Is this Trump’s Liz Truss moment?: 'It could be cataclysmic'
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Donald Trump’s impact on the US economy has been compared to that of Liz Truss in the UK during her brief stint as Prime Minister, with both having caused financial chaos within months of taking power. But is there any chance of the president wilting like a limp lettuce, or will he simply dig his heels in deeper?
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In brief…
- Both Liz Truss and Donald Trump crashed the economy in their countries after coming to power. Now experts are drawing comparisons between the two.
- Mehreen Khan, economics editor at The Times, says no one ever expected the US markets – once considered the safest in the world – to be in such disarray, and says Trump will need to axe his own tariffs strategy to put America back on track.
- The News Agents say what is happening in the US could be thousands of times worse, for the whole world, than when the UK economy crashed due to the dollar being at the centre of global finance.
What’s the story?
In 2022 Liz Truss became Prime Minister of the UK, and swiftly crashed the economy with her disastrous 'mini-budget' before ducking out of the job after just 49 days in office.
Donald Trump has achieved half of this, becoming president of the US and crashing its economy – and causing untold damage worldwide – with his ill-advised tariffs.
Truss has since become a staunch Trump advocate, travelling to America to support the Republican at his rallies while campaigning for election in 2024.
But while her economic activity cost Truss her job, could Trump's tariffs do the same across the pond? Or will the belligerent president cling to power no matter the disruption he causes across the globe – and on his home soil?
And, perhaps most importantly, is it time to get a new lettuce?
There’s a simple way out for Trump – but he’s unlikely to take it
Mehreen Khan, economics editor of The Times newspaper tells The News Agents that if Trump follows the track of the doomed 49-day PM, it will make her actions seem like a "storm in a teacup".
She adds that if the world finds itself in a place where nobody wants to hold onto dollars and US bonds as assets – once seen as the safest in the world – then "all bets are off" on what comes next.
"We always thought a Liz Truss moment would never happen to a country like the US," Khan tells The News Agents.
"When everyone is panicking, that's what you buy; dollars and US government bonds. Now people are panicking, and they're selling it because of the panic generated by Donald Trump.
"We saw what happened with Liz Truss – Tory MPs decided she was a liability, and she had to go. Men in grey suits booted her out, and that was the end of Liz Truss."
But, she adds, this is highly unlikely to happen from within the Trump administration as it currently stands.
"Panic is not going to be stemmed by the White House," Khan adds.
"In the next couple of days, we're not going to see a retrenchment on tariff policy from the Trump administration which, if anything, has widened it to things like the pharmaceutical sector and become more aggressive on China."
And China could pose another problem for Trump, and America, beyond t its retaliatory tariffs.
Along with Japan, it is the biggest foreign holder of US government bonds, and if they choose to "yank up the pressure on Trump", they can get rid of those bonds, resulting in a situation Khan describes as "apocalyptic".
"The good news is there's a really easy way out, and the way out is the tariffs don't happen," she says.
"If they do happen, they happen for a short amount of time, and then we never hear or see them again."
Once again, however, Khan says this currently seems like an impossibility.
"This President is ideologically committed to tariffs. He's obsessed with them. He loves them," she says.
"He thinks that they are a silver bullet to regaining purchasing power for American workers and bringing back American jobs.
"There are very few people, beyond his immediate circle, who think that way."
What’s The News Agents’ take?
Lewis Goodall says if Trump's Truss moment comes, it will be a thousand times worse than anything that happened in the UK.
This, he adds, is largely because of the dollar's place at the centre of the financial world – while British pounds sterling never was when Truss crashed the economy.
"If the Liz Truss situation had gone on, it would be a crisis in the UK," says Jon Sopel.
"It would have been a crisis for UK pension holders, because the pensions industry would have fallen over – but it wouldn't have led to worldwide contagion.
"I don't want to catastrophize this, but oh my god, are we in a critical position now in terms of the US economy. Potentially, this is cataclysmic."
As well as the immediate threats posed by Trump's tariffs, the US also has trillions of dollars worth of debt, and if it is unable to continue paying that off, Lewis says the global financial system will simply "freeze up".
"We've never seen anything like it before," he adds.
The solution to the situation is simple, says Jon – Trump just needs to reverse his tariffs policy. But in doing that, he would become a "lame duck" president.
Trump has said that countries all over the world are now lining up to beg him for a deal – or, in his words "kissing my ass" – which Emily Maitlis compares to the Miss Universe competition, which the president once owned.
"It's a beauty contest between all these countries," she says.
"Who's going to flatter him, who's going to wear their bikini in the best way, who's going to come out and win the evening dress?
"He's playing the world off like it is some beauty pageant, and it just won't end well – for them or for America."
Lewis describes what comes next for Trump as his "biggest test" as he comes face to face with his biggest rival yet – the financial markets.
"The bond markets are very powerful – we saw that in our own country with Liz Truss," he says.
"Once the markets have you and your currency in their cross hairs, it is a very dangerous place to be."
Listen to the latest episode of The News Agents.
