Trump and Biden both claim diplomatic win in Gaza ceasefire deal

Good morning. We’re in the final days of the Biden administration. In his farewell address to the nation last night Joe Biden warned that an “oligarchy is taking shape in America”. As we close out this era of aviator sunglasses, let’s look at:

• Trump’s role in the Gaza ceasefire

• Scott Bessent in the Senate hot seat

• A defence industry shake-up?

Israel and Hamas agreed to a ceasefire in Gaza yesterday but the deal remains extremely fragile, with Israel’s cabinet yet to vote on it and Prime Minister Benjamin Netanyahu accusing Hamas of reneging on parts of the agreement. If it sticks, however, both Biden and Donald Trump will have had a hand in it. 

The US president and president-elect declared diplomatic victory yesterday, after their respective Middle East envoys helped secure a multiphase deal that includes the release of the remaining hostages held by Hamas.

The agreement was announced after Biden’s top Middle East adviser, Brett McGurk, and Trump’s Middle East envoy, Steve Witkoff, made a 96-hour negotiating push with Qatari and Egyptian meditators.

The pairing of officials from a current and future administration, which stemmed from a two-hour Oval Office meeting in the days after November’s election, was “almost unprecedented”, said a senior Biden administration official, adding that “it was a highly constructive, very fruitful partnership”.

Biden’s team laid the diplomatic groundwork for more than a year, but Trump’s blunt, belligerent tone on the issue added momentum to the long-stalled talks. [Free to read]. In December, the president-elect warned that there would be “all hell to pay” in the region if Israeli hostages were not freed before his inauguration. 

The durability of the truce, however, could depend on Trump’s willingness to flex Washington’s political muscle, including making sure that Israeli Prime Minister Benjamin Netanyahu’s far-right government sees the deal through.

The incoming administration is filled with figures who are staunchly pro-Israel, and during his first term Trump implemented a series of measures that upended decades of US policy. But the hope now is that he will want to own the deal, and therefore ensure its success.

What will Trump’s second term mean for America and the world? FT subscribers can join our webinar on January 23 at 8am ET/1pm GMT to put questions to our journalists.

Transitional times: the latest headlines

• Treasury secretary nominee Scott Bessent is in the hot seat today after Trump’s picks for attorney-general, secretary of state and CIA director were grilled by senators at their confirmation hearings yesterday. 

• Dealmakers and investors warned that the Trump administration could use cross-border deals to pressure foreign governments. Learn more about what dealmaking could look like over the next four years on the Behind the Money podcast.

• Wall Street bankers are optimistic about growth potential and regulation cuts under Trump, despite worries about inflationary policies and geopolitical risks.

• Ottawa is warning of tit-for-tat tariffs on US products such as steel and orange juice if Trump makes good on his threat to impose a levy on Canadian imports. 

• The Biden administration is trying to “Trump-proof” its sanctions against Russia.

What we’re hearing

The US defence industry is bracing for a tech-flavoured shake-up under Trump.

Last time around, he personally intervened in defence procurement — a move that left Boeing with heavy losses. Executives are now worried about greater disruption: the defence hierarchy being rocked by lucrative contracts going to newer players.  

During his confirmation hearing on Tuesday, Pete Hegseth, Trump’s defence secretary pick, said the department was “too insular” and praised Silicon Valley, which “for the first time in generations, has shown a willingness, desire and capability to bring its best technologies to bear at the Pentagon”.

The Wall Street background of billionaire investor Stephen Feinberg, Trump’s nominee to be Hegseth’s deputy, should help bring in new players since he understands how companies backed by venture capital money work, Cynthia Cook, a defence industry expert at think-tank CSIS, told me.

The emergence of defence tech groups such as Palantir and drone maker Anduril has unnerved traditional contractors as they vie aggressively for a big slice of the mega $850bn defence budget. Notably, Palantir was co-founded by billionaire Peter Thiel, who has close ties to incoming veep JD Vance.

In October, Palantir published a procurement “treatise” called the “Defense Reformation”, stoking the ire — and ridicule — of many industry veterans. 

“What I do think [the legacy contractors] are worried about is whether or not the DOD puts their finger on the scale to help” these newer players and try to help develop new, big, rival defence groups, one industry adviser told me.

Viewpoints

• The emergence of a powerful tech elite close to Trump has jarring echoes with Russia, writes John Thornhill, who reported from the country in the 1990s.

• Trump’s presidency offers Israel the “prospect of carrots that Biden would never offer”, writes Yair Rosenberg (The Atlantic)

• Though Trump is a threat to liberal democracy, Martin Wolf is betting that his hold on public opinion and the Republican party will weaken.

• Trump’s real gift to Wall Street is how much volatility he’ll bring, boosting securities trading results — and therefore profits — for big banks in the process, writes John Foley in his latest Lex column. [Available for Premium subscribers]