#20 The (Misguided) Masterplan Behind the Tariff Chaos

In a speech at the Hudson Institute, CEA Chairman Steve Miran—the person who floated the idea of a “Mar-a-Lago Accord”—offered a public-facing explanation (compared to the nerdy working paper from last November) of the broader strategic logic behind the tariff chaos unleashed by the Trump administration in recent days. Miran paints a picture of an overburdened United States, single-handedly underwriting global peace and prosperity through its military power and the dominance of the dollar. His argument is that the rest of the world has been free-riding on American sacrifice, and it’s time for the rest of the world to “pay their fair share.” The first step is tariffs.

Miran describes the U.S. dollar as a “global public good” that comes at a net cost to Americans. Because global trade is largely conducted in dollars, demand for the currency keeps it overvalued—hurting U.S. manufacturing competitiveness. Meanwhile, the American taxpayer funds a military apparatus that helps secure the very international system everyone relies on. In this view, the U.S. loses on both fronts. One way to rebalance this, according to Miran, is for the U.S. to remain the dominant military power and global currency issuer, but deploy massive tariffs to weaken the dollar and reduce its trade deficit.

This framing clearly runs counter to what we know about the benefits the U.S. derives from dollar dominance, which we’ve know for a long time. Back in 1965, French President Charles de Gaulle sharply criticized this dominance, and his finance minister, Valéry Giscard d’Estaing, famously called it an “exorbitant privilege.” That phrase was later used as the title of economist Barry Eichengreen’s book on the global role of the dollar.

De Gaulle’s critique was blunt: the United States could finance its deficits simply by issuing dollars, which the rest of the world accepted due to the currency’s privileged status. This “unilateral facility,” as he called it, enabled the U.S. to live beyond its means and accumulate debt with few constraints - this is why the US, unlike any other country in the world, is able to routinely increase its debt ceiling. And while the Bretton Woods system collapsed in 1971, the privilege didn’t disappear—it merely evolved. As Eichengreen documents, foreign demand for dollar-denominated assets has allowed the U.S. to borrow cheaply, avoid painful external adjustments, and project geopolitical power with limited fiscal pressure.

If you think about it, this dynamic extends to U.S. military ...