Amidst President Trump’s recent trade actions, a significant speech by Stephen Miran, one of Trump’s top economic advisors, has drawn attention to a potential shift in the global economic order.
In his speech, Miran hinted at the White House’s aim to go beyond just imposing tariffs.
The administration is focused on goals like reducing or eliminating America’s trade deficits and boosting domestic manufacturing.
While tariffs are an essential tool in this strategy, the existing global economic system relies heavily on the unique role of the U.S. dollar, recognized as the “international reserve currency.”
This exclusive status of the dollar has historic roots that trace back to 1944.
During this year, global financial leaders gathered at Bretton Woods in New Hampshire to outline a new economic framework post-World War II.
In this recent speech, Miran expressed concerns that the reserve currency status of the dollar, while beneficial for the U.S. and the global economy, inadvertently raises the dollar’s value.
A stronger dollar leads to higher prices for American exports, thereby making them less competitive in international markets.
Miran has proffered the idea of a new international summit reminiscent of Bretton Woods, which he’s dubbed “The Mar-A-Lago Accord.”
This potential summit aims to renegotiate the global economic system, possibly including steps to lower the value of the dollar or seeking compensation for the dollar’s unique role.
Some analysts believe that this objective partially drives the aggressive tariff policies being implemented by the Trump administration.
The ongoing debate centers around whether the special global role of the dollar constitutes a privilege or a burden.
The dollar’s reserve currency status does come with numerous advantages for the United States.
Among the key benefits is the power to impose financial sanctions on foreign nations by restricting access to dollars or seizing U.S. assets, as demonstrated in the aftermath of Russia’s invasion of Ukraine.
Additionally, the high demand for dollars globally helps to reduce interest rates on U.S. debt, allowing the government to borrow at a lower cost.
This dynamic has led economists to label it as “the exorbitant privilege.”
However, Miran argued that while the demand for dollars keeps borrowing rates low, it also distorts currency markets.
The positive aspect for American consumers is that they enjoy cheaper foreign imports due to the stronger dollar.
Conversely, the adverse effect on American exporters results in higher prices for their products abroad, complicating global trade.
Interestingly, during times of economic uncertainty, investors typically seek safety by buying U.S. Treasury bonds, further strengthening the dollar.
Yet, this trend can also hinder American exporters during economic downturns, particularly when the dollar appreciates further.
Recent market behavior has raised alarms, as investors displayed a disconnection from this historical trend, reportedly fleeing from U.S. financial assets.
Miran invoked the idea that the reserve function of the dollar contributes to enduring currency distortions and unsustainable trade deficits.
He contended that these deficits have significantly harmed the manufacturing sector in the U.S. and adversely affected working-class families.
The question persists around whether this global reserve status of the dollar acts as a privilege for the U.S. economy or as a burden resulting in adverse outcomes for American producers.
Vice President JD Vance has shared similar sentiments regarding the reserve currency status, arguing it strengthens the dollar’s value but simultaneously undermines American producers.
He pointed out that the reserve currency status serves as a significant subsidy for American consumers while posing a tax on American manufacturing, contributing to an over-reliance on imports.
Economists have weighed in on these claims, with UC Berkeley economist Barry Eichengreen declaring them as fundamentally flawed, describing the arguments as “nonsense.”
Eichengreen acknowledged that the dollar does experience slight strength due to its role in international trade but emphasized that it ranks low on the list of factors affecting U.S. export competitiveness.
He highlighted that elements such as worker productivity, wages, innovation within industries, inflation rates, and the quality of domestic manufacturing equipment hold far more weight in determining competitiveness.
Eichengreen expressed that the dollar’s exceptional role globally is ultimately beneficial to the U.S., underscoring that there is broad consensus among economists supporting this view.
President Trump himself, prior to the election, affirmed the importance of the dollar’s reserve status, asserting that its decline could plunge America into “third-world status.”
He has threatened countries attempting to develop alternative reserve currencies, emphasizing that such actions would lead to steep tariffs on their exports to the U.S.
Trump’s stance serves to reinforce the significance attributed to the dollar’s international standing.
Miran’s approach offers a means to address the perceived drawbacks of the dollar’s dominance while attempting to safeguard its status as a global reserve currency.
This notion of the “Mar-A-Lago Accord” signifies an effort to invite global representatives to renegotiate the economic landscape, ultimately aiming to ease burdens linked to the current economic order.
Miran’s proposals, while presenting a potential roadmap for the future, do not clarify whether they represent a cohesive strategy for Trump’s expansive tariff agenda.
There are differing views regarding the coherence and effectiveness of the administration’s trade policies, a sentiment echoed by many observers, including Eichengreen.
Despite the shifts and uncertainties within U.S. financial markets, the dollar maintains a notable level of resilience as the primary global reserve currency.
Historical patterns suggest that, despite repeated claims that the dollar’s supremacy is at risk, countries continue to utilize it extensively, as there have yet to emerge viable alternatives.
Moreover, Eichengreen pointed out that the U.S. has historically been regarded as a reliable steward of the dollar’s international role.
Such faith in American institutions has played a substantial role in maintaining the dollar’s appeal during moments of economic unrest.
However, recent market responses have raised concerns, signaling a shift in investor confidence amidst perceived instability within the administration’s policy approaches.
The unanticipated financial turmoil has led analysts to speculate about the future of the dollar’s reserve status, prompting discussions on the far-reaching effects of the Trump administration’s evolving strategies.
image source from：https://www.npr.org/sections/planet-money/2025/04/11/g-s1-59772/are-trumps-tariffs-a-bargaining-chip-for-a-new-global-economic-order
