United States President Donald Trump’s second term in office has launched with a whirlwind of changes to the status quo in Washington, DC, and to US relations with the world.

The rapid pace of departures from the norm – from targeting Canada, the US’s most steadfast ally, with larger tariffs than China, and floating the US occupation of Gaza, to the threat to annex Greenland and the decision to reach out to Russian President Vladimir Putin to try to end the war in Ukraine – is overwhelming, and intentionally so.

Trump’s tariffs may not be the most shocking foreign policy overture of his second administration, but they may well end up being the most consequential in the long run.

Like all his headline-generating foreign policy moves, his plan for tariffs is also part of his overreaching game plan to reshape the US economy. He says he will be imposing tariffs on Europe, China and everyone else that trades with the US to bring manufacturing back home, and “Make America Great Again”.

But in this instance, Trump’s boldness is unlikely to bring him closer to his long-term goals due to the inadvertent impact these tariffs will eventually have on the US dollar.

Manufacturing costs in the US are far higher than they are even in Europe, let alone Asia, and thus the immediate effect of his tariffs and threats of tariffs would inevitably be to raise inflation expectations as well as begin a new cycle of US dollar strength versus other leading currencies. While it may seem that a stronger dollar would weaken inflation, tariffs and the threat thereof add additional costs to trade, which minimise this potential benefit. Additionally, the US Federal Reserve has paused its rate-cutting cycle even as other top central banks, such as the Bank of England and the European Central Bank, push ahead with their cuts, as their fears of renewed inflation have been supplanted by the need to stimulate growth in the face of trade threats.

The structure of the international monetary system in which the US dollar already dominates,........

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