Tariffs are part of Trump’s big plan to save US dollar (Uncut) 04-09-2025
Tariffs are part of Trump’s big plan to save US dollar dominance. Will it work?
Our military and financial dominance cannot be taken for granted and the Trump administration is determined to preserve them. The president has made clear that the United States is committed to remaining the reserve provider, but that the system must be made fairer. If other nations want to benefit from US geopolitical and from the US geopolitical and financial umbrella, they need to pull their weight and pay their fair share.
Let me first say that I don’t think that dollar dominance is a problem. I think that dollar dominance is a great thing. It has some side effects which can be problematic and I would like to find ways to ameliorate the side effects that dollar dominance can continue for decades in perpetuity.
I think that would be that would be fabulous. US President Donald Trump is very committed to preserving the global dominance of the dollar. This is why during his 2024 presidential campaign, Trump repeatedly threatened countries that tried to de-dollarize, that tried to seek alternatives to the dominance of the US dollar.
And we will keep the US dollar as the world’s reserve currency and is currently under major siege. Many countries are leaving the dollar. You’re not gonna leave the dollar with me.
I’ll say you leave the dollar. You’re not doing business with the United States because we’re gonna put a hundred percent tariff on your goods. In the past two decades, the share of the US dollar in the foreign exchange reserves held by central banks around the world has been steadily falling from over 70% in 2000 to now under 58% and it continues to decline every year.
And one of the things that many central banks have been doing is buying more and more gold, especially after the 2008-2009 financial crisis that started in the United States. And this is especially the case for countries in the global South, particularly nations that are members of BRICS or have expressed interest in joining BRICS. BRICS is a global South led organization.
It’s an acronym for the founding five countries, which are Brazil, Russia, India, China and South Africa. And when did they found BRICS? It was in 2009, precisely in response to the financial crisis that originated in the US financial system and showed the world how dangerous this global financial system built around the United States can be. Trump sees BRICS as a major threat to US dominance, which is why as US president he has constantly threatened BRICS and he falsely claimed that BRICS is dead because of his tariff threats.
BRICS was put there for a bad purpose and most of those people don’t want it. They don’t even want to talk about it now. They’re afraid to talk about it because I told them if they want to play games with the dollar, then they’re going to be hit with a 100% tariff the day they mentioned that they want to do it and they will come back and say we beg you, we beg you not to do this.
BRICS is dead since I mentioned that. BRICS died the minute I mentioned that. From comments like these you can see how Trump is using tariffs as a weapon of global economic warfare.
He is threatening foreign countries by cutting them off from the US market, weaponizing access to the US market in order to force other countries to meet his political and economic demands. And what Trump would like to do through these tariffs is to remake the global financial system, which is quite ironic because it was the US that created the current financial system. This all goes back to 1944 toward the end of World War II when the US brought together its allies to create the new international financial system, which came to be known as the Bretton Woods system.
And at this conference there were two main proposals for what this system would look like. One was made by the renowned British economist John Maynard Keynes, who ended up losing out. The US representative from the Treasury was the economist Harry Dexter White and he proposed that the entire global financial system should be built around the US dollar and other countries’ currencies would be pegged to the US dollar at a fixed exchange rate, but the US dollar would be backed by gold.
Keynes wanted a different system. Instead he proposed what he called the bond core, which would be a neutral reserve asset, not simply the currency printed by one country. And Keynes proposed that the bond core’s value could be based on a basket of important commodities in the global economy.
This system would be much more fair because it would not allow one country to have the exorbitant privilege of printing the global reserve currency. But of course, this is precisely why the United States designed the global financial system in this way, because at the end of World War II, the US was designing its global empire. Most of the other major powers in the world were physically destroyed by World War II.
The US was basically unscathed and the US wanted to make its currency the heart of the global financial system because it knew that it would give the US huge powers in this global empire. And we saw this in 1971 when US President Richard Nixon ended the convertibility of the dollar to gold. He broke the link between the dollar and gold.
The US then made an agreement with Saudi Arabia, which at the time was the world’s leading oil producer, and the US told Saudi Arabia that it would protect the Saudi monarchy and in return Saudi Arabia would only sell its oil in dollars. This was known as the petrodollar system and it guaranteed global demand for dollars and essentially what happened is that US government debt, US Treasury securities replaced gold as the center of the global financial system because before 1971 the dollar was still the global reserve currency, but it was linked to gold. It was considered as good as gold.
When that link was ended, the US Treasury security, US government debt, US IOUs became the center of the global financial system. And this has had a series of repercussions, one of which is the deindustrialization of the US economy and the US has become the banker of the world, the global financial center. As of 2024, the US stock market made up more than 60% of the entire market capitalization of all of the stock markets on earth.
And since the 1970s, more and more foreigners have been buying up US financial assets with all of the dollars that flood around the world as the US runs larger and larger trade deficits. Those dollars come back into the US and foreign investors buy US government debt, US Treasury securities and US stocks, which has inflated huge bubbles on Wall Street. Trump wants to save this system because it has been very good for billionaires like him.
And there are 13 billionaires who are top officials in the Trump administration, including the world’s richest oligarch Elon Musk. But although Trump loves this system and wants to do everything he can to maintain it, he has two big problems with this system built around the US dollar. The first problem is that this has led to the deindustrialization of the United States as the US economy has financialized.
The other major problem is that the US has to maintain a trade deficit with the rest of the world, a current account deficit. It continues to grow over time because other countries need dollars in order to maintain the dollar as the global reserve currency, in order to use dollars in foreign trade. And Trump sees this as a big problem.
So what is Trump’s solution to all of this? He wants to use the power of the US dollar and the US control over the international financial system to force other countries to pay the United States. This plan has been laid out by Trump’s top economic advisor, Stephen Myron, who’s the chair of the US Council of Economic Advisors. Myron published a lengthy report in November 2024, the month that Trump won the presidential election.
And in this report, Myron said that under Trump we are, quote, on the cusp of generational change in the international trade and financial systems, end quote. He argued that the root of the economic imbalances in this current system lies in the persistent overvaluation of the US dollar because there is inelastic demand for US reserve assets. What does that mean? It means that around the world there is insatiable demand for more US financial assets, including stocks and bonds, including US treasury securities, US government debt, and all around the world because the dollar is the global reserve currency.
Countries have all of these dollars. They don’t want to just put them in their bank account because with inflation they lose value over time. They want to invest those dollars somewhere.
Where do they put them? They put them in US financial assets. And this leads to an overvaluation of the US dollar, which has contributed to the de-industrialization of the US economy, because it means that the dollar is so expensive compared to other currencies that US manufactured goods are much more expensive than those produced by other countries, which makes US manufacturers less competitive and it has contributed to the financialization of the US economy. So Stephen Myron, the top economic advisor to Trump, who’s now a senior official in the Trump administration, they have outlined ideas that the US can use to try to force other countries to pay the United States, to transfer value to the United States, to preserve this system that benefits the United States.
So, as I’ll talk about later in this analysis, one of the reasons I’m very skeptical about this plan and why I don’t think it’s going to work exactly like the Trump administration expects is because the US is expecting other countries to make sacrifices on behalf of the United States, to benefit the United States at their expense. But this deal that the Trump administration is trying to impose on the rest of the world has been loosely referred to as the Mar-a-Lago Accord. As the Financial Times put it, the US president wants both to protect domestic manufacturing and hold the dollar as the reserve currency.
This idea is based on the Plaza Accord in 1985, in which the Ronald Reagan administration made an agreement with Japan, the UK, France, and West Germany in order to devalue the US dollar, to bring it down against those other countries’ currencies, because the US dollar was considered very overvalued at the time, which hurt US manufacturers. Trump wants to try to do the same today, and he’s using tariffs, among other policies, as leverage, as blackmail, to force other countries to come to the negotiating table. However, I’m skeptical about the possibility of this to work.
I think in the 1980s, the US was in a much more powerful situation than it is today, and in particular, the role of China in the global economy is completely different, and it’s very unlikely that China would agree to this kind of deal that would hurt China’s economy on behalf of the US. And there’s a very real possibility that these policies the Trump administration is pursuing could backfire really hard and cause a lot of damage to the US economy, and actually weaken US global dominance, while Trump is trying to save it. And this is precisely what some of Trump’s billionaire donors and supporters are warning about.
The billionaire hedge fund manager, Bill Ackman, is one of Trump’s strongest supporters, but even he has been publicly speaking out and warning about how destructive Trump’s tariffs can be. Ackman made it clear that he still 100% supports Trump, but he expressed concerns about the enormous tariffs that Trump imposed on countries around the world on the 2nd of April, which Trump called so-called Liberation Day. And this billionaire Trump backer, Ackman, warned that if Trump follows through and imposes these sky-high tariffs on countries around the world, it would be like, quote, launching economic nuclear war on every country in the world, end quote.
He called on Trump to put a pause on these enormous tariffs, and said if they go through, quote, we are heading for a self-induced economic nuclear winter, end quote. So I’m certainly not the only one who’s warning that there’s a very real possibility that the Trump administration’s strategy could massively backfire and seriously hurt the US economy. But how is the Trump administration thinking about this strategy? What exactly are they trying to do? Well, I mentioned the report that was published by Trump’s top economic advisor, Stephen Myron, and on the 7th of April, he held a talk at a major think tank in Washington, DC, in which he outlined more ideas the Trump administration has and explained their thinking.
He made it clear that Trump is dedicated to preserving US global military and financial dominance. Our military and financial dominance cannot be taken for granted, and the Trump administration is determined to preserve them. Trump’s top economic advisor also emphasized that he thinks that the global dominance of the US dollar is a good thing, not a bad thing.
He wants to save US dollar dominance, but he wants to ameliorate the side effects of that. Let me first say that I don’t think that dollar dominance is a problem. I think that dollar dominance is a great thing.
It has some side effects, which can be problematic, and I would like to find ways to ameliorate the side effects that dollar dominance can continue for decades in perpetuity. I think that would be that would be fabulous. So how exactly does the Trump administration plan to do this? I’m gonna go through some of the key points of this speech and explain what he’s talking about.
Now he begins this speech saying that the US provides so-called global public goods, and he names two examples. One, a security umbrella, so the US has a global empire with around 800 foreign military bases, and the US tells its so-called allies and vassals that it will protect them, and in return it wants to be paid by those countries. That’s what the Trump administration is demanding.
The other so-called global public good that they’re talking about is the US dollar, is US Treasury securities as the global reserve asset, and Stephen Myron argues that this is very costly to the United States to maintain this global empire with 800 foreign military bases and to massively run these huge deficits to keep the US dollar as the global reserve currency. He notes that around the world countries and private companies use the dollar for trade, even if the US is not involved. So if you take private companies in foreign countries like say for example Nigeria and Turkey, when they do trade with each other those private companies are probably trading in US dollars, not their local currencies, and he complains that in order to maintain the system the US has to run unsustainable trade deficits, as he puts it, and this has decimated the US manufacturing sector.
So the Trump administration is claiming that other nations are free-riding in scare quotes. As a result of all this Americans have been paying for peace and prosperity, not just for themselves, but for non-Americans too. President Trump has made it clear that he will no longer stand for other nations free-riding on our blood sweat and tears, whether in national security or trade.
They claim that the US has been hurt by the system which the US created to benefit itself, and they want to force other countries to pay the US. How can they do that? In this speech Trump’s top economic advisor outlined five different approaches to force other countries to subsidize the US Empire. First of all, he says other countries can accept tariffs on their exports to the United States without retaliation, providing revenue to the US Treasury.
Now, this is kind of strange because in reality it’s US importers who pay the cost of tariffs. It’s not foreign countries. The Trump administration has constantly claimed this, but it’s not true.
Myron makes another argument related to that which I’ll respond to in a second, but let me go through the other approaches that they have. The second is that by opening their markets and buying more from America. The third approach is that they could boost defense spending and procurement from the United States, buying more US-made goods.
They want other countries to buy more weapons and military equipment and ammunition and technology from US corporations in the military-industrial complex. Fourth, the Trump administration wants they can invest in and install factories in America. They won’t face tariffs if they make their products in this country.
And fifth, Myron argues that they could simply write checks to Treasury. That would help us finance global public goods as well. So he literally says that other countries should pay the United States to benefit the US and maintain this global empire.
And what does he mean by that? Well, one of the ideas that he floated in the report he published in November is that the US could pressure other countries to buy long-dated US Treasury securities like 100-year bonds at a very low interest rate. And of course that would be lower than inflation. So over time that would essentially be a subsidy.
Other countries would essentially be paying the US for the privilege of maintaining the US empire. And at the heart of this strategy is the use of tariffs to force other countries to either come to the negotiating table to meet US demands, to agree to subsidize the US government by buying these 100-year treasuries, so they lose value over time but they subsidize the US, or to agree to invest in factories in the US, or to agree to buy more weapons from US military contractors, or to agree to open their markets to US goods to buy more products from the US. They’re trying to weaponize the role of the US dollar at the heart of the global financial system to benefit the US.
As Myron puts it in the speech repeatedly, he says the US wants to put the burden on other countries to share the burden of the costs of maintaining the global US empire. To continue providing these twin global public goods, there needs to be improved burden sharing at the global level. If other nations want to benefit from the US geopolitical and financial umbrella, they need to pull their weight and pay their fair share.
The costs cannot be solely borne by everyday Americans who have already given so much. The best outcome is one in which America continues to create global peace and prosperity and remain the reserve provider, and other countries not only participate in reaping these benefits, but they also participate in bearing the costs. By improving burden sharing, we can enhance resilience, preserve the global security and trading systems, remain the reserve provider for many decades into the future.
Now one thing that Trump’s top economic advisor made absolutely clear in this speech is that the Trump administration sees China as its main so-called adversary, and much of the tariff policy and the trade war policy is aimed at trying to weaken China. We need to be able to make things in this country, as we saw during COVID, when many of our supply chains could not survive without being reliant on our biggest adversary, China. We clearly should not rely on our biggest adversary for equipment essential to keeping our population safe and secure.
Nor should our biggest adversary be allowed to benefit so much from an international security and financial architecture we finance. Myron gave this speech at an event hosted by the neoconservative think-tank the Hudson Institute, and it was an invite-only closed-door event. Now the Hudson Institute is a very hawkish, pro-war neoconservative think-tank, and it is extremely anti-China, and in fact during the event the Hudson Institute had four flags on the table while they were interviewing Trump’s top economic advisor.
Those were the flags of the US, Israel, Ukraine, and Taiwan. So this makes it very clear what their foreign policy is. Extremely hawkish, extremely pro-war.
The Hudson Institute is funded by many powerful US corporations and billionaires, including the billionaire Republican Party donor Harlan Crow, including the billionaire media mogul Rupert Murdoch, who is the founder of Fox News, and also the billionaire financier Charles Schwab, and other major donors to the Hudson Institute include top US corporations like Walmart, MEDA, Blackstone, Chevron, AT&T, the American Petroleum Institute, and then top contractors in the US military industrial complex like Lockheed Martin, Boeing, BAE Systems, and by the way, even Taiwan funds this neoconservative think-tank that is of course very anti-China. So of course in this speech that Trump’s top economic advisor delivered at this neoconservative think-tank, he made it clear that as he put it, China is the Trump administration’s biggest adversary, and he complained that the US is reliant on supply chains in which China plays a key role. So the Trump administration wants to try to use tariffs on China to remake global supply chains located in the US and in allied countries to try to decouple economically from China.
And then in one of the craziest, honestly stupidest parts of this speech, he blamed China for the 2008 financial crisis in the US. He blamed China for the housing bubble in the US, which was not driven by China. It was driven by US financial firms that were giving out subprime mortgages to people they knew couldn’t pay the mortgages, and then US financial firms bundled together these subprime mortgages in mortgaged-backed securities and collateralized debt obligations, and then sold these financial instruments which brought together thousands and thousands of very risky subprime mortgages, telling investors that there would be no risk, but obviously there was tons of risk.
This was crazy. In some cases, financial firms committed fraud, but instead of talking about the very serious problems in the US financial system with the deregulation of the US financial system and the crimes and fraud committed, the top Trump administration economic advisor absurdly blames China. This shows the kind of new Cold War we’re in, where the Trump administration is absurdly blaming China for things it basically had nothing to do with.
In this speech, Myron complains that China has become the world’s manufacturing superpower, whereas the US share of global manufacturing production has fallen significantly in recent decades. Myron and the Trump administration have blamed China for the deindustrialization of the US, and Trump started a trade war against China during his first term as president in 2018, and now he is threatening tariffs of over 100%. So on the 2nd of April, Trump announced an additional 34% tariff on China.
That’s in addition to the 20% that he had already put on China for a total of 54%, and then on his website, Truth Social, Trump announced an additional 50% tariff on China for a total of 104% if China retaliates, as it said it would, to the 54% tariffs that Trump announced against it. Now, this proposal is completely crazy, and the prominent US economist Brad Setzer, who worked for several years for the US Treasury Department, he estimated that if Trump goes through with 104% tariffs on China, it would be easily equivalent to an oil shock of increasing the price of oil by $100, not raising the price of oil from $60 a barrel to $100, but from raising it from $60 a barrel to $160 a barrel. Imagine the economic crisis this would unleash, the inflation, the very high rates of inflation, but in the speech that Trump’s top economic advisor delivered at the Hudson Institute, he made it clear that the Trump administration is trying to play a game of economic chicken with China, and he claimed that there are economic studies that show that by imposing tariffs against exporting countries, the US can improve economic outcomes, raise revenues, and impose huge losses for the tariffed nation, even with full retaliation.
And in a footnote in the official transcript of his speech that was published on the White House website, Myron quoted a 2024 research paper titled, Trade Wars with Trade Deficits, and what’s funny about this article is that in the abstract, the authors wrote that, quote, free trade benefits both countries compared to a trade war, end quote. However, they said that if there is a trade war, they estimated that, quote, relative to existing tariff rates, however, the United States gains from a trade war with China, end quote. So this is what the Trump administration is hedging its bets on, that they could win a game of chicken with China.
However, I think the strategy is very risky and could definitely blow back and cause a lot of damage in the US. And if you read through this academic paper that was cited by Trump’s top economic advisor to justify their trade war against China, if you go to the conclusion of the paper, they warn that according to their model, their mathematical model that they applied, so this is just hypothetical, completely based on a model, which could be wrong, but even according to their own model, they say that yes, countries with significant trade deficits like the US are better positioned to gain from trade wars. However, however, there’s a big asterisk.
They wrote, quote, quantitatively, these gains prove to be minimal when applied to a trade war between the two countries with the largest bilateral trade imbalance, the United States and China, end quote. So the Trump administration is gambling a lot. They’re betting a lot on the idea that they could win a trade war with China.
In the Q&A session after his speech, Stephen Myron argued that China has no alternative but to export to the US market. He said the US market is leveraged the US has over China, and the Trump administration wants to weaponize that because they think that China is more dependent on the US than the US is dependent on China. China has developed factories for selling to the US consumer market.
They have trained workers for selling to the US consumer market. We can move our demand across borders. Those factories and citizens cannot move.
They’re stuck where they are. The Chinese now have to find someplace else to absorb their demand, to absorb their excess supply, and guess what? There isn’t anywhere else to absorb their excess supply. Who’s gonna buy as much as American consumers? Nobody, right? There is no place else to absorb their excess supply.
You know, I do think they’re vulnerable to experiencing significant economic stress as a result of the historically bold action that the president has taken. And they have limited capacity to absorb that pain. But at the end of the day, there’s just there’s no substitute for American demand.
And this is part of why the United States has leverage and other countries don’t. Now, I think this is pretty dangerous because China itself says the same thing. China thinks that the US is more dependent on it than it is dependent on the US.
And in response to Trump’s threats to continue to expand tariffs on China to over 100 percent, what was the response of China’s Commerce Ministry? Quote, if the US insists on this wrongful path, China will be ready to fight to the end. End quote. China added that, quote, the US claim of imposing so-called reciprocal tariffs on China is completely unfounded and is a typical act of unilateral bullying.
End quote. And China said that there are no winners in a trade war. They don’t want a trade war.
But if Trump wants to massively escalate the trade war, China is calling his bluff. And China is willing to defend itself and fight back against Trump’s trade war. And honestly, I think if you look neutrally at the evidence, you come to the conclusion that the US is more dependent on China than China is dependent on the US.
This was the conclusion of a study that was published in 2024 by a Western economist in Switzerland. And he showed very clearly that the United States is much more reliant on imports of inputs from China in its own industrial sector. And over time, China’s reliance on the US has been falling, whereas the US reliance on China has been increasing.
He also showed that over the past two decades, China has become less dependent on exporting to the US market. And in fact, the majority of the purchases of China’s manufactured goods are internal. It’s actually domestic demand that has been driving China’s industrial boom.
In fact, if you look at data from the World Bank, what you can see is that China is less dependent on exports than the average country around the world. So the world average of exports as a percentage of GDP was 31% in 2022 or 29% in 2023. For China, exports make up slightly under 20% of its GDP.
Now, it is true that back in 2006, China was above the global average and exports made up 36% of its GDP. So 20 years ago, China was very dependent on exports. But what we’ve seen is a massive decrease over time as there has been much more internal consumption in the massive Chinese market.
Of course, China has 1.4 billion people. It doesn’t need necessarily to export. It does export a lot, but it’s not completely dependent on exports.
In fact, I made a chart using data from the official Chinese customs website. And if you look at China’s exports, you can see that as recently as 2018, 19.2% of China’s exports went to the United States. And that has fallen significantly and as of 2024, 14.7% of China’s exports went to the US.
That is still quite a bit. However, China’s largest trading partner is not the US anymore. It’s actually ASEAN, the Association of Southeast Asian Nations.
China’s economic integration with Southeast Asia has massively grown in the past two decades. And yes, it is true that part of the reason, not all of the reason, but part of the reason for that is because China has invested in countries like Vietnam, which is part of ASEAN, and then Vietnam has exported to the US. So some people would say that China was rerouting its exports to the US through Southeast Asia.
But that’s only part of the story. Another big reason for the story is simply because economies in Southeast Asia have been growing very fast. And some of them, like Indonesia, are some of the most populous countries in the world.
Indonesia is the fourth most populous country on earth. It has a population of more than 280 million. It’s closely catching up on the US in terms of population.
And Indonesia has the seventh biggest economy in the world when you measure its GDP at purchasing power parity. They have a big growing middle class and they want to buy those manufactured goods from China. And by the way, Indonesia has just become a full member of BRICS and the Indonesian government has made it clear that it wants to have very good relations with China and Russia and with the US.
They don’t want to cut off the US. But the point is that the Trump administration has this idea that it can force other countries to sacrifice their interests on behalf of the US. But many countries are saying no, we want to remain non-aligned and we want to continue doing more and more trade with China.
As recently as 2000, the US was the largest trading partner of most countries. However, as of 2020, China has become the number one trading partner of the majority of countries on earth, more than 100 countries, including all of Africa and most of Latin America and pretty much all of Asia. And of course, this is one of the main reasons for the new Cold War that the United States is waging against China.
It’s not just Trump and the Republicans. It’s also the Democrats. This is bipartisan, but Trump wants to use trade war on China and these tariffs to force an economic decoupling because their economies became so deeply integrated in the past few decades.
And the Trump administration thinks that China has no other options but to give in because it’s so dependent on exporting to the US. But if you look at China’s trade with other countries, like for instance Russia, which is a major country, more than 100 million people, you can see that China’s trade with Russia has exploded in the past few years. Now, US officials would say that this is because Russia has been isolated or whatever because of their sanctions, but the point is is that the numbers don’t lie.
As recently as 1996, only 5.6% of Russia’s exports went to China. As of 2023, 30.5% of Russia’s exports went to China. China is Russia’s number one trading partner.
And what’s even more incredible is how much Russia now imports from China. As recently as 1996, only 2.2% of Russia’s imports came from China. As of 2023, it’s now 36.5%. That is an enormous increase and what this shows is that this is a significant increase in trade both ways.
Both Russia exporting to China and China exporting to Russia. And who has lost market share in Russia? The United States and Europe. So this idea that the US has, the Trump administration has, that China and the rest of the world are completely dependent on the US market.
They can’t replace the US market. They’re living in the 1990s. They can’t see how the global economy has shifted in a lot of very significant ways.
And on the subject, one of the most absurd arguments that Myron made in this speech is he claimed that it’s easier for the United States to reindustrialize than it is for China to redirect its manufactured goods from exports to internal consumption. Countries that run large trade surpluses are pretty inflexible. They can’t find other sources of demand to substitute for America’s.
Instead, they have no choice but to export. And America is the largest consumer market in the world. By contrast, America has plenty of substitution options.
We can make stuff at home. I would say it’s the exact opposite. He’s turning reality on its head.
It’s very difficult to reindustrialize a country. It’s going to take the United States years, if not decades, to build the factories, to invest in the infrastructure, to train workers on how to work in those new factories, to develop an entire new supply chain in the U.S. or in allied countries, you know, like Canada and Mexico and other allies that exclude China. It’s going to take a long time, a lot of work, trillions of dollars to do that.
And the U.S. government is going to have to guide that process through an industrial policy, not simply relying on private companies in the free market. That’s extremely difficult. Honestly, I don’t think it’s going to happen.
I think it’s very unlikely. What’s actually much easier is for China to redirect those exports internally by boosting domestic consumption through a stimulus. All China needs to do is issue a stimulus.
They can inject it into the economy through social programs, through just getting people money, through investing in public goods like infrastructure, and they can increase the incomes of people in China, so they purchase those goods, which would benefit Chinese workers, and it would keep the Chinese economy growing, and they can replace the demand that they were relying on previously in the United States with domestic demand. That’s quite easy to do. All the Chinese government needs to do is spend money in its own currency.
It doesn’t need to borrow money in a foreign currency like U.S. dollars. It can do it all in renminbi, in yuan. So the Trump administration’s top economic advisor claims the exact opposite of reality.
But what this shows, once again, is how out of touch the Trump administration is with reality, and how they’re really overstating the power of the United States and understating the ability of other countries, especially China, but not just China, other countries to actually seek alternatives to their dependency on the U.S. market. And they’re making a huge gamble on this idea that the United States could win a trade war with China, and that the U.S. could win an economic game of chicken with China, seeing who will blink first. They think that China will give in before the U.S. But you know who’s gonna bear the cost of this trade war? U.S. consumers, average working people in the U.S. Stanford University’s budget lab estimated the effects of Trump’s tariffs on average Americans, and they found that the poorer Americans are, the more they’re going to be hurt by tariffs.
They estimated that the disposable income of poor households in the U.S. will fall by 4% because of Trump’s tariffs, and the disposable income of middle-class Americans will fall by up to 3%. So the Trump administration is cutting taxes on the rich and on corporations, but increasing taxes on poor and working-class Americans, the 95% of the population, and they expect that they’ll win over time against China, that average Americans will bear the burden, they will eat those costs of tariffs, and China will suffer. But I’m pretty skeptical.
I actually don’t think the strategy is going to work. I think it’s going to lead to inflation in the U.S., and people are going to be angry at the Trump administration, and as soon as the midterm elections in 2026, or at least in 2028, the Republicans may see they significantly lose a lot of votes because people are angry about the costs-of-living crisis that these tariffs, this trade war, is going to unleash. But if you listen to the rhetoric of the Trump administration and Trump’s top economic advisor, Stephen Myron, he claims, misleadingly, that other countries are going to pay for the cost of the tariffs because their currencies will fall against the U.S. dollar.
But that’s actually not what’s happening. In response to all of the uncertainty surrounding Trump’s tariffs, the U.S. dollar has been falling against other major currencies in March and April, especially after Trump announced the massive tariffs on countries around the world on the 2nd of April, on so-called Liberation Day. The dollar did slightly recover after, but the dollar has been falling, and yet Myron claims that other countries are going to pay for tariffs because their currencies will fall against the dollar.
So which is it? It’s a contradictory policy. Another contradiction is that Trump says he wants to bring down the U.S. dollar in order to reindustrialize the U.S. But Myron claims that putting tariffs on other countries will cause other countries’ currencies to fall against the dollar, which means that other countries will pay for the tariff in, scare quotes, in terms of the exchange rate difference. But then if the dollar rises because of the tariffs, how are they going to make manufacturing more competitive? I mean, again, this strategy is completely contradictory.
Top officials in the Trump administration have also made it clear repeatedly that they want to bring down the yield on the 10-year U.S. Treasury security. This was said by U.S. Treasury Secretary Scott Besson, a hedge fund billionaire, and it was repeated by Trump’s top economic adviser, Stephen Myron. I mean, it’s true that there has been a fall in the 10-year yield.
However, in response to Trump’s tariff announcement, there was a brief fall in the Treasury 10-year treasury yield, probably because investors were selling their stocks and buying treasuries, which is called a flight to safety. Even though at the same time, by the way, the U.S. Stock Market Index, the main index, the S&P 500, fell significantly. It’s now fallen by 20%.
So yes, there were some people who fled to safety and bought the 10-year, but immediately after, the 10-year yield went back up. And why is that? Because of now heightened fear of inflation risks. And as inflation increases or expectations of inflation increase in the U.S., yields go up because investors demand a higher yield because of higher inflation.
So once again, we see a major contradiction in the Trump administration’s professed policy. They say they want to bring down the 10-year treasury yield, but the tariffs are resulting in higher inflation expectations, which is causing the 10-year treasury yield to go up. Also in his speech, Stephen Myron claimed that average Americans will benefit from the fall in the 10-year treasury security because he said it would bring down the interest rates on mortgages.
But in fact, what you’ve seen in the United States in recent years is that the spread in the interest rate on 30-year fixed-rate mortgages and the yield on 10-year treasury securities has been increasing, not decreasing. The spread is growing, which means that Americans have to pay more for their mortgages, not less. And Myron also claimed that it would help to bring down the interest rate on credit cards in the U.S., but the spread on credit card interest rates is completely absurd.
Banks are already charging more than 20% on average on credit cards, even if the yield on the 10-year treasury goes down, let’s say 1%. Okay, assuming that credit card interest rates follow, which they don’t always, then maybe they’ll be at 19%, but that’s still insanely high. It doesn’t really help average people.
The real reason that the Trump administration is so insistent on bringing down the yields on U.S. treasury securities is because the cost of interest payments on U.S. federal debt have skyrocketed. The U.S. government is now spending 3% of GDP just paying interest on its debt. So the Trump administration is desperate to bring that down, and Trump has basically made it clear that he’s willing to push the U.S. economy into recession, pushing up unemployment.
Millions of Americans could lose their jobs because the U.S. is so desperate to bring down the cost on these interest payments that they think that if they push the U.S. economy into recession, then they can significantly reduce interest rates to bring down interest payments. But the irony of that strategy is that if the U.S. goes into recession, GDP will shrink, which means that debt as a percentage of GDP will actually rise, not fall. So all of the points that I’m trying to emphasize here are that the Trump administration’s policies are completely contradictory.
Trump wants to have his cake and eat it too. He wants to save the global dominance of the U.S. dollar by forcing other countries to bear the costs of maintaining that system to hurt their own economies on behalf of the United States. And the Trump administration is gambling on the very risky idea that other countries are more dependent on the U.S. than the U.S. is dependent on them.
And the Trump administration thinks that other countries don’t have a way to respond. But we’re already seeing response, including from major U.S. allies. All across Europe, average consumers are boycotting U.S. products.
So even if the European Commission does not officially impose tariffs in response to Trump’s 20 percent tariffs on the EU, it’s very likely that U.S. companies will see a significant decrease in the goods that they sell in Europe. Tesla could be the canary in the coal mine on this. Around the world, Tesla sales have been plummeting, especially in Europe.
And surveys show that a lot of people say they don’t want to buy a Tesla in protest of Elon Musk, who’s, of course, a top official in the Trump administration. And even in Canada, the U.S. neighbor, which is the second biggest trading partner of the U.S., many companies and consumers have been boycotting U.S. goods in protest of the Trump administration and its tariff threats. So the point I really want to drive home today is that the Trump administration may have this grandiose plan where they want to force other countries around the world to sign a Mar-a-Lago accord, whether or not that’s an actual agreement or whether it’s metaphorical.
They have this idea that they can use tariffs to force other countries to come to the negotiating table. And I honestly think the strategy could seriously backfire. And it’s not likely to work, at least how they think it will.
Maybe the U.S. can pressure a few allies or vassal states, but they’re definitely not going to force major countries in the global economy like China. Because the whole idea of the Mar-a-Lago accord goes back to the 1985 Plaza Accord. But if you look at the Plaza Accord, what were the countries that the Reagan administration was pressuring to devalue their currencies against the dollar? It was Japan, the U.K., France, and West Germany.
All of these countries are U.S. allies or frankly vassal states. The U.S. has been militarily occupying Germany and Japan since the end of World War II. These are countries that don’t make many significant foreign policy decisions without the approval of the United States.
And certainly the U.K. is joined at the hip with the U.S. Also, the role that those countries played in the global economy in 1985 when the Plaza Accord was signed was much bigger then than it is today. In 1985, Japan made up over 8% of global GDP measured at purchasing power parity. Germany was 6.5%. France and the U.K. were 4% of the global economy.
Since then, that figure has plummeted. And as of 2024, Japan and Germany only make up 3% of the global economy and France and the U.K. only make up 2%. In that same time period, there’s been a tectonic shift in the global economy.
In 1985 when they signed the Plaza Accord, China only represented 3% of global GDP and the U.S. represented 22%. Fast forward to 2024 and China now represents 19% of the global economy and the U.S. represents slightly under 15%. So China plays a much, much, much bigger role in the global economy.
Also, India and the other BRICS countries in the global south. The Trump administration thinks that it can force all of these other countries around the world to come to the negotiating table to sign a metaphorical or literal Mar-a-Lago accord. But why would they do that? The Trump administration wants to use the threat of tariffs and sanctions to blackmail these countries.
But like I said, the U.S. role in the global economy is much smaller today than it was 40 years ago when the Plaza Accord was signed. Furthermore, I can say from personal experience, speaking with many scholars and economists in China, that China will never repeat the same mistake that Japan made when it signed the Plaza Accord in 1985. The Plaza Accord led to the significant overvaluing of the Japanese yen against the dollar, which hurt the competitiveness of Japanese exports, hurting Japanese companies.
And at the same time, it fueled a stock market frenzy and the biggest asset price bubble in history, which popped in the early 90s and led to the infamous lost decade in Japan in the 1990s. Chinese economists have studied this episode so carefully. Every Chinese economist knows about how the U.S. hurt the Japanese economy with the Plaza Accord.
In China, it’s common for people to say that the U.S. did this intentionally because the U.S. feared that Japan in the 1980s was a rising power, especially technologically. Japanese industry was very competitive. It was making huge progress in advanced technologies and electronics, and U.S. companies couldn’t compete.
So the U.S. forced China to sign the Plaza Accord to significantly overvalue the yen, to hurt Japanese companies, to hurt the Japanese economy on behalf of the United States. There is basically no chance that China would come to a similar agreement with the United States that would hurt China on behalf of the U.S. This is what the U.S. would like to do. Ideally, this is the Trump administration strategy.
But what I’m stressing again is that I think the Trump administration is seriously over calculating and exaggerating the power of the U.S. empire. They still think that the United States is the most powerful country that can do anything it wants and no one can challenge them. But I think they’re going to be in for a rude awakening.
And what concerns me is that it’s going to be average working people in the United States who bear the cost of this trade war. And not just the people of the U.S., but the people of other countries around the world. A good example is Vietnam.
Trump threatened 46 percent tariffs on Vietnam, which could devastate the Vietnamese economy, which is like the Chinese economy 20 years ago that is still very heavily reliant on exports. And the financial analyst Glenn Look, who’s a great financial analyst, you should definitely follow him. He pointed out that essentially what the United States is doing is telling Vietnam to make the choice.
Are you with China or are you with us? And as he pointed out, all of the logic points to Vietnam choosing China, not choosing the U.S. Now, the Trump administration thinks that every country or the majority of countries around the world will choose the U.S. over China. But he points out, Glenn Look points out, that Vietnam’s export processing sector cannot function without inputs from China and the U.S. cannot provide substitutes for those inputs. And we’re seeing reports in the media that suggest this is true.
In fact, there was a report that Vietnam has invited China’s President Xi Jinping and also European leaders to come to Southeast Asia to discuss plans for trade with the threats of tariffs from the Trump administration. This is a clear sign of the multipolar world we’re in, where despite what the Trump administration says, countries do have other options. The U.S. is not the only game in town.
And in fact, at the 2025 summit of BRICS, Vietnam is one of the countries that was invited to join BRICS. However, Vietnam has still been neutral on this and has not given an official response, largely because Vietnam has been trying to carefully balance its relations between BRICS and the United States, because Vietnam is very reliant on exports to the U.S. But if the Trump administration uses these tariffs and trade war to force Vietnam to pick a side, it’s very possible that Vietnam would choose China and BRICS, not the U.S. So as much as the U.S. pushes, as much as Trump thinks that he can bully other countries and force them to do what the U.S. wants, this could actually accelerate the process of decline of the U.S. empire. It could further weaken U.S. hegemony, because there are alternatives.
They already exist. They’re being strengthened as we speak. BRICS is just one of those alternatives.
BRICS has so much interest with countries around the world. It now represents over half of the global population and over 40 percent of global GDP, PPP. Every year it continues to grow and they’re seeking alternatives to the U.S. dollar dominated financial system.
They already have ideas that they’re working on to create as we speak. So I think the Trump administration is really out of touch with reality. They’re significantly overstating the power of the United States.
And this could really blow back hard in their face. So on that note, I’m going to conclude. I know this was a very long episode today, but I wanted to describe what the Trump administration’s plan is to try to reshape the global financial system to benefit the U.S. empire and why I think it’s not going to work out the way that they think it will.
I’m Ben Norton. I’m the editor in chief of Geopolitical Economy Report. Please like and subscribe.
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