• In today’s CEO Daily: Peter Vanham talks to LSE’s Paul De Grauwe about the declining reputation of the dollar.
• The big story: More signs of compromise in the trade war.
• The markets: Mostly up!
• Analyst notes from Apollo on the dollar, Wedbush on AI capex, Macquarie on China, and Goldman Sachs on GDP.
• Plus: All the news and watercooler chat from Fortune.
Good morning. The threat of prohibitive “reciprocal” tariffs may have temporarily receded this week, but in one way, a 10 percent barrier for foreign companies exporting to the U.S. remains in place: the U.S. dollar dropped in value by about a tenth against a basket of currencies in the last few weeks, including against the euro, pound, Swiss franc, and yen.
President Trump has long believed that a strong dollar hurts U.S. manufacturers—making their goods less affordable in foreign markets—and has therefore wanted to devalue it. Despite the dollar being free-floating, it is one area where Trump’s wishes have been self-fulfilling, to a degree. His on-and-off again tariffs on imports, efforts by the administration to drive down government borrowing costs, and pressure on the Fed to lower interest rates, have dented markets’ trust in the greenback and plunged its value compared to other currencies.
To understand what’s happening now, and how it will affect U.S. and global multinationals, I spoke to LSE professor Paul De Grauwe, whose early 1990s work on “chaotic” exchange rates remains a fundamental text for economists today. Here are his takeaways for leaders:
This is nothing new. The dollar dropped in value, but it did not do so in a “phenomenal” way, De Grauwe noted. “It doesn’t worry me.” In fact, the dollar today is trading at about its 10-year average against the euro. And even the drop of about 10% in the past two months isn’t anything out of the ordinary. Back in 2017, the dollar dropped twice as much in a year.
CEOs were able to adjust then, and they can do so again now, the economist said. For foreign companies, it means “you’ll either have to raise prices, or lower profits,” he said, dryly. “It is always this way with currencies.” And for U.S. companies, the opposite is true. But in either case, the adjustment will be absorbable, and nothing new under the sun.
Don’t expect a Mar-a-Lago accord. De Grauwe isn’t buying the rumors about a possible “Mar-a-Lago” accord, where—in accordance with Trump’s wishes—global policymakers would help drive down the value of the dollar structurally. “It is fiction,” he says. Back in the 1980s, the so-called Plaza Accord did achieve that goal, halving the value of the dollar against the Deutsche Mark in the space of a year.
But two things will prevent any such plan today. First, the global economy is a lot more diversified, with China and other emerging markets having entered the scene, making effective interventions harder to coordinate. And second, the dollar isn’t as overvalued today as it was then, when a belief in the “wonder of Reagonomics” had doubled the dollar’s value in the years leading up to the 1985 Accord.
Watch the Treasury. The one place that could stir things up, De Grauwe said, is the Treasury. “The safe-haven reputation of the dollar is important,” he said. “The dollar has had this reputation for a long time. But that is now undermined.”
More specifically, if the administration ever became serious about forcing a swap between 10-year Treasuries and newly created 100-year ones (the so-called “forever bond”, which today remain a concept only), it could mean the end of the safe haven status of the U.S. dollar, and cause a dramatic fall in its value. For now, he said, that didn’t seem likely to happen. But with this administration, predicting the future is, to put it lightly, hard to do. More news below.—Peter Vanham
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
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Trump insists he is talking to China even though China says no talks are happening. Separately, China is considering removing some of the levies it imposed on U.S. goods, such as medical equipment and ethane, according to Bloomberg.
Apple will move iPhone production to India. President Trump’s tariff blockade on China—where most iPhones are currently made—had wiped $700 billion off Apple’s market cap.
Luigi Mangione will face the death penalty in the killing of UnitedHealthcare CEO Brian Thompson last year.
Google had a great Q1 and its stock rose 5% after hours. But the company dodged questions about how Trump’s tariff regime might affect the company.
SAP CFO calls for change in Europe. SAP CFO Dominik Asam hopes that global trade uncertainty will help push Europe to become less regulation-heavy. The finance chief of Europe’s most valuable company told Fortune that the continent is “pretty much maxed out” when it comes to valuation growth.
Chipotle CEO sees sales decline. Chipotle CEO Scott Boatwright said this week that “the consumer is sitting on the sideline” after the chain reported its first decrease in quarterly same-store sales since 2020. “Saving money because of concerns around the economy was the overwhelming reason consumers were reducing the frequency of restaurant visits,” Boatwright said.
The U.S. wants Ukraine to keep its military forces in the event of a peace deal, Bloomberg reports. That proposal, along with Trump telling Putin to “STOP!” bombing Ukraine, are rare signs of difference between Trump and Putin on the conflict. However, the U.S. is also considering offering official recognition that Crimea is Russian. Context: It isn’t. Russia invaded Crimea in 2014 and recognition would reward Moscow for that.
Defense Secretary Pete Hegseth threatened at least two senior Pentagon staff with polygraph tests in his hunt for the people who are leaking information about him to the press.
The markets
The S&P 500, Dow, and Nasdaq were all up at least 1% at the close on Thursday as investors continue to hope that the Trump Administration will soften its trade agenda. Strong earnings results, particularly from American Airlines, Southwest, and Hasbro also helped drive gains. The good vibes continued in Asia and Europe this morning, and U.S. futures were in the green too. Here’s a snapshot of today’s action:
• The S&P 500 rose 2% yesterday, notching a third straight day of gains. (Reality check: It’s still down 6.75% YTD.)
• The Nasdaq Composite was up 2.74%
• Palantir was up nearly 7%.
• Futures contracts for the S&P were up 0.49% this morning, pre-opening bell.
• In Japan, the Nikkei 225 was up 1.9% this morning.
• The Stoxx Europe 600 was up 0.35% in early trading.
From the analysts
• Apollo on the dollar: “By depreciating the dollar and starting a trade war about goods, which make up less than 10% of US GDP, the US is risking that the rest of the world will slow their imports of the 80% of the U.S. economy that is services, such as iPhones, Windows, Facebook, and large language models. In addition, a depreciating dollar puts upward pressure on inflation and the term premium, which can create new macroeconomic challenges. The bottom line is that depreciating the dollar comes with some risks. There is no free lunch in macroeconomics,” per Torsten Sløk.
• Wedbush on AI capex: “Over the last 2 weeks we have spoken to dozens of top CIOs, IT product managers, partners, and key enterprise decision makers in the field to track the pace of major cloud deals and AI spending given this tariff uncertainty and new landscape. The good news is that we are still seeing very firm Cap-Ex intentions for 2025 as this AI Revolution is upon us and the use case enterprise phase is accelerating in many large scale AI strategic deployments,” per Daniel Ives et al.
• Macquarie on China: “Will Beijing abandon its growth target? The consensus is yes. Street economists have lowered their forecasts since Liberation Day. Among global banks, the consensus forecast for China's GDP growth in 2025 is around 4%. Earlier this week, the IMF also cut its forecast from 4.6% to 4.0%. Our view is no. In our view, Beijing will stick to its policy rule of ‘achieve the GDP growth target, but not over-achieve.’ i.e. calibrate stimulus based on the growth target,” per Larry Hu and Yuxiao Zhang.
• Goldman Sachs on GDP: “Globally, we expect real GDP growth will slow to 2.1% yoy in 2025, reflecting headwinds from higher US tariffs. … In the US, we expect real GDP growth to slow to a below-consensus 0.5% yoy in 2025 on a Q4/Q4 basis … and [we] now see a 45% probability of entering a recession over the next 12 months,” per Allison Nathan et al.
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