Summary: Trump’s Trade War – Strategy Behind the Chaos?

This article analyzes whether Donald Trump’s disruptive trade policies, which have caused market turmoil and recession fears, are merely erratic actions or part of a calculated, albeit risky, strategy outlined by his advisor Stephen Miran.

Central Theme: The core issue explored is a potential strategic shift, dubbed the “Mar-a-Lago Accord,” aimed at deliberately weakening the US dollar against other currencies to combat the US trade deficit, without sacrificing the dollar’s global reserve status. This represents a potential break from the post-Bretton Woods consensus.

Key Points & Arguments:

• Advisor Stephen Miran theorizes that the dollar’s global currency status drives high demand for USD and US bonds, strengthening the dollar, disadvantaging US exporters, and causing the trade deficit.
• The proposed “Mar-a-Lago Accord” seeks to compel other countries to strengthen their currencies relative to the dollar.
• The strategy involves leveraging high tariffs and threatening to withdraw US defense guarantees as enforcement mechanisms.
• While Miran reportedly advocated for cautious implementation due to high economic risks, Trump’s actions appear impulsive, driven by his belief that trade deficits are inherently losses that tariffs alone can fix.
• The article argues tariffs are insufficient to eliminate the trade deficit, which is fundamentally linked to capital flows (more capital entering the US than leaving). The deficit would only disappear if global confidence in the US collapses, drying up these flows – a highly undesirable scenario.
• The rise of protectionism is contextualized by the negative impact of China’s 2001 entry into the WTO (the “China Shock”), which led to significant US job losses and socio-economic decline in certain regions, fueling support for policies like Trump’s.

Conclusions & Takeaways:

• Trump’s trade war may not be entirely random but potentially linked to a specific, high-risk economic strategy targeting the dollar’s value.
• Trump’s implementation appears erratic and deviates from the cautious approach advised, based on a simplistic view of trade deficits.
• The strategy of deliberately weakening the dollar is fraught with risks and could ultimately damage global trust in the US currency and economy. Tariffs alone are unlikely to resolve the complex issue of the trade deficit.

Source: Donald Trump popełnił historyczny błąd. W moment zrujnował zaufanie budowane przez 80 lat. Teraz chce wywrócić system do góry nogami – Wiadomości