As I posted elsewhere (here and here) and before: Reducing the investibility of the US diminishes financial inflows domestically. Meanwhile, massive debt issuance in the EU—targeted at funding external security, climate action, and infrastructure—is building more liquid debt markets. Declining commodity prices could further lead to more debt issuance in other emerging market economies. This increase in supply of debt assets will mostly be short term securities which will need to be regularly rolled over. This creates alternative investible assets amid a global savings glut.
As these expanded and new asset classes absorb capital, the process may imply that other nations are effectively “socializing” their currencies and debt. The outcome is a more diversified global currency system with less dominance by the US dollar. Yet, the US is trying to counter this trend by leveraging stablecoins, exerting indirect control over payment systems, and deploying digital ID issuers—essentially attempting to “have its cake and eat it too.”
This strategy raises deep concerns about sovereignty. The reliance on private entities with limited liability in opaque legal jurisdictions challenges traditional notions of state control and has, in practice, been weaponized by adversaries.
If there is any coherent strategy behind what might seem like non-strategy (as suggested by Trump’s policies), it could be aimed at weakening the dollar’s role as a safe asset. Historically, crises tend to drive the dollar’s value up. However, deliberate policy uncertainty might reverse that trend—albeit at a high cost. A drop in the value of US-listed firms could dampen consumer spending through the wealth effect. While such a rebalancing might eventually benefit the economy, it would likely come with significant short-term costs.
Or put differently: the US under Trump may be Putin and Xi’s best ally. It may help get out of the present trap arising from exorbitant privilege, but I would like to think there are better ways of achieving this.
NBC News had a small quote that was taken from a larger comment:
“The tariffs may be effective in achieving one thing: making the US less investable, eroding its soft power, and reducing financial flows into the US. This will lead to a devaluation of the dollar that will just increase the economic pain for US consumers.”
“I have one hope that the structural fissures this escalation may bring could give rise to a global discussion on a reset around the governance framework for trade in services in addition to trade in goods. But this is optimistic as the US is actively trying to divide and rule, when its adversaries aim to create coalitions in particular with countries in the global south.”
“The US was underway to re-industrialise and onshore thanks to the previous administration, Trump’s policies are likely to put an end to this budding renaissance.”