theglobeandmail.com
Trump's Tariff Threat Exposes Contradiction in U.S. Economic Policy
President-elect Trump's threat to impose tariffs on countries abandoning the U.S. dollar highlights the inherent conflict between boosting domestic manufacturing and preserving the dollar's global dominance, a tension reflected in the U.S.'s persistent trade deficit and its impact on consumer purchasing power.
English
Canada
Carnegie ChinaRsm
Donald TrumpJoe BidenKamala HarrisMichael PettisJoe Brusuelas
- What are the potential consequences of reducing the U.S. trade deficit on interest rates, consumer purchasing power, and the global demand for U.S. assets?
- The U.S. has run a trade deficit for nearly 50 years, correlating with the dollar's status as the world's reserve currency. This deficit is offset by a capital account surplus, as foreign countries invest in U.S. assets. Reducing the trade deficit would decrease demand for U.S. assets, potentially increasing interest rates and reducing consumer purchasing power.
- How can the U.S. simultaneously boost domestic manufacturing and maintain the dollar's global dominance, given the inherent conflict between these objectives?
- President-elect Donald Trump's threat to impose tariffs on countries that move away from the U.S. dollar reveals a key contradiction in U.S. economic policy. His aim to boost domestic manufacturing clashes with maintaining the dollar's strength, as a stronger dollar hinders exports. This conflict highlights the inherent tension between promoting domestic production and preserving the dollar's global dominance.
- What global economic adjustments would be necessary to resolve the contradiction between a strong dollar and a reduced U.S. trade deficit, and what are the political and economic challenges involved in achieving such a rebalance?
- Resolving this conflict requires significant global adjustments. A rebalanced economy with reduced U.S. trade deficits would necessitate a weaker dollar and higher prices for imported goods, potentially impacting consumer purchasing power and political feasibility. Successfully navigating this requires addressing the inherent tension between economic nationalism and global financial dominance.