Narendra Pachkhédé 
“The benefits of free trade are so clear that its opponents must rely on myths and misconceptions to justify protectionism.”
– Milton Friedman in Free to Choose (1980).
The rhetoric of economic nationalism, a powerful tool in the arsenal of populist leaders, is deeply rooted in Donald Trump’s longstanding economic philosophy. His approach to global trade, characterised by aggressive tariff policies and a disdain for multilateral agreements, is not an impulsive deviation but a calculated attempt to reshape the international financial order. Critics continue to dismiss Trump’s trade war as reckless protectionism – an outdated mercantilist tantrum in a world of free trade. However, a deeper economic logic is at play beneath the bluster and tariff threats, a logic that is deeply intertwined with Trump’s economic philosophy.
A new trade order?
What is at stake in Trump’s latest tariff salvo is not just a specific set of trade disputes but the broader architecture of the postwar economic order. If the post-Cold War liberal trade system is to be dismantled, then in everyone’s mind, one name was at the forefront – Robert Lighthizer, the former US Trade Representative.
“The nation has veered from six decades of adherence to a rules-based, multilateral trading system, embracing instead a staunchly nationalist orientation. Lighthizer’s successor under President Joe Biden, Katherine Tai, has maintained this newly charted course,” reported Foreign Policy magazine.
Though he is not part of the current dispensation, his imprint is all over. Why is the mastermind of Trump’s Tariff Plan still sitting at home in Florida? With that headline, The New Yorker ran a story on Lighthizer and his belief, as Benjamin Wallace-Wells explains. Rather than seeing Trump as a disruptive outsider who hijacked the GOP, Lighthizer likely saw him as the embodiment of a recurring pattern in Republican politics – perhaps a populist strain of economic nationalism, scepticism of free trade, or a preference for strongman-style leadership.
In this view, Trump wasn’t overturning Republican orthodoxy so much as channelling forces that had always been present, just more bluntly and theatrically. In his No Trade is Free, he expands on his ideas and contends that America’s trade deficits stem from unfair policies, worsened by post-1990s trade agreements, and are economically ruinous, thus defending the administration’s protectionism as a corrective measure.
In 2022-23, Zoltan Pozsar, a widely followed strategist in global finance, introduced his Bretton Woods III thesis, arguing that the post-Cold War era of globalisation was giving way to a new, commodity-driven economic order. Its key premise: as Western dominance in financial markets waned, the BRIC nations – Brazil, Russia, India, and China – leveraged their control over essential commodities to reshape global trade dynamics.
Unlike the US-led Bretton Woods II era, which revolved around the dollar’s dominance and financial assets, Bretton Woods III would be defined by commodity-backed economic power. Western sanctions on Russia accelerated this shift following its 2022 invasion of Ukraine. The sanctions, designed to weaken Russia’s economy by restricting its access to Western financial markets and technology, had unintended consequences for global inflation.
Russia, a major oil, natural gas, and key industrial metals supplier, redirected its exports toward China and other non-Western nations while cutting off supplies to Europe and other Western markets. The resulting supply shock sent energy and commodity prices soaring, exacerbating inflationary pressures worldwide.
For central banks, inflation had previously been seen as a temporary phenomenon driven by pandemic-era disruptions. However, as the Bretton Woods III framework took hold – where commodity-rich nations dictated supply and pricing to the West – it became clear that inflation was more structural than transitory. Central banks, particularly the US Federal Reserve, responded by aggressively raising interest rates to cool down inflation.
These rate hikes had cascading effects, particularly on the US debt market. Years of deficit spending had led to a bloated sovereign balance sheet, with US debt levels reaching unprecedented highs. With higher interest rates, the cost of refinancing this debt soared. At the same time, global investors, once eager buyers of US Treasuries, became more cautious. Some, particularly China, scaled back their purchases amid rising geopolitical tensions, while others sought better returns elsewhere, given the changing dynamics of global trade and investment flows.
The result was a more fragile US financial system, grappling with inflationary pressures and a shifting global investment landscape. The era of ultra-low rates and abundant capital was replaced by a world where commodity power and geopolitical strategy played a much more significant role in economic stability.
Yet, by late 2024, the picture had changed again. Thanks to its resurgence as an energy superpower and stronger-than-expected economic growth, the US found itself in an unusual moment of relative strength – despite ongoing political divisions. Once thought to be moving toward multipolarity, the global economy now appeared to be circling back to US dominance, at least for the time being. Whether Bretton Woods III remains a long-term reality or a short-lived theory will depend on how nations continue to navigate these shifting economic tides.
Hiding in plain sight
But for those looking beyond the bluster, a more sober calculus emerges. At its core, Trump’s tariff regime is not merely an ad hoc flex of economic muscle but a meticulously designed project. This project finds its blueprint in a primarily overlooked policy paper released shortly after the 2024 election.
The document titled ‘A User’s Guide to Restructuring the Global Trading System, offers a manifesto for economic realignment, authored by Stephen Miran – Trump’s newly appointed chair of the Council of Economic Advisers,’ established by the Employment Act of 1946, provides the US President with expert economic advice, shapes policy, forecasts trends, and communicates economic ideas.
Miran, a forty-one-year-old alumnus of Boston University and a Harvard PhD in Economics, is now a senior strategist at the hedge fund Hudson Bay Capital and previously served in the Trump administration as a senior advisor at the US Treasury Department. Miran has since occupied a perch at the conservative Manhattan Institute, where he has issued sharp critiques of secretary Janet Yellen and Federal Reserve chairman Jerome Powell, prominent figures in Joe Biden’s administration.
In the report, Miran lays out a two-phase strategy: first, the targeted use of tariffs to extract concessions and repatriate industrial capacity, and second, a sweeping realignment of global currency markets to entrench American economic primacy. If this sounds eerily familiar, it should.
The model draws from the 1985 Plaza Accord, in which the United States forced key allies to devalue their currencies to boost American exports. But where the Plaza Accord was multilateral, Miran’s vision is pure Trumpian unilateralism – a “Mar-a-Lago Accord,” in which the US dictates terms through economic coercion and the spectre of protectionism, a potential game-changer in global trade dynamics.
The burden of the American dollar
The great paradox of American power is that its greatest strength – its currency – may also be its most significant liability. For decades, the dollar has been the world’s reserve currency, a symbol of financial supremacy and stability. However, embedded within that privilege is a persistent imbalance that distorts trade, hollows out industry, and burdens the workers who were once the backbone of the American economy.
Miran, the architect of evolving economic doctrine, puts it bluntly – the dollar is too strong for America’s own good. Because nations around the world hoard it as a store of value, its price remains artificially high, making American goods less competitive abroad. The result is a structural trade deficit, where consumption is cheap but production is expensive – where financial markets thrive but factories close. This is the hidden cost of dollar hegemony, a quiet force shaping the decline of domestic manufacturing and deepening the fault lines of economic inequality.
Trump, in his instinctive, unscripted fashion, grasped this imbalance in a way many policymakers refused to acknowledge. His tariffs on Chinese imports and his threats against European automakers – were not merely acts of economic nationalism but an attempt to blunt the effects of an overvalued currency. By making foreign goods more expensive, he sought to level the playing field for American producers, forcing a reckoning with a system that had long favoured capital over labour.
Miran, however, argues that tariffs alone were insufficient. The 2018-2019 trade war with China provided a case study of economic cause and effect: as Trump imposed duties on Chinese goods, the yuan depreciated in response, absorbing much of the impact. In theory, American consumers did not bear the full brunt of price increases. The administration, eager to claim victory, insisted that China was paying the cost of the tariffs – a claim that was only partially true. What the episode did reveal, however, was that trade measures, when combined with currency adjustments, could be a powerful tool for economic rebalancing.
Withdrawing from the Trans-Pacific Partnership (TPP) and renegotiating North American Free Trade Agreement (NAFTA) into United States-Mexico-Canada Agreement (USMCA) – were moves that signalled a rejection of diplomatic consensus in favour of brute force. Critics warned that trade wars were mutually destructive and that economic isolationism would backfire. And yet, Miran does not entirely dismiss Trump’s instinct. If executed precisely, a phased strategy of tariffs and targeted currency interventions could, in theory, recalibrate the playing field. In his first attempt at implementing these ideas, Trump’s trade war was less a strategy than a series of erratic skirmishes, creating chaos rather than stability. Markets craved order, but his unpredictability turned economic policy into a spectacle of uncertainty.
Miran suggests that a more measured approach – perhaps a deliberate sequence of currency interventions paired with selective tariffs – could have mitigated this volatility while achieving the administration’s economic aims. Instead, Trump’s chaotic brinkmanship undermined investor confidence and dulled the impact of his policies. The strategy was sound; the execution was less so.
Sharp observers did not miss the irony. A few weeks ago at Davos, a site of free trade festivities, in his virtual appearance, a key line of Trump’s speech “America First, not America alone” was the catch. It was a moment of tweaking the popular reception and offering a nuance: “It was not about trade war but fair trade”.
The critique: A flawed economic doctrine?
The highly publicised new tariff regime lacks theoretical grounding. Dismantling free trade, what replaces it? With economists rejecting universal tariffs, no model exists. The treasury nominee, however, suggests the tariffs are merely a negotiating tactic. However, the economic rationale behind Miran’s support for high tariffs has faced significant scrutiny. Notably, economists Arnaud Costinot and Andres Rodriguez-Clare, whose research Miran cited to justify the 20% tariff benchmark, have explicitly rejected this application of their work. In a Le Monde op-ed, the two economists deconstructed the optimal tariff argument, illustrating how it oversimplifies complex global trade dynamics.
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The optimal tariff argument suggests that large economies like the US can manipulate trade terms in their favour by imposing tariffs that force foreign producers to lower prices. However, Costinot and Rodriguez-Clare caution that such a strategy depends on factors that are difficult to measure, including the ease with which exporters can find alternative markets. If, for instance, French winemakers redirected their products to Germany or China in response to US tariffs, the expected price drop would never materialise, rendering the policy ineffective.
Moreover, they argue that while tariffs may have been effective in past economic environments, China’s rise as a major global player necessitates a more nuanced approach. Retaining dominance in high-tech sectors, investing in green industries, and addressing regional economic disparities require policies that extend beyond blunt instruments like tariffs.
As America stands on the precipice of another political and economic inflexion point, the fundamental question remains: is the country willing to confront the burdens of its financial hegemony? Or will the dollar’s strength continue to serve as both a weapon and a weight, shaping an economy where financial capital reigns supreme, and the workers who built America are left to bear the cost?
Narendra Pachkhédé is a critic, essayist and writer who splits his time between Toronto, London and Geneva.