The last few weeks have been a whiplash, with US President Donald Trump unveiling a set of tariffs on every country in the world, then quickly reversing for a “pause”—in practice, the rollout of 10% tariffs—except for on China, on which Trump has imposed a tariff of 145%. Amid all the chaos, Trump has begun to outline the new order of the post-neoliberal world. The rules of the game have changed. It is difficult to even imagine what the consequences of this change may be.
In the months since Trump’s inauguration, it has become clear that all that Trump has done this term, he has done so in a more decisive and a more effective way relative to his first term. The debate is whether he is enacting a well-considered plan, or whether he is accomplishing short-term goals, whims, and fancies.
What is identifiable as an economic plan is a document written by the chair of the Council of Economic Advisors, Stephen Miran, which was published last November under the title “A User’s Guide to Restructuring the Global Trading System.” The theory presented was unofficially referred to as “the Mar-a-Lago Accord,” recalling the Plaza Accord which reshaped the global monetary system.
Simply put, the idea that stands as the base of the document is that the US today is the strongest nation, but is also the biggest loser in the current order. The basic reason for this is that the dollar is simply too strong. The high exchange rate of the dollar relative to other currencies means that production in the US is not worth it — to pay wages in dollars will always be more expensive than to pay the same amount in Chinese yuan, Indian rupees, Mexican pesos, or even Euros.
Thus, production has gradually migrated to other countries, and the US’s share of the global economy has shrunk. According to the document, this situation benefits a small portion of the wealthy American public, but harms more, especially in that it makes the American economy less competitive.
Theoretically, the weakening American export is supposed to weaken the dollar, but according to Miran, this is not the case in the US for a simple reason: everyone wants dollars. They do not want dollars because they necessarily want to buy goods from the US, rather they want dollars because it is the global reserve currency. A country that wishes to save does so in dollars. It is always possible to use dollars—even in transactions that are not at all connected to the US. The high demand for the dollar has become a burden for Americans.
One option in such a situation is to act such that the dollar will cease to be the global reserve currency, though Trump is very much not interested in that possibility. In fact, he even threatened the BRICS countries which had looked into the possibility of switching to a different reserve currency. Replacing the dollar means significantly weakening the power of the US, which today can operate without budgetary constraints and serve as the central investment pipeline for investments worldwide—since the reserves must be put somewhere.
What Miran proposes is a policy of tariffs which would advantage American manufacturing, and would “fix” the issue of the strong dollar. The US trade deficit (the ratio of exports to imports) would shrink, and the tariffs would bring in money that would shrink the national debt of the US.
Miran proposes to complete the process through measures related to national security. The US today is the main (and nearly the only) sponsor of defense around the world: the US makes up for 37% of world defense expenditure, and maintains aircraft carriers and military bases around the entire world. There is a deep connection between the military and the economic dominance of the US. The weakening of the dollar will also cause partner countries to shoulder more of the burden of defense spending.
Understanding this allows us to understand Trump’s demand that other NATO countries increase their defense budgets, and what seems like an expectation for each regional power to be responsible for the defense of its own region—with the US at the forefront. In addition to this is the idea for the US to force negotiations on its debt, another way to achieve the weakening of the dollar.
In reality, as Miran himself admits, this is a complicated plan, with a very narrow pathway to success. The implementation of tariffs meant certain inflation while at the same time, there would still be uncertainty that it would actually weaken the dollar rather than strengthening it, and uncertainty that it would cause an increase in manufacturing within the US. Moreover, nobody wants Americans to go back to sewing t-shirts in place of workers in Bangladesh. Miran claims that the stronger American industries will choose to return their manufacturing to the US, but there is no way to be sure. Additionally, the unilateral implementation of these steps increases the chances of the US becoming isolated, losing its power, or simply creating a less stable and worse economy.
The application of the plan also raises certain questions: what is the purpose of a tariff on aluminum, an action that will make the import of a basic material for industry more expensive? Does Trump expect that aluminum sellers will move manufacturing to the US? Relying on executive orders that can change at a moment's notice also makes it difficult to carry out the long-term planning needed to lead policy change—certainly when it comes to agriculture, which requires long-term planning spanning years.
In any case, Trump is undermining a number of truths of the neoliberal era, in such a way that could potentially lead to their end:
- • Instead of a free and open global market—tariffs and burdens on global trade
- • Instead of policy that provides conditions for the private sector to thrive—a government that intervenes and attempt to direct the private sector
- • Instead of Pax Americana and the absence of national economic tensions—competition between states over production and growth
- • Instead of a currency market determined by supply and demand—policies that manipulate currency exchange rates
The neoliberal era—which began in the 1970s and 1980s, and which is perhaps ending now—tends to be seen as a project of the right-wing. Even if there is truth to that on the ideological level, on the party-political level, it is not. These changes progressed by the hands of both the right-wing and left-wing parties simultaneously, and they both presented their own versions within the boundaries of consensus.
At the end of the day, the moves that Trump is leading presents the right-wing version of the end of neoliberalism: not a country of development, initiative, and progress, but a country that obtains the best conditions for its private sector. It is not a free market, but neither is it a welfare state.
For the immediate future, there is no certainty that these measures will cause private companies to open factories in the US, instead of causing them to try to bypass the tax and tariff policies or to find other, creative solutions. There is also no way to control whether the jobs that may come to the United States will be good, or whether the wealth produced by them will make its way into the general public.
When looking at the longer term, a true national advantage requires well developed infrastructure, education, and welfare systems. In order for the Americans to lead the world, they need to be smart, strong, healthy, and to have a real chance at success in life without fear. Trump, through his friend Elon Musk, is meticulously dismantling all the systems that would ensure this working.
This article was translated from Hebrew by Tzivia Gross.
