Benn Steil writes – correctly, in Barron’s – that “Trump wants the dollar to be mighty but weak. It makes no sense.” (HT Steven Kaufman). Two slices:
President Donald Trump’s views on the role and level of the U.S. dollar recall a famous claim by the novelist F. Scott Fitzgerald. “The test of a first-rate intelligence,” Fitzgerald wrote, “is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function.” Assuming the president’s policy hyperactivity is evidence of functioning, we are witnessing a first-rate intelligence in action.
Either that or a devastating disproof of Fitzgerald’s claim.
Both Trump and Vice President JD Vance have, for some years, been outspoken in support of a weaker dollar. They believe that depreciation will cut the U.S. trade deficit and help U.S. manufacturers and exporters. But they have also contradicted themselves, and each other, repeatedly on matters that have a strong and enduring impact on the level of the dollar.
First and foremost among these contradictions is their view on the dollar’s role as the dominant central-bank reserve currency and its outsize use in international trade. On Jan. 30, the president thundered a threat at the “seemingly hostile” countries that make up the BRICS group—Brazil, Russia, India, China, and South Africa. “They will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar,” Trump warned. But if they do, they “will face 100% Tariffs.”
The irony is rich and multilayered. First, the BRICS nations are seeking alternatives to the dollar specifically to escape proliferating unilateral U.S. financial sanctions, yet the president is threatening more such—in the form of 100% import tariffs—if they proceed. Second, the dollar’s dominant role in reserves and trade is a major factor keeping its value higher than it would be if other currencies played or shared that role. Third, Vance in 2023 referred to the dollar’s “reserve currency status” as “a massive tax on American producers.” It fueled, the then-senator said, “our mass consumption of mostly useless imports, on the one hand, and our hollowed-out industrial base on the other.”
The two men cannot both be right. And indeed Trump himself, notwithstanding his famed claim to be a “very stable genius,” is ensnared in a logical knot. Either the dollar must remain “mighty” and dominant, or it must shed this albatross and fall to a level more favorable to U.S. exports. To demand that the dollar do both is as illogical as to demand that tariffs raise import revenue while at the same time stopping imports.
…..
To return to Fitzgerald, the president’s supporters frequently laud his seeming inconsistency as a brilliant negotiating tactic designed to achieve some higher Hegelian synthesis. Perhaps “prosperity for our time” is therefore just around the corner. But my money is on a tariff-driven stronger dollar together with higher costs, retaliatory tariffs, and a withering of the multilateral trading system—which is, unfortunately, the worst possible combination for U.S. business.
Parker Hudson adds his voice to those warning of the destructiveness of Trump’s protectionism.
The Editorial Board of the Wall Street Journal explains that “Trump’s tariffs will punish Michigan.” A slice:
Mr. Trump says tariffs will force auto makers to make more cars in the U.S. Not likely, and that would take time in any case. Domestic demand for some vehicle models—especially sedans—isn’t sufficient to justify the cost of building new U.S. factories. Auto makers will have to absorb the tariff, increase prices on cars, or stop selling some models because they are too expensive.
U.S. auto workers will pay, too, if auto sales drop as a result of higher prices. Note that new U.S. vehicle sales last year were about 1.2 million lower than in 2019, largely because inflation and higher interest rates have made cars less affordable. One result is that U.S. plants produced 340,000 fewer cars last year than in 2019.
There are about 17,000 fewer U.S. workers employed in motor vehicles and parts than there were six years ago. Average weekly hours worked in the industry have fallen. The President can’t blame imports, which have fallen even more than U.S. car production.
Jim Dorn applauds this reality: “DeepSeek is a private/nonstate research firm run by a self-made billionaire who favors the spread of knowledge bodes well for China’s future.” And he laments this one:
The process of scientific discovery and innovation, however, cannot itself turn China into an open society where individuals are free to choose and express their ideas without the threat of political reprisal. As long as China’s leaders maintain the CCP’s monopoly on power and suppress freedom of thought, improvements in AI will be hampered by the state, as will the emergence of a harmonious society.
The Massachusetts Democrat devised the CFPB after the 2008-09 financial panic to be independent of political control and normal constitutional checks and balances. Because the bureau obtains its funding on demand from the Federal Reserve, Congress can’t use its power of the purse as a form of oversight.
Democrats in Congress are suddenly fuming that they can’t stop the Trump Administration’s plans to overhaul the bureau. “Congress built [the CFPB], and no one other than Congress—not Donald Trump, not Elon Musk, no one—can fire the financial cops,” Ms. Warren said this month in a protest at CFPB headquarters.
Well, no, by her own design Congress can’t force the bureau to spend money, including on employee salaries. She also says no other agency will protect consumers, but plenty of other regulators can do the same job better.
Jacob Sullum makes clear that “the FTC has no business trying to make sure social media are ‘fair’.”
