Trump’s tariff war is a prelude to a global agreement on dollar devaluation

According to the United States, the dollar is overvalued because exporting countries buy dollars and thus systematically and consistently devalue their own currencies against the dollar, building up foreign exchange reserves.

By Maurizio Novelli, manager of the Lemanik Global Strategy fund

A question we should ask ourselves, but that no one dares to ask, is why a strong and prosperous economy needs to open a trade war with the rest of the world. We can find the explanation in the document published by the head of the economic advisers of the Trump administration, Stephen Miran, which explains in detail the points of the US government’s agenda. By reading this document, one can offer a logical explanation for everything that is happening, as well as why it is happening.

In reality, this document sets out in detail a "global rescue plan" for an economy now at risk of collapse. Stephen Miran and Zaltan Poszar (former head of the Fed’s trading desk and Senior Advisor to the Treasury) are the two most influential economic advisers to the Trump government. Published in November 2024, immediately after the election result, the document was completely and probably deliberately "censored" by mainstream research, so most portfolio managers who "drink in" macro research from the leading investment banks are not informed about what could happen. It is nevertheless certain that the chancelleries of the main international governments were shocked when they read what the United States wants to do over the next four years.

The full document, titled "A user's guide to restructuring the global trading system", by Stephen Miran, can be found on the website of Hudson Bay Capital, an independent US research firm, and now shows that if you really want to know what is happening in the economy, you can no longer rely on the mainstream narrative, which tends to tell you only what you are allowed to know. The main points on which the "securing" of the American economy, at risk of bankruptcy as Elon Musk says, is based are:
1) Dollar devaluation
2) Total control of the Supply Chain in strategic sectors such as defence, technology and pharma.
3) Control of interest rates on US debt and its financing through Century Bonds.
4) Reduction in energy prices (Oil & Gas)
5) Tariffs and sanctions used as a coercive system to force third countries to accept the plan.

The current US view is that the reserve currency (dollar) is an overvalued asset, since all exporting countries buy dollars to build foreign exchange reserves and therefore steadily and systematically devalue their currencies against the dollar. There are therefore two ways to break this mechanism:
a) reach a global agreement on dollar devaluation,
b) impose tariffs unilaterally.
The American government believes that, since it is difficult for China and Europe to accept a revaluation of their currencies, it is preferable to act unilaterally. Tariffs and control of the yield curve are a signal

that the path has been taken, but the goal is to reach an agreement on dollar devaluation, because America is seeing a loss of manufacturing jobs due to globalisation, and the analysis shows that this impact has occurred in places where there are no alternatives to the jobs lost. It is therefore necessary to intervene to bring manufacturing activity home in Technology and Pharma and in all the components used by the defence sector. Deglobalisation in some key sectors has begun.

Another point of view, debatable but important, is that the United States provides the world with a reserve currency but, at present, gains only disadvantages from it. Since America provides a global military defence umbrella to allied countries, those countries use that service for free and also take advantage of an overvalued dollar (Trump’s recent statements toward Europe should be interpreted in light of this view). Since "the use of defense umbrella" is a global public good ("is a public good"), it must be financed at low rates and with long-term debt (Century Bonds). America is therefore asking to unload part of the costs it bears in two ways:
a) a contribution to defence spending by allies,
b) financing the costs through the subscription of 100-year dollar bonds at low rates.

Such bonds would be issued only to the central banks of allied countries and could not be sold. The Fed would be willing to open swap lines to carry out repos in the event of liquidity needs. The United States is therefore asking for a low-rate, long-dated financing plan to exit the debt crisis and avoid a global crisis. Reducing energy prices to contain inflation requires international cooperation. It is therefore likely that the current U-turn on Ukraine and alignment with Russia are intended to bring Russia back into the Western sphere in order to return Russian oil to Western markets and push prices down. Europe does not yet seem to have understood that the US shift toward Russia is part of a plan concerning energy prices, which are part of Trump’s economic programme.

The United States, ultimately, is trying to build a defence line around the reserve currency. It is, in effect, asking for control over the rates it must pay international creditors, asking central banks that hold dollar reserves to finance it with Century Bonds, and asking to devalue the dollar. This is to save Bretton Wood and the Dollar Standard and to save the US and global economy from a debt crisis. It is likely that it will not be easy to accept these conditions and that the conflict may intensify in the coming months, but it is necessary to assess whether, in exchange, it is better to let financial markets decide how to restructure the system or whether perhaps it is better to accept reality and try to save the US and world economy from a crisis worse than 1929.