CETRI
Donald Trump’s top economic advisor claims the President has weaponised tariffs to ‘persuade’ other nations to pay the US to maintain its supposedly mutually beneficial global empire.
Geopolitical economist Ben Norton was among the first to highlight the significance of Trump’s Council of Economic Advisers chairman Stephen Miran’s briefing at the Hudson Institute.
The Institute is funded by financiers such as media czar Rupert Murdoch, who controls Fox News, The Wall Street Journal, and other conservative media.
Miran made his case just after Trump’s electoral victory in A User’s Guide to Restructuring the Global Trading System. Miran attempts to rationalise Trump’s economic policies, which are widely seen as at odds with conventional wisdom and reason.
Enhancing US dominance
Miran defends Trump’s tariffs as part of an ambitious economic strategy to strengthen US interests internationally with a “generational change in the international trade and financial systems”.
“Our military and financial dominance cannot be taken for granted, and the Trump administration is determined to preserve them”. Miran claims the US provides two major ‘global public goods’, both “costly to us to provide”.
First, Miran claims US military spending provides the world a ‘security umbrella’ that others should also pay for. Second, the US issues the dollar and Treasury bonds, the main reserve assets for the liquidity of the international monetary and financial system.
Miran seems blissfully unaware of longstanding complaints of US ‘exorbitant privilege’. The dollar’s reserve currency status has provided seigniorage income to the US while Treasury bond sales have long financed US debt at very low cost.
Miran’s case for Trump
The White House has threatened others with high tariffs unless they make concessions, at their own expense, benefiting the US. Miran’s defence of tariffs is indirect, as part of an ostensible grand strategy.
“The President has been clear that the United States is committed to remaining the reserve [currency] provider”, Miran added. He claims US dollar hegemony is “great” and denies “dollar dominance is a problem”.
While this “has some side effects, which can be problematic”, Miran “would like to … ameliorate the side effects, so that dollar dominance can continue for decades, in perpetuity”.
For Miran, these side effects are supposedly largely adverse while ignoring the benefits to the US. Chronic US trade deficits have been possible and financed by mounting US debt, enabling the dollar to serve as a global reserve currency.
Hence, US trade deficits have been sustained since the 1960s, rather than “unsustainable”, as he alleges. US manufacturing has been “decimated” by its consumers and transnational corporations, not by an extensive foreign conspiracy.
Miran’s Guide acknowledged the ‘Triffin dilemma’. In 1960, Robert Triffin warned that the dollar’s status as global reserve currency posed problems and risks for US monetary policy.
He invokes Triffin to argue that the US must import more than it exports to provide liquidity to the world, which needs dollars for international trade and to hold as reserves.
Miran adopts the Trumpian narrative of only blaming others. However, the US expected to benefit from continuing trade surpluses at Bretton Woods. In 1944, it opposed alternative payments arrangements to deter excessive trade surpluses.
US trade deficits have grown since the 1960s with post-World War II reconstruction of the Global North and uneven ‘late industrialisation’ in the Global South.
The empire must pay
The Trump administration wants to eat its cake and still have it. It intends to strengthen US empire while minimising adverse side effects and costs.
Miran wants foreign nations to “pay their fair share” in five ways. First, “countries should accept tariffs on their exports to the US without retaliation”. Tariffs provide revenue, which has financed its global public goods provision. Second, they should buy “more US-made goods”.
Third, they should “boost defense spending and procurement from the US”. Fourth, they should “invest in and install factories in America”. Fifth, they should “simply … help us finance global public goods”, i.e., foreign aid should go to or via the US.
Miran then emphasises that Trump “will no longer stand for other nations free-riding”, and calls for “improved burden-sharing at the global level”.
“If other nations want to benefit from the US geopolitical and financial umbrella, then they need to … pay their fair share”, i.e., the world must “bear the costs” of maintaining US empire.
Trump dilemmas 2.0
Trump wants to use tariffs to force countries with trade surpluses with the US to buy more from the US. Ending these deficits would undermine dollar hegemony, which, paradoxically, Trump obsessively wants to preserve.
Miran wants other countries to convert their US Treasury bills into 100-year bonds at very low interest rates, effectively subsidising the US over the long term. He also wants nations running trade surpluses with the US to buy more long-term US Treasury securities.
Trump has threatened 100% tariffs on BRICS members and all countries promoting de-dollarisation or undermining dollar hegemony in the international monetary system.
During his first term, Trump wanted to do the near-impossible by boosting exports while preserving a strong dollar !
Miran acknowledges that the “root of the economic imbalances lies in persistent dollar overvaluation that prevents international trade balancing”. But he also insists that dollar “overvaluation is driven by inelastic demand for reserve assets”.
Trump now hopes to kill both US trade and fiscal deficit birds by cutting imports and raising revenue with higher tariffs. He also wants the world to continue using dollars despite the US budget and trade deficits and policy uncertainties.
Meanwhile, official US debt, financed by selling Treasury bonds, continues to grow. Trump has to deliver his promised tax cuts soon before his earlier measures run out. Trump is falling foul of his bluster and may have to revert to the status quo ante while denying it.
Despite Miran’s best efforts, he cannot provide a coherent rationale for Trump’s rhetoric. But dismissing Trump as ‘mad’ or ‘stupid’ obscures the impossible dilemma due to and obscured by post-war US dominance.
