross margin has improved, even with marketing and investments in new products. Despite economic challenges facing younger consumers and concerns over Tapestry's other brand, Kate Spade, analysts expect double-digit earnings growth amid global expansion. $145

2. CMC Markets (LSE: CMCX)
Investors' Chronicle
CMC Markets' full-year pre-tax profit of £101 million fell short of expectations owing to high operating and legal costs. But this financial year, CMC expects net operating income to total £460 million-£480 million, a 17%-22% increase from last year. This is due to the company's shift from being tied to volatile trading patterns to establishing itself as a “financial-architecture specialist for corporate clients”, making income more stable. This led to a 33% increase in net investing revenue, while the core trading division continued to grow. 462p

3. Mitie (LSE: MTO)
Investors’ Chronicle
Mitie's full-year revenue increased 10.5% thanks to organic growth and acquisitions. Adjusted operating profits rose 13% to £264 million, while the underlying margin improved despite rising national insurance costs. Free cash flow exceeded expectations, and new business wins boosted orders to a record £16.3 billion. Earnings per share are expected to increase from 14.4p to 16.4p by fiscal 2028. Despite the stock's valuation being broadly in line with its peers, the group has delivered “earnings surprises” over the past decade. 163p

Stock to sell

1. Ulta Beauty (NASDAQ: ULTA)
Barron's
Ulta Beauty's stock has more than doubled since the pandemic, but it is now down over 30% from its highs of February 2026. The US cosmetics retailer reported higher first-quarter sales, higher average purchases and prices, and an uptick in the number of members in its loyalty programme. But investors are concerned about the sustainability of earnings growth and margins in addition to the need for heavy investment to maintain market share amid fierce competition. Influencers promoting products on social media makes it difficult for bricks-and-mortar players to keep up. While Ulta's TikTok Shop is attracting new, younger customers, other consumers have to contend with high inflation. Avoid. 467p

Stocks to hold

1. Quanta Services (NYSE: PWR)
Barron's
America's Quanta Services, a provider of key infrastructure for electric utilities and pipelines, has benefited from the surge in demand for AI, with the shares up 50% since October 2025. Major technology firms are set to invest trillions in AI, leading to increased demand for electricity and data centres, which will need power plants to keep running; this helps explain Quanta's record $48.5 billion order backlog. Quanta is the partner of choice for many utilities owing to its equipment and large labour force, and it could benefit from the potential expansion of ultra-high-voltage transmission lines. Buy ($707).

2. VP (LSE: VP)
Investors' Chronicle
VP swung to a pre-tax loss due to a soft construction market and lower revenues. However, the equipment-hire company maintained the dividend, and leverage remained below target. Adjusted profit declined 26% to £27 million, in line with guidance. VP's restructuring of the Brandon Hire business, which included cutting branches and jobs, resulted in a £25 million charge, but should bolster margins. VP expects trading for the new fiscal year to meet expectations, with sales of £352 million and adjusted profit of £33 million. Analysts expect double-digit earnings-per-share growth. Buy (465p).

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Elon Musk is now not only the richest person in the world but also the first and only trillionaire in history.

After SpaceX’s highly anticipated IPO on 12 June, Forbes reported that Musk added $188 billion to his already astronomical wealth. It means that his net worth is now more than that of the four billionaires after him on the Forbes Real Time Billionaires List.

But where exactly did it all start, and how did the South African tycoon add 12 zeroes to his net worth?

We chart how his wealth has grown from his early years of founding what is now PayPal, joining Tesla, and launching SpaceX.

Elon Musk’s net worth over the years

At the time of writing, Elon Musk’s net worth is $1.3 trillion, according to Forbes.

To put that into perspective, Sarah Coles of AJ Bell says: “If you aimed for a trillion pounds and you were starting from scratch, you could put away £500 a month and, with growth at 5% a year and contributions rising 2% a year, it would take around 316 years.”

Musk’s net worth has grown substantially over the past few years, driven largely by his stakes in electric vehicle company Tesla and aerospace firm SpaceX.

He first appeared on Forbes’s World’s Billionaires list in 2012, when he had an estimated fortune of $2 billion, making him the world’s 634th richest person. From then on, it took Musk less than a decade to take the top spot, dethroning Amazon CEO Jeff Bezos as the world’s richest person in January 2021.

Elon Musk’s early life and career

Musk was born in South Africa on 28 June 1971. From an early age, he showed an interest in technology and innovation.

His first major success came with Zip2, a company that provided online business directories and maps to newsletters. In 1999, Compaq acquired Zip2 for nearly $300 million, paving the way for Musk into the tech industry.

Musk used proceeds from the sale to launch X.com, an online payment platform that eventually evolved into PayPal. In 2002, eBay acquired PayPal for $1.5 billion. That same year, Musk used $100 million of his own fortune to start SpaceX, aiming to make space exploration more accessible and colonise Mars.

In 2004, Musk joined Tesla Motors and became the company’s CEO four years later. Under his leadership, Tesla emerged as one of the world’s most electric vehicle companies, with a market capitalisation of over $1.12 trillion.

Musk also co-founded solar panel installation firm SolarCity, neurotechnology company Neuralink and tunnel construction firm The Boring Company.

How SpaceX became the largest IPO in history

SpaceX’s meteoric rise to become the world’s largest-ever initial public offering can be attributed to Elon Musk’s larger-than-life public persona, widening interest in investing in space, and rising AI spending by tech megacaps.

On 12 June, shares in the AI and space company began trading on the Nasdaq at $150 per share, raising $75 billion and closing with a market cap of $2.11 trillion.

It makes SpaceX one of the world’s most valuable companies, reaching the milestone in an extremely short timespan.

Elon Musk’s role in the Trump administration

Elon Musk’s influence extends far beyond the tech world. He was a prominent supporter of Donald Trump during the 2024 US presidential election, spending over $290 million to get Trump into the White House, according to CNN.

Following Trump’s victory over Democratic nominee Kamala Harris, Musk secured a position in his administration, serving as the leader of the Department of Government Efficiency (DOGE).

DOGE emerged as a means to cut US government spending, which resulted in mass workforce layoffs and controversial cuts to USAID, which is responsible for foreign aid and humanitarian relief. On 28 May 2025, Musk departed from the role to focus on Tesla.

Elon Musk’s property portfolio and car collection

Musk has built up a vast property empire over the years. In 2020, he stated on X that he would sell all his “physical possessions” and “own no house”. At that time, the asking prices for his seven homes were more than $100 million in total, according to Architectural Digest, including a 16,000-square-foot home in Los Angeles, which sold for $29 million.

After shedding his property portfolio, Musk moved into a tiny home in Boca Chica, Texas, close to the SpaceX headquarters. In 2022, he bought a 6,900-square-foot mansion in West Lake Hills, Texas, worth $6 million.

The billionaire has also built his own company town called Starbase, named after his rocket launch site, on the southern tip of Texas. The city covers around 1.6 square miles and is home to some 500 people, according to The Guardian.

The Tesla CEO has a large collection of cars, ranging from a Ford Model T, a 1997 McLaren F1, a Tesla Roadster and the 1976 Lotus Espirit that James Bond drove in the 1977 film The Spy Who Loved Me. Musk bought it at an auction in 2013 for nearly $1 million, according to the BBC. He also owns private jets, each worth millions of dollars.

How does Elon Musk manage his wealth?

With so many billions to his name, it’s not surprising that Elon Musk has a wealth manager. His fortunes are handled by Excession LLC, a single-family office formed in 2016. It’s run by James Birchall, Musk’s trusted advisor and CEO of Neuralink.

While Musk doesn’t donate his wealth as generously as other billionaires like Bill Gates, Jeff Bezos and Mark Zuckerberg, he still gives away billions in shares to charities. He has an organisation called the Musk Foundation, with more than $14 billion in assets. However, The New York Times reported that the charity failed to give away the minimum amount required by law for the fourth year in a row.