US: Trump’s true objectives

The commotion caused by Trump’s unpredictable moves should not be misleading. In reality, this is a plan that was meticulously prepared before the start of his second term.

Understanding the fundamental ideas guiding this administration’s decisions can help anticipate its evolution.

The philosophy underlying the Trump administration’s economic and trade policy decisions can be reconstructed from some statements by Bessent, the new Treasury Secretary, and Stephen Miran, Trump’s chief economic advisor.

The central idea is that the United States is assuming costs that should be borne by other countries.

Specifically, these costs relate to:

1. Defense: Within the framework of NATO, the United States also pays for other countries that allocate a much smaller percentage of their GDP to defense.
2. Dollar: The United States provides the world with the global reserve currency. The high demand for dollars generates a structural overvaluation of the currency, which penalizes domestic industry in terms of competitiveness in international markets.
3. Support for global consumption: The American consumer has, over time, assumed the role of consumer of last resort for all goods produced globally.

Given this role played by the United States, other economies, especially Europe and China, can afford not to stimulate their domestic demand as much as they could; they finance themselves at low interest rates and have undervalued currencies, allowing them to live off exports.

According to the new Trump administration, the time has come for other countries to also bear some of these costs.

This goal can be achieved in several ways:

• Encouraging a depreciation of the dollar and an appreciation of other currencies.
• Inducing other countries to stimulate their economies to reduce the US trade deficit.
• Forcing allied countries to purchase perpetual US Treasuries if they want to continue enjoying US protection.
• Imposing tariffs on US imports.

There has been much talk of a supposed Mar-a-Lago Accord that could include many of these points.

In reality, a formal agreement along these lines will likely never see the light of day, but it is clear that these ideas are already at the heart of the negotiations.

It is worth noting how decisions regarding European defense and fiscal stimulus in Germany, presented as autonomous decisions of their governments, are claimed by the Trump administration as its own negotiating victory. These measures are in line with the administration’s desired cost-sharing and weakening of the dollar. They have very likely been discussed with the United States. Looking ahead, we should expect trade negotiations and defense discussions to become increasingly intertwined, with the US administration always looking for a “deal,” as Trump calls it, inspired by the ideas mentioned above.