Opinion
Mint Quick Edit | Eye-rolls over US policy myopia are no surprise
Summary
- Is there a method to the US trade madness? A tax on capital inflows aimed at a weaker dollar, some argue, can join tariffs to get US factories whirring. This hints of a strategy, but where will it lead?
Is there a method to the madness that seems to guide US trade policy under President Donald Trump? An effort to revive American manufacturing behind import tariff walls, some aver, can be followed by a tax on capital inflows.
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The argument is that the US dollar’s external value is kept unnaturally high by demand from trade partners buying Treasury bonds to stuff their forex reserves; a levy on bond purchases (or payments) could act as a disincentive.
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This move to weaken the dollar, aimed at making US exports more competitive, may be backed by a sovereign wealth fund that buys foreign assets to balance capital inflows with outflows. Also, by a “Mar-a-Lago Accord" that gets other nations not to depress their own currencies.
The dollar’s status as the world’s invoice currency will presumably be upheld by global fear of US ire evoked by disloyalty. This is neither sustainable, nor the plan’s only flaw.
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It reflects an urge to turn back the clock on trade integration and opt for a relatively closed economy, if not autarky, under an interventionist state. Those who have seen where such myopic policies lead have a valid reason to palm their foreheads and roll up their eyes.
