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American investment bank Jefferies has raised concerns over the shifting global economic balance and what it calls the “diminishing financial leverage” of the United States under President Donald Trump. The firm’s latest report highlights the consequences of Trump’s ongoing tariff policies and their impact on the country’s economic exceptionalism. According to Jefferies, America’s ballooning net international investment deficit and chronically low household savings contrast starkly with China’s surplus-driven economy. As of end-2024, the U.S. net international investment position (IIP) stood at a record USD 26.2 trillion deficit, or 89.9% of GDP, while household savings hovered at just 4.3% of disposable income—well below China’s 31.8%.
Savings Gap Widens Global Divide
“A major problem for Donald Trump, as it would be for any US president, is simply that China has the savings, whereas America does not,” Jefferies stated. The report draws attention to the widening imbalance and notes that this savings gap restricts Washington’s ability to wield economic influence, especially in a global environment increasingly shaped by trade wars and supply chain shifts.
Dollar Reserve Status Under Threat
Jefferies warned of increased volatility in U.S. financial markets, noting a “sharp sell-off” in both the U.S. dollar and Treasury bonds during recent risk-off moves. The firm expressed concerns about the sustainability of the dollar’s reserve currency status, calling it the last true vestige of America’s financial dominance. “The one real example of American exceptionalism in terms of financial matters remains the ability to print the world’s reserve currency,” it said. “Yet this is precisely what is threatened by last week’s risk-off action.”
Tariff Reversals Shake Business Confidence
The report criticizes Trump’s tariff reversals, such as temporary exemptions on electronics and new investigations into semiconductors, for increasing uncertainty among investors. Jefferies linked these moves to falling domestic business sentiment, weaker consumer confidence, and the Atlanta Fed’s forecast of a 2.2% GDP contraction in Q1 2025.
Jefferies analysts advised Trump to pivot from protectionism to pro-growth policies. “Trump [should] revert to a universal, nondiscriminatory 10% import tax, abandon his longstanding tariff and trade war obsessions, and revert to his bullish domestic tax reform and deregulatory agenda,” the report said. “In such an outcome, his presidency may yet be saved.”
Global Realignment And Investment Shift Due To Tariff
As China cements its lead in manufacturing, with 32% of global output, it has retaliated with rare earth export curbs. Meanwhile, the EU’s warming ties with Beijing, including electric vehicle tariff talks, highlight diverging trade strategies. Jefferies recommends reducing U.S. equity exposure in favor of Europe, China, and India, and noted a growing investor shift toward gold and high-grade corporate bonds over Treasuries.
(With Inputs From ANI)
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