Hot topic these days: tariffs announced by the Trump Administration on imports to US.1 And a series of proposals from the so-called ‘Mar-o-Lago’ initiative foreshadowing USD dollar depreciation and US debt restructuring2 to executive orders and legislative proposals on private digital currencies (stablecoins). Are the two related?
Trade and currency related through the international payments system, which is yet centered around the USD dollar and implies an US exorbitant privilege. That privilege might have empowered US actors to be the worldwide creditors of the rest of the world… But they chose (or ended up) becoming the largest global debtors…3
Would that privilege last in a fragmented and multipolar world?
BRICS Clear Platform and the US Dollar Relic
Issuing the reserve currency of denomination and the international mean of payments provides an ‘exorbitant’ privilege, especially under the international fiat money regime in place since the disbandment of the Bretton Woods Agreement in 1971.
In November 2024, Stephen Miran - now elected to chair the Trump Administration Council of Economic Advisers, argued for tariffs on imports to US in a policy paper titled “A User’s Guide to Restructuring the Global Trading System”.
Back in the eighties, after the international monetary system based upon the USD-Exchange Standard was unilaterally disbanded by the US, two episodes occurred which were quite relevant then and are today.
The first one was the Voluntary Export Restraints (1981):
“In the early 1980s, facing competition from Japanese automakers, the U.S. negotiated voluntary export restraints (VERs) with Japan, limiting the number of cars Japan could export to the U.S. While this protected domestic manufacturers temporarily, it led Japanese companies to establish production facilities in the U.S., mitigating the intended protective effects.”4
The second one was the Plaza Accord (1985). According to professor Jeffrey Frankel:
“[The Plaza Accord] was probably the most dramatic policy initiative in the dollar foreign exchange market since Richard Nixon originally floated the currency in 1973. At the Plaza Hotel in New York on September 22, 1985, US officials and their counterparts among the Group of Five largest industrialized countries [France, West Germany soon reunified, Japan, and the United Kingdom] agreed to act to bring down the value of the dollar. Public statements from the officials were backed up by foreign exchange intervention, selling dollars in exchange for other currencies in the foreign exchange market.”5
Some argue that this Accord, and its combination with tariffs on imports to US, was at the origin of the Japan’s lost decades.6
Would a new combination of inter/national currency management and tariffs - as foreshadowed by Stephen Miran in his policy paper - help the US leveraging upon China and the other international creditors and exporters?7
As usual for the devil, policy and the law, virtually all that matters will depend on details. US trade deficit does certainly depend on the USD currency relative value which depends, in turn, on benchmark interest rates across countries. It does also depend on domestic production (and competitiveness) relative to foreign production. But it does further depend on production located abroad by US multinational companies. According to Yuqing Xing of the National Graduate Institute for Policy Studies in Tokyo:
“Many North-American multinational companies (MNCs) have turned into factory-less. […] If the value added of Apple intellectual property and services sold to foreign consumers were counted as part of US exports, total US exports in 2015 would increase by 3.4%, and its trade deficit would decrease by 7.0%.”8
Would those North-American multinational companies relocate production to US? Would foreign companies move to produce in US? Would this help managing US deficit and debt outstanding? May stablecoins help this management and relocation?
This might be the ultimate bet fostering inter/national currency and trade maneuvering: renew the USD dollar privilege - once again after the eighties - through stablecoins while fostering US production and competitiveness, including through tariffs.
To be sure, countries do not and cannot pay. For sake of simplicity, we relinquish to the widespread and quite misleading personification of countries, whose nickname stands for a posse of varied entities located under that jurisdiction.
https://automotiveamerican.com/2025/03/28/a-brief-look-at-the-history-of-us-automotive-tariffs/