In this edition of My Thoughts on Currencies, Stephen Jen dissects the evolving global macro landscape with a focus on the U.S. twin deficits, shifting trade dynamics, and the emerging paradigm of "Globalisation 2.0." Jen gives the Trump Administration an “A” for intent and a “B-/C+” for policy execution, arguing that the sequencing and balance between addressing the fiscal versus trade deficits is suboptimal. While the trade deficit has taken centre stage, it is the fiscal imbalance that poses a more immediate systemic threat.
Jen challenges the prevailing recession fears, arguing that the net economic drag from recent policies may be modest, around 0.5–1.0 percentage points off trend growth. He introduces the idea that we are transitioning from a symbiotic global economic regime, where the U.S. consumed and China exported, to a more fractious but necessary rebalancing. This geopolitical and macroeconomic realignment is creating market volatility, but Jen suggests that such friction is inherent in the adjustment phase.
The note closes with a pair of thought-provoking reflections, on the systemic risks facing mid-sized economies like the U.K. in a world of bond vigilantes, and on the idea that the next chapter of U.S. foreign policy might lean more toward “great power collusion” than competition, echoing 19th-century diplomatic frameworks like the Concert of Europe.
Key Quote
“We are in the middle of a paradigm shift, from Globalisation 1.0 … to Globalisation 2.0 … As the needed transformations evolve at different speeds, tensions and fractures will be felt in the financial markets in the coming years. This is like a three-legged race … imperfect coordination will create friction and market volatility.”
— Stephen Jen, May 22, 2025
Table of Contents
-
Bottom Line
- An early report card on the policies of Trump 2.0: not too pretty.
- The trade war: early détente likely.
- The US’ fiscal policy: I’m turning more pessimistic.
- US won’t likely fall into a genuine recession.
- A paradigm shift from Globalisation 1.0 to Globalisation 2.0.
- Financial market outlook.
- Some musings.
To read more of our latest macro and market insights, click here to start a free trial of our research.
Disclosure
This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
ESLJ-130525-R1
Subscribe to our insights
If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.
I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com
Our Research
Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.
