Is the Strategy to Weaken the Dollar?
Context
Additionally, this overvaluation stems from the inelastic demand for reserve assets. The paper outlines policy options—tariffs and currency adjustments—to improve US competitiveness, reallocate global demand, and enhance burden-sharing with trading partners while examining their economic and market implications and mitigation strategies. (See note 1 for a counterargument to tariffs.)
The rationale behind the strategy is that the overvaluation of the US dollar discourages domestic manufacturing and production by making imports cheaper for US consumers and US exports less competitive globally.
On March 13, 2025, Miran appeared to contradict himself in a Fortune article regarding his earlier position as outlined in his November 2024 paper. While he previously argued, as mentioned before, that “tariffs should be used as a negotiation tool to devalue the US dollar,” his March statement suggested that tariffs could strengthen the dollar relative to foreign currencies (such as the yuan). This apparent contradiction is significant because a stronger dollar would offset tariff costs for US importers, undermining the trade rebalancing that Miran’s original strategy aimed to achieve through dollar devaluation. This inconsistency could raise questions about the coherence of the administration’s economic approach.
The Miran strategies do not contradict each other. They are better described as tensions between a weaker and stronger dollar in exchange markets that need balancing acts, using tariffs as tools.
Describing the balancing act, we point to Elon Musk’s quote concerning Steve Davis’s (key lieutenant) DOGE actions: “A little chemo can save your life; a lot of chemo could kill you.” The balancing strategy can also be compared to a music or audio mixer. Just as a music mixer allows a sound engineer to tweak various sliders and knobs—volume, bass, treble, reverb, etc.—to create a harmonious track, Miran’s currency policies involve manipulating multiple levers (tariffs, multilateral accords, unilateral tools like the International Emergency Economic Powers Act, (IEEPA) and reserve accumulation) to balance economic competitiveness, financial stability, and geopolitical objectives.
In part I, our article examines and summarizes Miran’s Guide paper and explores the apparent contradiction between a weak and strong dollar strategy. Part II matches policies to Miran’s thesis.
I: Analysis and Summary of Miran’s Guide to Restructuring the Global Trading System
Core Argument:
Key Sustaining Points
The Triffin Dilemma & Overvalued Dollar
- The US dollar’s role as the global reserve currency creates persistent demand for US assets, particularly US Treasury securities (USTs).
- This demand strengthens the dollar more than it would under normal trade conditions, making US exports more expensive and hurting US manufacturing competitiveness.
- The US bears a disproportionate burden of providing reserve assets and international security as global GDP grows.
The Impact on Manufacturing and Trade Deficits
- An overvalued dollar leads to cheaper imports, which result in trade deficits and job losses in manufacturing.
- This scenario undermines the US industrial base, increasing the economy’s reliance on financial and service sectors.
The US “Defense Umbrella” & Economic Burden
- The US supports global security through military alliances (e.g., NATO) and the protection of international trade routes.
- This security role benefits other nations without adequate compensation, contributing to the economic strain on US resources.
Tariffs as a Corrective Measure
- Tariffs provide revenue and can be noninflationary if offset by currency adjustments.
- Suppose a foreign country’s currency weakens significantly in response to tariffs. In that case, the cost of imports can remain relatively stable for US consumers, allowing them to purchase similar quantities of goods with fewer dollars. In contrast, the foreign country primarily bears the economic burden through reduced export profitability and terms of trade. (See note 2).
- Tariffs can also be used as a negotiation tool to force trade partners to accept fairer trade terms.
Currency Policy as a Strategy
- The US has both multilateral and unilateral tools to adjust exchange rates.
- Currency devaluation can be achieved through:
- Reserve accumulation (buying foreign assets to weaken the dollar).
- Tariff-driven fiscal devaluations, where tariffs indirectly lower the value of the dollar.
- A weaker dollar would boost US manufacturing competitiveness, but it also carries risks, such as higher borrowing costs and potential global financial instability.
Financial Market Consequences
- Policy changes in tariffs or currency can create volatility in global markets.
- A sharp depreciation in the dollar could disrupt global capital flows and cause inflationary pressures in the US.
- However, the gradual implementation of these policies could minimize adverse market reactions.
The Paradox of Weakening vs. Strengthening the US Dollar: A Strategic Dilemma
The Desire for a Strong Dollar – to maintain the US dollar’s global reserve currency status, preserve low borrowing costs, and retain financial and geopolitical dominance.
The Need for a Weaker Dollar – to make US exports more competitive, reduce trade deficits, and support domestic manufacturing and employment.
These two objectives pull in opposing directions and require trade-offs. Below, we examine the key balancing acts, trade-offs, and policy mechanisms that strive to reconcile this contradiction.
1. Why Does the US Need a Strong Dollar?
A. Financial & Monetary Power (Global Reserve Currency)
The US dollar is the world’s primary reserve currency, meaning that global central banks, investors, and governments store value in US treasuries and dollars.
This allows the US to borrow cheaply because the world has an insatiable demand for US debt.
A strong dollar ensures global liquidity and gives the US leverage in international sanctions, trade, and geopolitical influence.
B. Lower Borrowing Costs & Deficit Financing
- Foreign demand for dollars lowers US interest rates, meaning cheaper borrowing for the US government.
- This supports large fiscal deficits without causing runaway inflation.
- A weaker dollar would make it more expensive for the US to finance its debt, potentially destabilizing financial markets.
C. Stability for Global Trade & Investments
A stable, strong dollar acts as a global anchor for trade, reducing currency volatility.
It benefits US multinational corporations, which hold significant assets abroad.
Countries that peg their currencies to the dollar (e.g., oil exporters, East Asian economies) rely on dollar strength for financial stability.
A stable, strong dollar acts as a global anchor for trade, reducing currency volatility.
It benefits US multinational corporations, which hold significant assets abroad.
Countries that peg their currencies to the dollar (e.g., oil exporters, East Asian economies) rely on dollar strength for financial stability.
2. Why Does the US Need a Weaker Dollar?
Despite the benefits of a strong dollar, there are significant economic downsides, particularly for trade competitiveness and industrial employment.
A. US Exports Become Too Expensive
A strong dollar makes US goods more expensive for foreign buyers, reducing exports and manufacturing output.
This has contributed to persistent trade deficits, as foreign goods are relatively cheaper in the US.
US companies are at a competitive disadvantage against nations with deliberately weaker currencies (e.g., China, Germany, Japan).
A strong dollar makes US goods more expensive for foreign buyers, reducing exports and manufacturing output.
This has contributed to persistent trade deficits, as foreign goods are relatively cheaper in the US.
US companies are at a competitive disadvantage against nations with deliberately weaker currencies (e.g., China, Germany, Japan).
B. Deindustrialization & Trade Deficits
Over the decades, a strong dollar has led to job losses in US manufacturing as production has moved to cheaper locations.
Countries like China and Germany have benefited from US demand for goods, while the US has run chronic trade deficits.
A weaker dollar could revive US manufacturing and reduce trade imbalances.
Over the decades, a strong dollar has led to job losses in US manufacturing as production has moved to cheaper locations.
Countries like China and Germany have benefited from US demand for goods, while the US has run chronic trade deficits.
A weaker dollar could revive US manufacturing and reduce trade imbalances.
C. The Burden of the “Global Defense Umbrella”
The US spends massive sums on military bases, alliances, and global security, indirectly subsidizing worldwide trade and supply chains.
These costs are not offset by trade benefits, widening fiscal pressures on the US.
A weaker dollar could help balance trade and reduce reliance on deficit spending.
The US spends massive sums on military bases, alliances, and global security, indirectly subsidizing worldwide trade and supply chains.
These costs are not offset by trade benefits, widening fiscal pressures on the US.
A weaker dollar could help balance trade and reduce reliance on deficit spending.
3. The Balancing Act: Trade-offs & Policy Mechanisms
To manage these conflicting priorities, the US must balance maintaining its dominance as a reserve currency and ensuring domestic economic competitiveness.
A. Partial Dollar Weakening (Managed Depreciation)
Instead of a sudden collapse, policymakers could aim for a gradual, controlled decline in the dollar.
This would involve:
Foreign exchange interventions (e.g., selling dollars to buy foreign currencies).
Tighter capital controls to prevent excessive capital inflows that boost the dollar.
Negotiating currency agreements with major trade partners (e.g., China, Germany).
Instead of a sudden collapse, policymakers could aim for a gradual, controlled decline in the dollar.
This would involve:
Foreign exchange interventions (e.g., selling dollars to buy foreign currencies).
Tighter capital controls to prevent excessive capital inflows that boost the dollar.
Negotiating currency agreements with major trade partners (e.g., China, Germany).
B. Selective Protectionism (Tariffs & Industrial Policy)
Instead of ultimately devaluing the dollar, the US can target specific trade sectors with tariffs to safeguard industries.
For instance, tariffs on steel and high-tech imports compel companies to shift production domestically without impacting the entire currency system.
Additionally, industrial subsidies and incentives for manufacturing can help mitigate the effects of a strong dollar.
Instead of ultimately devaluing the dollar, the US can target specific trade sectors with tariffs to safeguard industries.
For instance, tariffs on steel and high-tech imports compel companies to shift production domestically without impacting the entire currency system.
Additionally, industrial subsidies and incentives for manufacturing can help mitigate the effects of a strong dollar.
C. Burden-Sharing with Allies
The US can demand more financial contributions from allies to reduce military spending abroad.
This would ease fiscal pressures and allow more investment in domestic infrastructure and industrial policy.
Military cost-sharing agreements (e.g., with Japan and NATO) could reduce the US financial burden while preserving security commitments.
The US can demand more financial contributions from allies to reduce military spending abroad.
This would ease fiscal pressures and allow more investment in domestic infrastructure and industrial policy.
Military cost-sharing agreements (e.g., with Japan and NATO) could reduce the US financial burden while preserving security commitments.
D. Fiscal Policy Adjustments
Tax incentives for domestic production (e.g., tax credits for manufacturing and infrastructure spending) could offset currency pressures.
A corporate tax structure that favors domestic investment would help retain jobs and production capacity.
Strategic deficit spending (e.g., investing in R&D, technology, and education) can improve long-term competitiveness.
Tax incentives for domestic production (e.g., tax credits for manufacturing and infrastructure spending) could offset currency pressures.
A corporate tax structure that favors domestic investment would help retain jobs and production capacity.
Strategic deficit spending (e.g., investing in R&D, technology, and education) can improve long-term competitiveness.
E. Coordination with the Federal Reserve
The Federal Reserve’s interest rate policy affects the dollar’s value.
If the US needs a weaker dollar, the Fed could pause rate hikes or inject liquidity through quantitative easing (QE).
However, too much easing could cause inflation, creating another trade-off.
The Federal Reserve’s interest rate policy affects the dollar’s value.
If the US needs a weaker dollar, the Fed could pause rate hikes or inject liquidity through quantitative easing (QE).
However, too much easing could cause inflation, creating another trade-off.
Is There a Middle Ground?
The fundamental contradiction between weakening the dollar for economic competitiveness and maintaining its strength for global financial dominance requires a delicate, multi-pronged strategy.
Gradual dollar depreciation (rather than sudden weakening) could make US exports more competitive without triggering financial panic.
Targeted tariffs and industrial policies could protect critical sectors while stabilizing global trade flows.
Sharing global security costs could reduce the burden on US taxpayers without sacrificing geopolitical influence.
Coordinating monetary and fiscal policy to avoid excessive inflation or economic overheating.
Final Thought:
Without contradictions, the US cannot pursue a firm dollar policy and a manufacturing revival. The solution is fine-tuning policies that balance economic competitiveness, financial stability, and geopolitical influence. The trade-offs cannot be eliminated entirely, but can be managed strategically.
Part II: Matching White House Policies to Miran’s Thesis
Reviewing Miran’s Arguments
Miran’s paper, published as an analytical exercise, argues that the US dollar’s reserve status leads to overvaluation, harming American manufacturing and exacerbating trade deficits due to the Triffin Dilemma. He proposes two main strategies:
- Tariffs: To raise revenue, improve competitiveness, and provide negotiation leverage, with potential noninflationary effects if offset by currency adjustments.
- Currency Adjustments: To weaken the dollar and boost exports, currency adjustments can be multilateral (e.g., a “Mar-a-Lago Accord” for coordinated currency revaluation) or unilateral (e.g., using IEEPA for user fees on foreign UST holdings or ESF/SOMA for reserve accumulation)
Miran emphasizes sequencing—using tariffs first to strengthen the dollar and gain leverage, then pursuing currency adjustments to weaken it while managing market volatility through gradualism and Federal Reserve (Fed) cooperation.
Miran’s paper, published as an analytical exercise, argues that the US dollar’s reserve status leads to overvaluation, harming American manufacturing and exacerbating trade deficits due to the Triffin Dilemma. He proposes two main strategies:
- Tariffs: To raise revenue, improve competitiveness, and provide negotiation leverage, with potential noninflationary effects if offset by currency adjustments.
- Currency Adjustments: To weaken the dollar and boost exports, currency adjustments can be multilateral (e.g., a “Mar-a-Lago Accord” for coordinated currency revaluation) or unilateral (e.g., using IEEPA for user fees on foreign UST holdings or ESF/SOMA for reserve accumulation)
Miran emphasizes sequencing—using tariffs first to strengthen the dollar and gain leverage, then pursuing currency adjustments to weaken it while managing market volatility through gradualism and Federal Reserve (Fed) cooperation.
Trump’s Policies in Context
As of March 2025, Trump’s trade policies have been characterized by aggressive tariff imposition and proposals, alongside expressions of intent for currency adjustments. Starting January 20, 2025, his administration has continued a nationalist and transactional approach to trade, focusing on reducing trade deficits and protecting American workers. Key policies include:
- Tariffs: During his first term, Trump imposed tariffs on China under Section 301 of the Trade Act of 1974 and on steel and aluminum under Section 232 of the Trade Expansion Act of 1962. In 2025, he proposed a 25% tariff on imports from Canada and Mexico if they do not address drug and immigration issues, and a global tariff of at least 10% on all imports (Reuters).
- Trade Deals: Renegotiated NAFTA into the USMCA, aiming to address trade imbalances, which aligns with Miran’s focus on countering non-reciprocal practices.
- Currency Policies: Trump has repeatedly expressed a desire for a weaker dollar. His trade advisers, including Robert Lighthizer, have considered unilateral or negotiated approaches, often using tariffs as leverage (POLITICO). On January 20, 2025, an executive order assigned the Treasury Secretary to recommend measures against currency manipulation (OMFIF).
As of March 2025, Trump’s trade policies have been characterized by aggressive tariff imposition and proposals, alongside expressions of intent for currency adjustments. Starting January 20, 2025, his administration has continued a nationalist and transactional approach to trade, focusing on reducing trade deficits and protecting American workers. Key policies include:
- Tariffs: During his first term, Trump imposed tariffs on China under Section 301 of the Trade Act of 1974 and on steel and aluminum under Section 232 of the Trade Expansion Act of 1962. In 2025, he proposed a 25% tariff on imports from Canada and Mexico if they do not address drug and immigration issues, and a global tariff of at least 10% on all imports (Reuters).
- Trade Deals: Renegotiated NAFTA into the USMCA, aiming to address trade imbalances, which aligns with Miran’s focus on countering non-reciprocal practices.
- Currency Policies: Trump has repeatedly expressed a desire for a weaker dollar. His trade advisers, including Robert Lighthizer, have considered unilateral or negotiated approaches, often using tariffs as leverage (POLITICO). On January 20, 2025, an executive order assigned the Treasury Secretary to recommend measures against currency manipulation (OMFIF).
Analysis of Alignments
Tariffs:
The president’s tariff policies, both implemented and proposed, directly support Miran’s argument for using tariffs to improve competitiveness and raise revenue. For instance, the 2018-2019 tariffs on China, which Miran cites as having minimal inflation impact, align with his view that tariffs can be noninflationary if paired with currency offsets. The proposed global 10% tariff further extends this strategy, aiming to reduce the $1 trillion trade deficit, as noted in recent policy statements (Reuters).
Currency Adjustments:
While the president has not explicitly adopted Miran’s specific tools (e.g., IEEPA user fees or a Mar-a-Lago Accord), his desire for a weaker dollar and consideration of unilateral or negotiated approaches align with Miran’s broader goal. For example, Lighthizer’s discussions about using tariffs to negotiate currency weakening (POLITICO) mirror Miran’s multilateral strategy. The January 2025 executive order assigning the Treasury to counter currency manipulation (OMFIF) further indicates policy direction, though specifics remain unclear as of March 2025.
Sequencing:
The president’s approach of implementing tariffs first, as seen in his first term and continued in the 2025 proposals, followed by discussions on currency weakening, aligns with Miran’s sequencing strategy. This is evident in the timeline: tariffs were a primary tool in 2018-2019, and currency discussions gained traction in 2024-2025, supporting Miran’s view of using tariffs for initial leverage before currency shifts.
Trade Deficits and Leverage:
The president’s focus on trade deficits, as seen in the “Fair and Reciprocal Plan” (White House Fact Sheet), and his use of tariffs to negotiate deals (e.g., Phase 1 with China) align with Miran’s emphasis on addressing non-reciprocal practices and using tariffs for broader negotiations. This includes leveraging tariffs to pressure countries into currency adjustments, a strategy Miran highlights for multilateral accords.
Gaps and Uncertainties
While the alignments are strong, there are gaps. The president’s policies lack the granular tools Miran proposes, such as using the Exchange Stabilization Fund (ESF), which is managed by the US Department of the Treasury, and the System Open Market Account managed by the Federal Reserve Bank of New York ESF/SOMA for reserve accumulation, or century bonds for reserve term-outs. Additionally, the effectiveness of the president’s currency policies remains uncertain, with debates on market volatility and inflation, as noted in analyses (Chatham House). This uncertainty reflects Miran’s caution about managing volatility, suggesting a shared concern but differing levels of specificity.
While the alignments are strong, there are gaps. The president’s policies lack the granular tools Miran proposes, such as using the Exchange Stabilization Fund (ESF), which is managed by the US Department of the Treasury, and the System Open Market Account managed by the Federal Reserve Bank of New York ESF/SOMA for reserve accumulation, or century bonds for reserve term-outs. Additionally, the effectiveness of the president’s currency policies remains uncertain, with debates on market volatility and inflation, as noted in analyses (Chatham House). This uncertainty reflects Miran’s caution about managing volatility, suggesting a shared concern but differing levels of specificity.
Our Thoughts
Our examination suggests that the president’s policies, particularly his tariff actions and proposed currency adjustments, largely sustain Miran’s arguments for restructuring the global trading system. The evidence leans toward alignment in using tariffs for leverage, addressing trade deficits, and considering currency weakening, though specifics on implementation remain less clear. This match highlights a shared focus on US competitiveness and burden sharing, with Trump’s approach providing a practical, if broader, application of Miran’s analytical framework.
Our examination suggests that the president’s policies, particularly his tariff actions and proposed currency adjustments, largely sustain Miran’s arguments for restructuring the global trading system. The evidence leans toward alignment in using tariffs for leverage, addressing trade deficits, and considering currency weakening, though specifics on implementation remain less clear. This match highlights a shared focus on US competitiveness and burden sharing, with Trump’s approach providing a practical, if broader, application of Miran’s analytical framework.
Notes
1. Why Trump’s Tariff Strategy Is Becoming Riskier, According to Economists (WSJ).
2. This supports Miran’s 2018-2019 tariff experience analysis and his theoretical framework (e.g., optimal tariff models and currency offset effects). However, it is not universally applicable. It depends on the extent of currency depreciation, the lack of significant retaliation, and minimal dollar appreciation, which Miran indicates are not guaranteed.
1. Why Trump’s Tariff Strategy Is Becoming Riskier, According to Economists (WSJ).
References
China Explores Limiting Its Own Exports to Mollify Trump
Why Stephen Miran thinks tariffs can work
Final Remarks
A group of friends from “Organizational DNA Labs” (a private group) compiled references and notes from various theses, authors, media, and academics for this article and analysis. We also utilized AI platforms such as Gemini, Storm, Grok, Open-Source ChatGPT, and Grammarly as research assistants to save time and ensure our expressions’ structural and logical coherence. Using these platforms, we aim to verify information from multiple sources and validate it through academic databases and equity firm analysts with whom we have collaborated. The references and notes in this work provide a comprehensive list of our sources. As a researcher and editor, I have taken great care to ensure that all sources are correctly cited and that the authors receive recognition for their contributions. The content is primarily based on our compilation, analysis, and synthesis of these sources. The summaries and inferences reflect our dedication and motivation to expand and share knowledge. While we have drawn from high-quality sources to inform our perspective, the conclusion represents our views and understanding of the topics covered, which evolve through ongoing learning and literature reviews in this business field.
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China Explores Limiting Its Own Exports to Mollify Trump
Why Stephen Miran thinks tariffs can work
Final Remarks
A group of friends from “Organizational DNA Labs” (a private group) compiled references and notes from various theses, authors, media, and academics for this article and analysis. We also utilized AI platforms such as Gemini, Storm, Grok, Open-Source ChatGPT, and Grammarly as research assistants to save time and ensure our expressions’ structural and logical coherence. Using these platforms, we aim to verify information from multiple sources and validate it through academic databases and equity firm analysts with whom we have collaborated. The references and notes in this work provide a comprehensive list of our sources. As a researcher and editor, I have taken great care to ensure that all sources are correctly cited and that the authors receive recognition for their contributions. The content is primarily based on our compilation, analysis, and synthesis of these sources. The summaries and inferences reflect our dedication and motivation to expand and share knowledge. While we have drawn from high-quality sources to inform our perspective, the conclusion represents our views and understanding of the topics covered, which evolve through ongoing learning and literature reviews in this business field.
.jpeg)
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