Donald Trump's Dream? An op-ed by Jérôme Sgard
1. What is Donald Trump dreaming of? Where does he want to take his country? What can we expect from the “great again” America he is promising the world? Four months after returning to the White House, the intentions of the new president still elude the vast majority of commentators, experts, and even his peers—the statesmen and women trying to settle in with him and establish regular communication. The idea of “transactional diplomacy”, which is often set forth as a summary of this new approach to foreign affairs, has quickly shown its limitations: beyond its outlines, recurring displays of resentment, unpredictability and disorder often prevail. Is this what lies ahead? A large-scale lose-lose game in which the powerful act arbitrarily towards the weak or the hesitant, though within the limits of their competition?
Such a Hobbesian stance would align with the American right's aversion to public regulation in general. Techno-libertarians and the impoverished (mostly white) working class share this view. Often one gets the impression, for instance, that it is not so much climate change itself that is being denied, but rather the idea of taking action—regulating behaviour, taxing abuses and negotiating treaties. Other things being equal , the same applies to vaccines, banking regulation, gun control, fighting discrimination or tackling urban congestion. It seems indeed that few externalities or public goods can justify interfering with the free will of American citizens—to say otherwise is so often tarred as “socialism”. Similarly, geopolitical alliances or multilateral agreements are seen as a way for weaker countries to exploit honest Americans and restrict their legitimate government. Collective action, shared commitments, risk pooling and investment in soft power are therefore of no use. Deals can be made, but at best they are narrow contracts—bartering, if you like, and sometimes racketeering, as in the case of Ukraine and its mineral resources.
2. The question of American hegemony is therefore being raised insistently: what are its methods, costs and objectives, hence its political horizon? According to the classic definition, a hegemon is a power whose interest in maintaining a stable international order is such that it is prepared to bear most, if not all, of the maintenance costs. Britain thus policed the seas for decades before 1914, to its own benefit and that of other Western countries. The case of NATO from 1949 to the present day is another obvious example. Multilateralism, lastly, has required constant investment, both political and financial, in its construction and expansion since 1945, as well as the United States’ (broad) acceptance of the need to play by the rules.
Still, at a time when the competition with China for international supremacy is a constant concern in Washington, the new Republican administration’s rejection of established US hegemonic policies raises additional questions. One of these, naturally, is why three generations of American leaders, from Truman and Eisenhower on, endorsed the multilateral deal conceived in Washington in the 1940s if it is so fundamentally exploitative? In fact, when Trump evokes America's past greatness, it is unclear to which era he is actually referring. If it is not the triumph of 1945, should we look to 1919 and the rejection of the Treaty of Versailles? Or the self-affirmation of a new imperialism under Theodore Roosevelt? Or should we look back even further, to a time before widespread public regulation, when the Robber Barons set the rules of the game?
Beyond the question of lineage, of course, is the widespread scepticism about the analytical framework that underpins the new American approach to the economic and political global order. Apart from the new administration, very few economists in academia, think tanks or the financial press have been convinced by the promises of the new protectionism. The same epistemic dissonance also applies in the financial and monetary sphere, where the White House has also been active.
3. First, take international trade, even setting aside the absurd manner in which customs tariffs were increased in early April, then in most cases reduced, while still leaving the door open to further increases. The crux of the matter in this discussion is that an increase in customs duties, just like the relocation of production lines from more competitive countries, will lead to higher consumer prices for the vast majority of goods.
In other words, if this policy is applied to pharmaceuticals, cars, phones, fridges, T-shirts and trainers, American consumers will be seriously impoverished. They will have to work harder (or become much more productive) just to maintain their standard of living, measured, for example, by the number of T-shirts they buy in a year or the size of their refrigerator.
This point reminds us that over the past 40 years, alongside the new elites and workers in emerging economies, consumers in wealthy countries have been the primary beneficiaries of globalisation—even taking into account growing income inequalities at the domestic level. Today’s American protectionist experiment therefore highlights a generally overlooked proposition: there is no easy way out of globalisation. A ‘move back’ would not look like a simple pendulum, swinging us back to a world that may be less economically vibrant, but socially gentler. In particular, Western consumers are unlikely to willingly give up the increased purchasing power brought about by open trade—the political cost of inflation in recent years is a good indicator of this. For sure, they have not always recognised these benefits, following the old political economy theorem that the costs of trade liberalisation are typically concentrated and immediate, while its benefits are diffuse, gradual and often unnoticed. What’s more, financing social policies or sustaining large public debts could become much more challenging. Indeed, in such a protectionist scenario, countries as a whole would become poorer.
On the supply side, economists generally agree that, in the coming years, a number of industrial investments can be expected in the United States, which may create more low-skilled jobs. However, it is doubtful that this trend will be enough to rebuild an industrial and social fabric comparable to that of the post-war decades—Trump’s childhood, in short. In particular, there is no guarantee that protectionism can address the injustices that have accumulated since that time, regarding e.g. unemployment, stagnating real wages, relocations of industries to emerging countries or regional disparities. Finally, epistemic dissonance hits its highest level in the case of the new American policies regarding investment in secondary and higher education, research, infrastructure, or public health—public goods whose impact on the nation’s wealth has been explored for decades by students of economic growth.
4. Turning to the financial and monetary aspects of the new administration’s policies, we quickly encounter the same conundrum: what is the strategy here underpinning the project of building a greater, more powerful America? The most notable initiative in recent months came from the new president’s economic adviser, Stephen Miran. In short, his idea is to preserve the international status of the dollar while shifting the costs of supporting it to other countries. He thus suggested, for instance, imposing low or zero interest rates on holdings of US Treasury bonds by other countries’ central banks. The threat of a substantial increase in customs tariffs, or even a withdrawal of US military support, would ensure the cooperation of the most reluctant parties. Such ideas are unprecedented at this level. Rating agencies S&P and Moody’s pointed out that such action would amount to a sovereign default and the proposal was seemingly dropped from the conversation—at least for the time being.
At about the same time came recurring threats to dismiss the governor of the US Federal Reserve, shortly followed by the adoption by the House of large, unfunded tax cuts, which would increase public debt even further. All of these proposals have had a massive impact on capital markets: since February and in successive phases, international investors have sold large volumes of US public debt and dollars, preferring, for instance, German debt and the euro, both of which have seen substantial appreciation. Severe market tensions have accompanied the shift, leading the Federal Reserve to announce its readiness to intervene to ensure that the markets function properly. In principle, “serious countries” avoid this kind of situation.
Day and night, the financial press and social media have discussed these unique circumstances: the world’s main currency and safest debt market were now directly challenged on capital markets. In other words, American financial hegemony, which had been established sometimes between the 1920s and the 1940s, was no longer considered as being beyond doubt. For sure, few dared announce the demise of the dollar, if only because there is no ready substitute. But many questions have been raised which, for decades, had remained purely “academic”. Could this be the beginning of the end of the “exorbitant privilege” denounced by De Gaulle and Giscard d'Estaing in 1964? Are the United States about to commit monetary hara-kiri, either inadvertently, or due to a lack of professionalism? Might the euro or the Chinese renminbi take market shares and impose a move towards a “pluri-centric” international monetary system?
5. There are three possible interpretations of the Trump administration's initial steps regarding trade, finance and the reconfiguration of American hegemony. The first, rather optimistic and constructive approach, would see here a collective learning process. Although undoubtedly chaotic, this process would guide an ideological and incompetent government towards a more rational relationship with the real world. In short, the aforementioned epistemic dissonance would gradually be reduced. Rules of the game would be accepted. The time horizon for deals would gradually lengthen. The remaining question would be whether the president can learn from experience. Does “learning by doing” apply to him?
A sceptical interpretation, on the other hand, abandons any hope of constructive change. Those who want to draw lessons from practical experience may be rejected by the president and his closest aides. In that case, we would experience a series of lurches, one after the other, continually characterized by the improvisation and sudden changes of direction that we have become accustomed to in recent months. Even in the short run, the collective costs of unpredictability could obviously be high, whether one thinks about customs tariffs, public finances, the dollar’s strength or inconsistent international initiatives (on Ukraine, Gaza, China, etc.). Still, in this scenario the real world (the bond market, trade integration and the balance of power) would impose sufficient checks on US policy makers. But the costs for US international standing would undoubtedly be substantial. Its major and minor competitors are much more realistic; they typically make decisions with a much longer time horizon.
Finally, there is the risk that impulsive decision-making and loose analytics might lead to outright miscalculation or catastrophic misunderstanding. Payment crises, a full breakdown of relations with China or war with Iran—many such scenarios can be envisaged. But even without reaching such an extreme outcome, many across the world may simply conclude that the United States have already lost the technological and industrial race with China, and with it, the global upper hand. Confusion and inconsistency would lead to the construction of a ‘Fortress America’, withdrawn from global governance but highly disruptive when its interests or sensitivities are at stake. After all, the role of 'global spoiler' would probably suit Donald Trump quite well. His dream, our nightmare.
Photo: Man in front of stock market screens noting heavy losses as Trump introduces tariffs. 18 May 2025. Credit: Ascannio for Shutterstock
