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The writer is a senior member at the German Council on Foreign Relations
US President-elect Donald Trump has chosen Scott Bessent as his Treasury Secretary. Having worked with him when he was chief investment officer of Soros Fund Management, I believe he could play a role similar to the one James Baker played for Ronald Reagan in the 1980s, establishing design a global agreement to realign the world’s major currencies and achieve certain achievements. level of financial adjustment.
Bessent has always been a keen observer of the world economy and the operation of international financial and monetary systems. He ran George Soros’s European office at the time of the sterling crisis in 1992; First of all, he clearly understood how the fundamental changes implemented by Shinzo Abe would revive the Japanese economy despite the difficulties of prolonged stagnation in 2012; and he understands better than Soros himself why the alignment of the American and Chinese economies produced an implicit “Shanghai accord” to avert China’s financial crisis in 2015.
Policy and political regime changes in the global macroeconomic environment, imbalances and exchange rate differences are Bessent’s main concerns. Although Bessent was officially behind the Maga economic policy agenda, he certainly understood how disruptive it could be not only for the United States and the global role of the dollar but also for the world economy.
A very aggressive trade policy towards China as well as towards US allies will not achieve the necessary rebalancing in the world economy but could eventually lead to a new grand bargain – a strategy that Bessent described as “Climb the ladder to get down the ladder”. In this view, tariffs are best seen as a negotiating tactic designed to gain economic policy concessions from important trading partners.
Trump’s proposed tariffs would have only a limited impact on the US trade deficit and have a significant negative impact on the world economy, largely due to inevitable retaliation and the appreciation of the dollar due to the deliberate devaluation of the yuan. A stronger dollar won’t just make Trump angry; it will also destabilize the global economy, especially developing countries.
As Bessent argued when speaking of a “realignment of the global economy” in which he was willing to participate, and as Trump demonstrated in his first term with a bilateral agreement between the US and China China, the result could be a huge windfall on the international stage. in the form of a gradual and coordinated devaluation of the dollar in exchange for reduced US tariffs. This will not only force China to accept more currency flexibility but also help other countries contribute more meaningfully to the global rebalancing by boosting domestic demand.
In return, the US will commit to tax reductions and some degree of fiscal consolidation. This would stabilize the dollar and promote a rebalancing of the world economy, beneficial for better allocation of global investments and savings. It will also improve the growth potential of the world economy, especially in emerging and frontier markets.
Such a grand bargain, reminiscent of the Baker-engineered Plaza Accord of 1985, in which the United States acted in concert to weaken the dollar, would be a way to put Maga economic policy into perspective. international cooperation. Without it, there is a real risk of increased dollar instability, leading to inappropriate fiscal policy and debt monetization and ultimately culminating in a currency crisis .
Bessent has some significant obstacles to overcome. First, he needs to create a cohesive economic policymaking environment within the Trump administration. Second, he needs to be able to get a series of smartly implemented spending cuts through Congress. And third, and most important, he must restore the US government’s ability to coordinate policy at the international level. If he can do all that, Bessent certainly has a chance to become Trump’s Baker.
