As Trump doubles down on tariffs and deficit spending, Robert Peston warns the US is heading for fiscal crisis – and Europe must seize the moment.

Financial journalist Robert Peston has warned that the United States is on the brink of fiscal disaster, with global consequences that could dwarf previous financial crises.

Speaking to risk managers at the Airmic annual conference in Liverpool, Peston predicted that the coming decade could bring significant growth for the UK and Europe - driven largely by instability in the US.

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Europe’s window of opportunity

Peston argued that global investors were beginning to shift capital away from the US in search of greater stability.

“The uncertainty in the US is seeing asset managers look to move capital away from the US and a Europe which believes in the rule of law and can deliver greater certainty has the opportunity to be that new home,” he said.

He noted, however, that Europe must overcome its own inefficiencies. Capital markets across the continent remain fragmented, and even the London Stock Exchange is losing listings to the US as companies scale up.

“We need more capital but at present out capital markets are inefficient. The London Stock Exchange for example is seeing companies who are looking to take the next step in their growth plans looking to US markets. In Europe capital market remain fragmented,” he said.

Yet political leaders are waking up to the opportunity. “There are real reasons to believe that the next three or four years will allow the UK and Europe to be more optimistic,” Peston added.

Deliberate disorder in Washington

In contrast, Peston painted a bleak picture of the US under Donald Trump’s renewed leadership. The former president’s fiscal strategy, he argued, risks pushing the country into full-blown economic crisis.

“Although I have reported in crisis after crisis since the economic crash of 2007-2008, which includes Brexit and the Covid pandemic, I do not believe I have ever been in a more uncertain world than that I see today. We are living though history,” he said.

“The chaos he causes is deliberate,” he continued, citing former advisor Steve Bannon’s infamous phrase: ‘flood the zones with s**t.’

“We have seen this hour after hour with a huge range of announcements and we have seen national guards on the streets of Los Angeles and the concern over the immigration approach, coupled with his announcement over tariffs,” said Peston.

“He has launched his one beautiful bill and his approach to international rule of law is simply not to care about it.”

A trillion-dollar deficit and a warning for risk managers

The journalist also raised concerns about the scale of Trump’s spending, warning that the fiscal bill would deepen the national deficit by $2.4 trillion over the next decade.

“Because of, tariffs there is global economic uncertainty and normally that would see a move towards the dollar, However, asset managers are moving away from the dollar. US interest rates are rising, and the dollar has been falling,” he said.

The implications could be global. “It has raised the real spectre of the world turning its back on the United States and saying they will not fund this fiscal recklessness.

“If we get to the state of a Liz Truss style crisis in the US it will be a global crisis that will be at a level which would make the economic crash of 20207/8 look like a tea party.”

Although some tariff measures have been partially rolled back, Peston warned that rates remain alarmingly high. “We have tariffs at level which we have not seen since the Great Depression in the 1920s and 1930s,” he said.

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