Tariffs are just the beginning

The Trump administration wants to rewrite the global economic system

Apr 02, 2025

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Today marks what President Trump and his economic nationalists are privately calling "Liberation Day" – the moment America throws off the shackles of a global trading system they believe has disadvantaged American workers for decades. The President is expected to announce his long-threatened reciprocal tariffs on goods imported into the United States.

Though the complete scope of the tariffs is unclear, the White House has indicated these measures will match those of other nations and may specifically target industries like pharmaceuticals and computer chips. Trump's previously declared 25% tariffs on imported automobiles and auto parts are set to take effect tomorrow.

The immediate impact of these tariffs will be substantial. Economists project they could slash global economic health by up to $1.4 trillion, with widespread price hikes rippling through supply chains. Markets increasingly fear these measures could trigger a global recession, reignite inflation just as it was cooling and spark financial instability across interconnected economies.

For American consumers, this means higher costs on everything from cars to electronics to groceries. Studies suggest the average American household could pay anywhere from $500 to $2,000 more annually for everyday goods, effectively functioning as a regressive tax that hits working-class families hardest. The manufacturing sector faces disruption, while retailers scramble to reconfigure supply networks built over decades.

But tariffs are just the beginning. They may dominate today's headlines, but make no mistake - they merely serve as the visible manifestation of a much deeper agenda.

Over the years I've learned to spot the difference between tactical moves and strategic realignments. This is unquestionably the latter. The Trump administration is methodically dismantling the global economic architecture the United States itself built over 75 years. This isn't just about border taxes or manufacturing jobs; it's about fundamentally rewriting the rules of international commerce, finance, and monetary policy.

Under President Trump, the United States has switched sides in the global economic order, transforming from its chief architect and defender into its most formidable challenger.

The "Mar-a-Lago Accord" blueprint

Wall Street can't stop talking about the "Mar-a-Lago Accord" – a concept detailed last year in a 41-page paper written last year by Stephen Miran, now head of Trump's Council of Economic Advisers. Though Trump hasn't publicly endorsed the plan, Miran's elevation from theoretical strategist to presidential whisperer has transformed his obscure white paper into required reading for global investors.

At its core, the Accord rests on a provocative thesis: the dollar's global dominance has harmed America by creating unnatural demand that has grossly overvalued the currency. This overvaluation, according to Miran, has decimated America's export competitiveness, perpetuated trade deficits, and hollowed out U.S. manufacturing.

The remedy? Nothing short of a currency revolution: The U.S. and its trading partners would intervene in foreign exchange markets to weaken the dollar. To prevent interest rates from spiking as foreigners sell Treasuries, these partners would be "encouraged" – through the threat of higher tariffs or withdrawal of security guarantees – to purchase longer-term Treasury bonds.

The dollar paradox

Trump is betting the industrial heartland that suffered most from the dollar's structural overvaluation stands to benefit from a more balanced exchange rate. Manufacturing communities in Pennsylvania, Michigan, and Wisconsin – not coincidentally, key electoral battlegrounds – could see an export renaissance under a weakened dollar regime coupled with strategic tariff protection.

Financial services, conversely, would face unprecedented challenges as global capital flows reorient away from Wall Street. The zero-sum nature of this rebalancing explains why business reactions split so clearly along sectoral lines, with manufacturing executives cheering while banking CEOs issue dire warnings.

Unlike his first term, when Trump obsessively monitored the Dow as a barometer of his success, he now appears willing to sacrifice Wall Street's interests for his broader economic agenda – signaling that financial market volatility is simply the price of economic liberation. Markets are not happy: Stocks have erased their gains since his election in November, while consumer confidence has plummeted.

The irony, as financial experts like David Lubin at Chatham House point out, is that Trump's policies might achieve the opposite of his stated aim. "Although Trump favors a weaker exchange rate, his policies are likely to have the opposite effect."

Trump's tariffs may perversely strengthen the dollar since countries hit by tariffs typically see their currencies weaken in response – as happened with China in 2018 when the renminbi depreciated by 10% after Trump's first round of tariffs. Add to this the inflationary impact of proposed tax cuts, likely leading to higher interest rates, and you have textbook conditions for dollar appreciation. In this case, the administration would face a stark choice: watch the dollar strengthen despite their intentions or take drastic unilateral measures like capital controls that could undermine global financial confidence.

Dismantling WTO authority

Trump's team isn't merely adjusting policy dials – they're dismantling the institutional architecture of global trade.

In February at the WTO headquarters in Geneva, America's representatives blocked consensus on dispute settlement reforms and sought to remove language condemning unilateral tariffs before voting against a resolution supporting rules-based trade. Reuters is reporting the U.S. has decided to pause funding for the WTO.

"For many decades now, the international economy has been backstopped by a reasonably predictable set of rules, led by a United States that believed it had a strong national interest in nurturing that sort of predictability,” Edward Alden at the Council on Foreign Relations notes. “That era has come to an end."

The United States is now signaling that tariffs are an all-purpose weapon to be used for whatever policy goal the president wishes – from migration control to fentanyl reduction to currency manipulation. This unpredictability makes rational economic planning almost impossible for both allies and adversaries.

The path forward

Trump's approach will force rapid and expensive adjustments when global growth is already struggling. But it might create clarity where ambiguity persisted for decades. The post-Cold War economic order has ended. The comfortable assumptions about American leadership, always willing to absorb trade deficits for the greater geopolitical good, have given way to a hard-nosed transactionalism that prioritizes domestic industrial interests over systemic stability.

For a world that has known predictable economic rules largely under American leadership, these are profound challenges. European diplomats privately acknowledge Trump isn't entirely wrong about Europe free-riding on America's open markets while building massive surpluses. But, they say, there's a vast difference between pushing for reform within a system and bulldozing the entire structure.

As Trump's team pivots toward implementing the next phases of this economic revolution – potentially including capital controls, currency intervention, and withdrawal from remaining trade agreements – the question is no longer whether global financial architecture will change, but how radically and at what speed.

The tariffs grabbing today's headlines are merely the visible tip of a much larger iceberg – one threatening to upend financial assumptions that have guided global commerce for generations. Whether this represents liberation or catastrophe depends entirely on where you stand in the economic order Trump seems determined to overturn.