What still baffles me is how people act like this was some kind of thoughtful decision.

When you put someone incompetent in charge of a country, a company, or a sports team, collapse is inevitable, no exceptions. We’ve seen it play out over and over again because of stupid choices only driven by ego.

Now it’s the US’s turn

> This is Russia's and China's liberation day

With the tariffs in Asia (Vietnam: 46%, Thailand: 36%, Cambodia: 49%) it feels like a good opportunity for China to increase their trade/influence in the region as well.

To add to the comment: If you want to be the capital of an empire, you have to act like it—like Troy, Rome, or Constantinople—meaning you run deficits and play buyer of last resort. When you are no longer that, the empire has indeed collapsed.

Relate: https://www.washingtonpost.com/archive/opinions/1998/08/18/t...

> The golden prize for America's enemies is to remove the US dollar as a global reserve currency.

I think it is misleading to speak in terms of enemies even if that plays to the fears of US isolationists. It is good rhetoric but I think it obscures the truth, There was a time when the stability and strength of the US made the dollar a good choice for friends and enemies alike. The world is changing and the current US administration is accelerating some of those changes. China is going to play an increasing role as the US turns inward but I doubt they will ever replace the US dollar as a reserve currency. The Euro is the second most held currency after the dollar and there are probably a few others ahead of China.

"The golden prize for America's enemies is to remove the US dollar as a global reserve currency."

I would argue that for this to become even remotely possible, America's list of enemies must not automatically become everyone else's enemies too.

that is to say: the USA's secondary statutes have to become ineffective.

To do this, the EU's blocking statutes (to ignore secondary sanctions) have to be effective. Right now Europe's own companies just ignore the statutes to keep their US trade.

To make the blocking statues effective, the EU's own research recommended fines/sanctions/bans/… on licences for foreign (read US) banks, and companies that ignore the statue and don't serve EU companies trading with sanctioned countries.

But to do that, the EU would need alternatives to American services.

Power and influence follow sovereignty.

€0,02

> Since trade is conducted largely in USD, that means other governments must purchase USD to trade.

This is just one facet of a broader point. When people talk about a "trade deficit" what they are really talking about is what's known in Economics as a "Current Account deficit". When discussing international trade and Balance of Payments, there are two accounts - Current Account (goods and services flow) and Capital Account (asset and liability flow). By definition, the two must net to zero. That's not an equation, it's an identity. If you have a Current Account deficit then you have an equivalent Capital Account surplus. It works in both directions. For example, foreign direct investment into another country in the form of a loan leads to a flow of funds into the country (Capital Account surplus) and then those funds are used to buy things (import) from the first country or other countries, leading to a Current Account deficit.

I wonder which nations are truly "antifragile" to similar takeovers?

The U.S. seems especially vulnerable with its limiting two-party bias, among other factors.

I'd argue that the level of education of the general populace in (still) functioning democratic countries might be the prime mitigation factor.

Based on this, if I were placing bets on prediction markets, I'd wager that e.g. Finland would be among the last to succumb.

To be fair this strategy will work if other countries cannot tolerate tariffs for long enough to come up with non-USD trade that is accepted by everyone. Which to be fair may take them a very long time.

If they fold and remove tariffs on the US (so the US can drop the tariffs on them) before coming to an agreement because the economical pressure of tariffs is too high, then this will result in the largest market expansion the United States has ever seen.

My point is: yes lots of negatives can happen, but let’s also look at what happens if it works out so we are intellectually honest about what’s going on here.

So much for making America great again. It looks like they're doing the exact opposite.

Yes, but it's even worse than you think.

As these countries move away from the dollar, there becomes a glut of US dollars in the world, triggering inflation like we have never seen before. Ignoring the barriers to trade that the tariffs represent and what that will do with our productivity. Ignoring the additional cost of an uncertain market future (because all decisions are made from the gut and could change tomorrow). The massive stagflationary impact of foreign countries unloading the 75% of US dollars they hold would effectively kill them US economy. The tariffs wouldn't even matter because you effectively couldn't give US dollars away -- they'd be worthless internationally. No one that is not rich could afford to import anything.

> Our debts would suddenly become existential because inflating our currency to pay for them could result in functionally not being able to import goods required to run our economy.

Can you elaborate on this? Every other country does not have the luxury of having its currency be the reserve currency but still manages to both inflate that currency when needed and import good just fine.

> Foreign countries buy US dollars so they can trade with other people

Who are those other people and why do they want to be paid in USD so badly instead of their own currency in which they presumably pay their employees and taxes? I never understood that.

God damn you nailed it. All the stupid wars for nothing. Rarely do I see anyone talk about these shenanigans as the mechanism to end the reserve status of the $ and the end for influence and affluence. It will breed a lot of resentment from some Americans thinking the world is against them. They could be used for war.

One thing I don’t understand here, genuine question: If, hypothetically, US manufacturing was to become so competitive that the trade deficit would go away, would that have the same disastrous effects for the US dollar as a trade/reserve currency? Or how would that work?

It's typical Empire Hubris: thinking you can get away with anything because you are special.

Trump doesn't really know what he's doing. He surrounded himself with yes-men that know perfectly not to contradict him.

The global Dollar order was built to American advantage. Trump is dismantling it for no reason. If the dollar order crumbles, the US will discover it has much lower productivity.

There is no American exceptionalism: it's just Dollar exceptionalism. No Dollar, no exceptionalism.

"because inflating our currency to pay for them could result in functionally not being able to import goods required to run our economy."

You can't inflate your currency to payoff a debt that's due in in a different currency. As soon as you inflate your currency, the exchange rate changes.

This comment is good, yet it also reflects a lot of what I dislike about political discourse online.

You've identified a potential severe negative consequence of a change or new policy, but you write as if this is a guaranteed logical corollary and there is no scenario where this consequence does not materialize. This creates an alarmist rather than genuine and analytical tone.

Describing tariffs as a "decapitation strike" feels hyperbolic and even perhaps conspiratorial. Saying this guarantees Chinese hegemony is exaggerated and ignores all the other equally (if not more) significant factors influencing both American and Chinese trajectories. Applying Dalio's broad thesis to tariffs specifically is a stretch -- tariffs may exacerbate tensions Dalio describes, but they aren't necessarily the coup de grace to hegemony.

Basically, you're highlighting real risks and issues, but packaging them in language that overstates their likelihood and doesn't take into account any other factors at play simultaneously. If your goal is to paint a doomsday picture of the future, this works well. If your goal is to understand the impact of tariffs on the world, there's too much emotion and speculation and not enough hard analytical work here.

They don't need to hold USD long term to complete transactions. Transaction demand does not explain why the dollar is the global reserve currency.

I’m past the point of thinking people are just being crazy or paranoid. Any baffling move this administration makes, I just ask myself: what would Russia want?

And without fail, it explains the unexplainable. This move is a prime example. This doesn’t help the billionaires in America, it doesn’t help ANYONE in America, but is sure is a massive bailout to a Russian economy that was on the verge of collapse.

Major question is then, what currency should be reserve?

Euro? - Nowhere near as stable as the dollar, and some quite shaky fundamentals and history? Yen? Pound? Swiss Franc?

I suspect Yuan will be unpalatable.

I agree tariffs are harmful and counterproductive, even if they're applied by the other side. My only hope is that this is part of some grand bargain where other countries reduce theirs on US goods and things reach a more balanced equilibrium.

It is interesting to note that none of this panic applied when US trading partners imposed tariffs on US.

But if this is part of a larger shift in terms of funding the government, I would be somewhat open minded. For instance, if instead of taxing income, we had tariffs that play a role of basically a sales tax, I think that has some benefits. For one, I think tax policy should encourage productive work (income) as opposed to consumption (sales). So a shift from income to consumption taxes would be a positive development. You can make adjustments so that its progressive (i.e. tax credits to cover the first N dollars in consumption tax). The big problem is the geo-political effect less trade might have and the effect on the markets.

Time to learn Mandarin

The only other currency that comes to mind for global trade is the Euro but even that seems impossible?

> It is the definitive end to it, and the birth of Chinese hegemony.

I think you’re spot on about the risks of the tariffs (I’m not really sure where I stand on them today), but your arguments don’t produce this conclusion. China is far more protective of its markets, nobody has or will have any interest in trading in any Chinese currency, and tariffs from not just the US but other nations will continue to exacerbate existing problems at home for China.

Companies like Temu came into existence because global pullback on purchasing Chinese manufactured goods is resulting in job losses, and instead of having factories go under the Chinese government would prefer to sell products that very quickly fall apart or are built extremely cheaply or with very poor environmental practices to at least get some money.

Further, while these tariffs seem questionable and everyone is piling on Trump (which is deserved, with prejudice, in my mind), let’s not pretend that the EU, Japan, and others are saints here. They do enact trade barriers to protect their own domestic industries as well. On the tech side for example there’s simply no argument that the EU is fining US tech companies just because they happened to enact policies and rules that the US companies break all the time. Some portion of that is a shakedown or a form of a trade restriction.

This is a decapitation strike (Timothy Snyder: Decapitation Strike -- https://archive.is/1xkxK) on America by our enemies.

This was done by Trump, nobody else.

> Since trade is conducted largely in USD, that means other governments must purchase USD to trade.

But then they sell it back. What you’re describing is not a trade deficit. To produce trade deficits they need to actually trade with the US. Buying forex does not do that.

> If trade stops occurring in US Dollar, which is a consequence of the stated goal of our current ruling regime, that would be the coup de grace on this country's hegemony. It is the definitive end to it, and the birth of Chinese hegemony.

Nobody will use Chinese currency because it doesn’t float and it’s subject to tight capital controls. Nobody in their right mind would switch to that from outside of China.

You can argue that China could become a hegemony anyway, but that is because everyone wants to trade with them, not because they want to use their currency in 3rd party transactions.

Is not the US export higher if they take into account all the Software and software as service they sell?

Does it follow that Yuan would replace USD? Could it be the EUR instead?

A big, resounding AMEN.

> This is a decapitation strike (Timothy Snyder: Decapitation Strike -- https://archive.is/1xkxK) on America by our enemies

Decapitation Strike seems to be not a general principle that is applying here, but the title of a specific polemic against the Trump administration. Just mentioning for clarity, as it sounded like a general thing warned about in past times that's applicable here.

It makes sense why Trump's family is investing opportunity into crypto like "American Bitcoin" -- they want to separate themselves from the dollar.

I said before that Trump would be the Gorbachev of the USA, if he knows it or not. He is dismantling the system under the disguise of reforming it.

> The golden prize for America's enemies is to remove the US dollar as a global reserve currency.

There you go... "Deutsche Bank says risk of a dollar confidence crisis" - https://www.reuters.com/markets/currencies/deutsche-bank-say...

When the history is written I think the Citizens United decision might be pegged as the end of the American republic. It allowed endless amounts of dark money including foreign money to pour into US elections.

In any case, I think we're seeing the beginning of the Chinese century.

I quite like the idea of our debts becoming real. Then we can’t live in the dishonest fantasy where we just print money and ignore debt anymore.

I believe that's Trump's plan. According to the Triffin Dilemma, the source of US budgetary deficits are due to the USD being the world's reserve currency. Once that's not the case, trade should rebalance to a healthy surplus.

> This is a decapitation strike [...] on America by our enemies.

From within. Make no mistake: whatever influence has been or is behind, this is entirely driven by USA citizens.

> This is a decapitation strike on America by our enemies.

> if foreign governments spend money, they can elect their preferred candidates.

> We institute regime change in other counties, and I see no reason to believe we are immune.

Do we really need such conspiracy theories? There's a much more mundane explanation, which is well-documented:

"Trump’s Love for Tariffs Began in Japan’s ’80s Boom" https://www.nytimes.com/2019/05/15/us/politics/china-trade-d...

"Allies and historians say that his admiration of tariffs is one of his longest and most deeply held policy positions."

In the 1980s, Russia still had a state-run socialist economy, and China was just beginning to grow (albeit quickly) after its 1978 economic reforms. These countries did not purchase Donald Trump's policies.

If you're concerned about foreign influence and foreign money in American elections, you should be much more worried about Australian Rupert Murdoch, for example, who founded Fox News, or South African Elon Musk, who just spent a whopping $250 million to elect Donald Trump and is now personally dismantling the US government (although Musk's money didn't help in the local Wisconsin election), or Israel, which has had one of the most powerful and well-financed lobbies in Washington for decades.

> This is Russia's and China's liberation day.

There's no reason to believe that Russia will not continue to be a declining, stumbling, brain-drained backwater hawking a nuclear arsenal over its current borders, Belarus, and The People's Freest and Greatestmost Republic of Donetsk-Luhansk.

The Pax Americana died during the first week of the Trump administration when he proceeded to turn on practically every single one of US' long standing allies and dissolve NATO for all intents and purposes. All the soft power disappeared right there.

Perhaps the world will be better for it in the end, but it's definitely a turning point. A new world order will emerge and America won't be at the helm.

I don’t get why it matters what currency people use - all currency is exchangeable, isn’t it? What does it matter if you buy something for dollars or pounds or euros or yen?

If I’m buying 1 barrel of oil for $100, does it matter whether I convert my USD into 150 of this currency or 50 of that currency, according to the current exchange rate, before I pay? I still get 1 barrel of oil, and the seller still received an equivalent to $100 in exchange?

>> Foreign countries buy US dollars so they can trade with other people. That guarantees the deficit since they give us something in exchange for USD, which they do not then spend on goods we make.

This is called Triffin Dilemma- And in many lies at the core of the most basic question every power in history has faced.

That is- You can either be a Geo Economic Super power or a Geo political Super power, You can't be both at the same. You have to chose to be one. China seems to be chosing the former. USA chose to be the latter, but can't seem to be sure about its choices so far.

> Since trade is conducted largely in USD, that means other governments must purchase USD to trade. This is the core of trade deficits. Foreign countries buy US dollars so they can trade with other people. That guarantees the deficit since they give us something in exchange for USD

I'm not convinced it works like that. When a foreign country buys something from another foreign country using USD, the seller country then receives that USD. The seller country then use those dollars do buy something else from a third country - unless they have imbalanced trade and keep accumulating the dollars, like China does. But, in general case, there's only a need for a limited number of USD in circulation to serve as "working capital" for all foreign exchange. There's no need to keep getting new dollars, as the old ones get recirculated.

It is not correct that an Asian business doing business with a Italian company first exchanges their currency to USD by selling the US goods then using that USD to complete the transaction.

I agree with you that the current situation in the world really benefits the US and the current policies seem to undermine that.

The world disagrees with your assessment that this is going to be bad for the dollar. See recent movement of 10Y.

The entirety of this scheme, in its soft and hard power forms, was financed by the parasitic impoverishment of the US populace. Everything the commenters on this site complain about: Runaway inflation, unaffordable housing, extreme financialization, excessive military budget, enrichment of the top, unaffordable healthcare, unjustifiable wars, all of it has partial or total roots in the money printing, artificially low interest rates, colossal trade deficits, and military adventurism that underpin the global US dollar reserve scheme.

I think it apt to boil it down to a binary choice: Either we give up our global empire and allow the multipolar paradigm to emerge for the chance at domestic prosperity, or we grip the iron to the bitter end and force the entire country to become the dystopic open-air homeless cities of the west coast.

> If trade stops occurring in US Dollar

If I understand Trump correctly he wants a weaker U.S dollar to make American exports more attractive. I'm not sure though he wants it to become THAT weak that its on longer the reserve currency. However, simply abandoning the Dollar will prove quite difficult for many countries because there is no clear alternative (the Euro perhaps but it has a tiny market share currently) and also I'm certain Trump will threaten to remove American military support from anyone who dumps the Dollar - so Europe will probably stay, Australia, Canada, Saudi and quite a few more.

>The golden prize for America's enemies is to remove the US dollar as a global reserve currency.

Its also the golden prize for America's victims, it has to be said.

We can't keep propping up the USA as a moral position to aspire to, when that state continually gets away with mass murder and human rights violations beyond the scale of any other peer.

The USA is the worlds #1 funder of terrorism, and violator of international law on the subject of war.

So its not just about 'enemies'. Its really about victims.

A lot of people fundamentally misunderstand why trade happens in USD and what creates demand for USD.

For example, you hear people say that the US invaded Iraq because Iraq was threatening to denominate oil sales in the euro. This particular conspiracy theory used to be more popular ~20 years ago for obvious reasons. Even if true, it's absolutely no threat to the petrodollar. You could sell oil in euros and what would most sellers then do? Immediately convert those euros into USD.

Trade occurs in USD because there's demand for USD not the other way around.

What really underpins the USD is the US military and the US still being the largest economy. So the USD will remain the global reserve currency up until the US collapses and/or another power rises to displace it, which really means the same thing at this point. That might ultimately be China but it's not yet and the Chinese yuan is wholly unsuitable to be a global reserve currency currently.

The Trump admin wants to devalue the dollar substantially, enact protectionism and maintain its reserve status. I can see them succeed with the latter two, but with these actions, the world has no choice but to move away from the USD as the reserve currency. It will take many years, but whatever replaces it certainly won't be to the US's advantage.