I think they’ll fail because, if I’m reading Miran’s manifesto correctly, he made a very rudimentary error in estimating the potential of tariffs as a coercive instrument to force PBOC to acquiesce to Trump. In fact I urge other users to read and discuss the manifesto which appears to be the Trump admin’s step by step guide to re-dominating the globe, it’s uhhh… really dumb.
Note how he never uses data or citations to back up claims about economic weaknesses of China which Trump can exploit with tariffs. Whole thing is chock full of “if everyone obeys me perfectly then I win” type reasoning.
Deepseek’s summary:
The document, titled *"A User’s Guide to Restructuring the Global Trading System"* by Stephen Miran of Hudson Bay Capital, explores potential reforms to the global trading and financial systems, particularly under a hypothetical second Trump administration. The essay focuses on addressing economic imbalances caused by the U.S. dollar's overvaluation, which has negatively impacted American manufacturing and trade competitiveness. Key points include:
1. **Economic Imbalances and the Dollar**: The U.S. dollar's role as the global reserve currency creates persistent overvaluation, leading to trade deficits and harming U.S. manufacturing. The Triffin dilemma explains how the U.S. must run deficits to supply global reserve assets, which becomes increasingly burdensome as global GDP grows.
2. **Tariffs as a Tool**: Tariffs, if offset by currency adjustments, can raise revenue without significant inflation. The 2018-2019 U.S.-China trade war demonstrated that tariffs, when accompanied by currency depreciation, can be noninflationary. Tariffs can also shift the burden of taxation to foreign nations by reducing their purchasing power.
3. **Currency Policy**: The U.S. could pursue multilateral or unilateral approaches to address currency misalignment. Multilateral agreements, like the Plaza Accord, could weaken the dollar, but cooperation from trading partners is uncertain. Unilateral measures, such as imposing fees on foreign holders of U.S. Treasuries, could also be used to reduce dollar demand.
4. **Market and Volatility Considerations**: Implementing tariffs and currency policies could lead to financial market volatility. Gradual implementation and coordination with the Federal Reserve could mitigate risks. Tariffs are likely to precede any significant currency policy changes, as they provide negotiating leverage and revenue.
5. **National Security and Trade**: The Trump administration is expected to intertwine trade policy with national security, using tariffs and currency policies to strengthen U.S. manufacturing and reduce reliance on foreign supply chains, particularly from China.
6. **Optimal Tariff Rates**: Economists suggest that moderate tariffs (up to 20%) can improve U.S. welfare by correcting trade imbalances and addressing foreign trade distortions. However, retaliatory tariffs from other nations could negate these benefits.
7. **Financial Market Consequences**: Changes to the global trading system could lead to increased currency volatility, shifts in asset prices, and a reconfiguration of global supply chains. The U.S. may also face challenges in maintaining the dollar's reserve status if other nations seek alternatives.
8. **Conclusion**: The essay outlines a path for the U.S. to reconfigure the global trading system to its advantage, but emphasizes the need for careful planning to avoid adverse economic and market consequences. Tariffs are likely to be the first tool used, followed by potential currency adjustments.
Overall, the document provides a detailed analysis of the tools available to reshape the global trading system, the trade-offs involved, and the potential economic and financial market impacts. It emphasizes the importance of balancing economic goals with the need to minimize volatility and maintain global stability.
