The administration's core economic philosophy is a fundamental break from decades of U.S. policy, moving from a neoliberal focus on free trade and global integration to a mercantilist one. This new approach views the global economy as a zero-sum game, prioritizing national power, trade surpluses, and domestic industry over all else.
The administration is openly discussing the possibility of enduring economic 'pain' or even a recession to achieve its objectives. This is framed as a necessary 'detox' from debt, cheap imports, and financialization to rebuild a stronger, more self-sufficient industrial base.
A proposed plan aims to orchestrate a multilateral devaluation of the U.S. dollar to make American manufacturing more competitive. The U.S. would use leverage, such as tariff relief and security guarantees, to compel countries like Japan and Germany to participate, while simultaneously trying to maintain the dollar's global reserve status.
The administration's primary tactics involve using all instruments of national power—tariffs, financial sanctions, and even defense guarantees—as leverage in economic negotiations. This approach is unpredictable and confrontational, aiming to keep adversaries and allies off-balance to extract concessions.
The U.S. and China are expanding their conflict from trade and technology into the financial realm, beginning a 'capital war.' In response to U.S. unpredictability and the weaponization of the dollar, foreign fund managers and central banks are actively seeking to diversify away from U.S. Treasuries.
Keep pulling the thread on Gillian Tett.