Donald Trump has plunged the world into a torrent of uncertainty, both commercially and financially. Behind the noise and fury of multiple announcements, strategies and their logic can still be discerned – though not without contradictions and risks.
In the financial and monetary domain, the main question can be summarized as follows: How does the United States intend to maintain the international dominance of the dollar while striking at commercial and financial globalization? Two possible answers are emerging in the president’s circle.
One, advocated by Stephen Miran, who leads the White House economic advisers, proposes forcing foreign governments and central banks to hold dollars and accept the terms of contracts decided by the US. The other, sketched out by Scott Bessent, the treasury secretary, focuses on developing private uses of the dollar through cryptocurrencies whose value would be pegged to it (stablecoins).
Miran thus believes he can maintain – and even strengthen – the dollar’s role as the foremost international reserve currency by strong-arming its public holders. These are mainly the central banks of countries that want to maintain a stable exchange rate with the dollar while financially opening up. The dollar reserves they accumulate are used either to lend to their country’s banks in case of capital outflows or to prevent their currency from appreciating against the dollar, thereby preserving the competitiveness of their exports.
Depreciating the dollar
Trump and Miran have repeatedly threatened tariffs against countries that might sell their dollars. They have also proposed exchanging these reserves, held in the form of short-term US debt, for long-term debt that would no longer be tradable on financial markets. This entire strategy rests on the assumption that other countries will accept the terms of the contract drafted by the US.
Moreover, this strategy faces a contradiction that is not easy to resolve without further coercion: The US also wants to depreciate the dollar to boost its exports and limit its imports (goods produced in the US would become cheaper relative to the rest of the world and could be more easily exported).
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