How to make sense of Donald Trump’s tariffs - Gillian Tett
Economic lunacy that it might seem better explained by psychologists than economists?
However, Albert Hirschman, author of a striking book published in 1945, National Power and the Structure of Foreign Trade.
Neoliberal thinkers often see politics as a derivative of economics.
A trio of American economists — Christopher Clayton, Matteo Maggiori and Jesse Schreger — released a paper outlining the growing field of “geoeconomics”, inspired by Hirschman.
https://globalcapitalallocation.s3.us-east-2.amazonaws.com/NBER_MacroAnnual_Geoeconomics.pdf
This year’s American Finance Association meeting, for instance, featured a novel session on geoeconomics, where Maurice Obstfeld, former chief economist of the IMF (and fan of Hirschman), delivered a forceful speech.
https://www.youtube.com/watch?v=gYpVaLdzI6g
Gillian Tett Financial Times 4 April 2025
https://www.ft.com/content/3436cd20-f09f-46dd-9e94-ba10b86de83f
Mr. Trump is likely to interpret greenback slide as good news.
He has long believed the dollar is overvalued in a way that hurts American exporters, and alleged “currency manipulation” by other countries was one of the benchmarks he says he applied when setting Wednesday’s reciprocal tariff rates.
That may mark the end of his intuition on the matter, but economists in his orbit put a finer theoretical point on it
To some of these advisers, a falling dollar will be a sign that the protectionist plan is working to rebalance global trade and capital flows.
But not to all of them.
Under another theory, an across-the-board tariff should cause an appreciation of the dollar by narrowing the U.S. trade deficit. That is the view of Stephen Miran, now the chairman of Mr. Trump’s Council of Economic Advisers, in a widely circulated paper last autumn.
Under this theory, dollar appreciation is a crucial tool to prevent tariffs from setting off domestic inflation in the U.S.
Mr. Trump won’t believe it, but a dollar resurgence is the best thing that could happen to him now.
Wall Street Journal wsitorial 3 April 2025
If one is to understand this more sophisticated approach, one should read Miran’s “A User’s Guide to Restructuring the Global Trading System”, published in November 2024.
Underpinning Miran’s argument is a proposition made by the Belgian economist Robert Triffin in the early 1960s.
Triffin argued that the growing demand for dollars as a reserve asset could only be supplied by persistent US current account deficits.
This in turn meant that the dollar was persistently overvalued relative to the requirements of equilibrium in the balance of payments.
Martin Wolf Financial Times 18 March 2025
https://englundmacro.blogspot.com/2025/04/handelskriget-klas-eklund-forstar.html
IMF: Higher-than-desirable current account balances prevail in countries such as Germany and Sweden — as well as in China
Maurice Obstfeld IMF 24 July 2018
https://englundmacro.blogspot.com/2018/07/imf-higher-than-desirable-current.html
Germany’s current account surplus – 8.5pc of GDP, and the world’s largest in absolute terms at almost $350bn
https://englundmacro.blogspot.com/2018/01/germanys-current-account-surplus-85pc.html
https://englundmacro.blogspot.com/2025/04/handelsunderskott-ar-en-noja-hos-donald.html
Donald Trump har tryckt på atombombsknappen i handelskriget.
Carl Johan von Seth DN
Tillbaka till Rolfs länktips 4 april 2025
https://englundmacro.blogspot.com/2025/04/rolfs-lanktips-4-april-2025-trump.html
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