Chaotic as it seems, Donald Trump’s tariff war and subsequent walk-backs are a deadly serious attempt by his team to address what they perceive as the core issues of the dollar-dominated global monetary system. The key Trump advisers (trade guru Peter Navarro, Treasury Secretary Scott Bessent and Council of Economic Advisers Chairman Stephen Miran) share visceral anger and angst in their speeches or writings. America is victimized by the current system because she has to run large current fiscal and trade deficits from the strengthening dollar, created by allies refusing to pay for America’s military protection, whilst trading rivals devalue or cheat to gain market share, weakening America’s once mighty manufacturing prowess.

Essentially, the Trump Administration wants to reset the whole dollar-dominated monetary and trading order. Miran’s November 2024 User Guide to the Global Trading System, which some label as the “Mar a Lago Accord”, is a global shakedown from Pax Americana to Tax Americana – users and holders of US dollars, especially allies will have to pay for protection and use of the dollar infrastructure in either user fees, tax or swaps into securities of longer duration. The key weapons are higher tariffs, sanctions or income or wealth taxes, at the extreme swaps for longer-term securities, freezing or possible seizure of their dollar holdings.

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This takes us back to a brutal history lesson in imperial finance. The Roman empire funded itself basically by confiscating enemy or vassal assets or extinguished debt through seizure, military conquests or shakedowns. The British empire civilized this model to a rule of law “borrowing”, offering perpetual Consol bonds to colonies and anyone seeking liquidity and store of value haven........

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