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Amid the dizzying trade actions President Trump has taken in recent days, it was easy to miss a remarkable speech the White House released by one of Trump's top economic advisors, Stephen Miran. In that speech, Miran hinted that the White House might be working to establish a new kind of global economic order that goes beyond just higher tariffs.
As the White House has already made pretty clear, its economic goals include reducing or eliminating America's trade deficits with foreign countries and boosting domestic manufacturing. Tariffs are one big tool for those goals. But the existing global economic system is built on more than just low tariffs and free trade. It's built on a special role that the U.S. dollar plays in the global economy. The dollar is the "international reserve currency." It's the main currency the world uses to trade and save.
This special role for the dollar can be traced back to 1944. That's when global financial leaders met at a fancy hotel in Bretton Woods, New Hampshire, and hammered out the details of a new global economic order that would take hold after World War II ended. (For more on the fascinating history of this, read this old Planet Money newsletter and listen to this Planet Money episode).
In this recent speech and previous writings, Miran has complained that — while this special status for the dollar gives benefits to the United States and the global economy — it also strengthens the dollar, making American exports more expensive and U.S. manufacturing less competitive. He has suggested that America basically needs another Bretton Woods-style meeting to reform the international economic system, which would include potentially helping the United States to devalue the dollar or getting the world to compensate the United States for the special role the dollar plays in it. He has dubbed this potential summit the "The Mar-A-Lago Accord."
Some observers, including Stanford historian Jennifer Burns, believe this idea is actually a primary motivation for Trump's aggressive tariff policy. That the White House wants to strengthen their hands in negotiations for a grand bargain that serves America's economy.
Is the special global role for the dollar a privilege or burden?
The reserve currency status of the dollar offers many benefits to the United States. One big one is it gives the United States a financial weapon to sanction other countries, by, for example, cutting their banks off to the flow of dollars or seizing U.S. financial assets, like the U.S. did to Russia after it invaded Ukraine. Because the dollar is the international reserve currency, it's the lifeblood of trade around the world — even trade that doesn't involve the United States. Control over the dollar gives the U.S. government a superpower over the global economic system.
Another big benefit of this special role for the dollar is lower interest rates on U.S. debt. People around the world have really wanted dollars and dollar-backed assets like U.S. Treasury bonds, which is how the government issues debt. When we buy stuff from abroad, those countries get dollars, and they need to do something with them. A lot of the time they buy U.S. debt. This mighty global demand for U.S. debt lowers interest rates on it. It's like the United States has a special, low-interest credit card and can spend like crazy and not face the same financial consequences as other nations. Economists have called this and other benefits the U.S. gets from this system "the exorbitant privilege."
But in his speech this week, Miran painted the dollar's reserve currency status as a kind of exorbitant burden. "While it is true that demand for dollars has kept our borrowing rates low, it has also kept currency markets distorted," Miran said. In particular, with so much global demand for U.S. dollars, the value of the dollar is higher than it would otherwise be. That's great if you're an American consumer because foreign imports are relatively cheaper with a stronger dollar, but that's less great if you're an American exporter. A stronger dollar means that American exports are more expensive to foreigners.
There's another sort of weird quirk about having the dollar as the global reserve currency. In what's known as "the flight to safety," during times of economic stress, there's been a tendency for global investors to flee risky assets like stocks and buy "safer" U.S. Treasury bonds. Economists debate whether that's a good or bad thing, but it means that the dollar tends to strengthen even more during recessions. That's not great for American exporters, including manufacturers, during hard economic times. (Importantly — and this apparently really scared the White House — during this week's economic turmoil there was no flight to safety. In fact, there was a flight away from U.S. financial assets. Interest rates on U.S. debt spiked — and people began worrying about a potential financial crisis).
Miran said in his recent speech, the "reserve function of the dollar has caused persistent currency distortions and contributed, along with other countries' unfair barriers to trade, to unsustainable trade deficits. These trade deficits have decimated our manufacturing sector and many working-class families and their communities, to facilitate non-Americans trading with each other."
As we've covered before in the Planet Money newsletter, Vice President JD Vance has also questioned whether the reserve currency status of the dollar is a privilege or a burden. Last year, when he was a Senator, JD Vance highlighted that the reserve currency status strengthens the value of the dollar. That may be nice for American consumers, who get benefits like cheaper foreign goods and international travel. "But it does come at a cost to American producers," Vance said. "I think in some ways you can argue that the reserve currency status is a massive subsidy to American consumers but a massive tax on American producers." This, he suggested, contributes to "our mass consumption of mostly useless imports, on the one hand, and our hollowed-out industrial base on the other hand."
We spoke with UC Berkeley economist Barry Eichengreen, a leading scholar of international finance and the author of books like Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. And we asked him for his perspective on Miran and Vance's arguments about the costs of the dollar's special role in the world.
"There is a technical economic term for those arguments: Nonsense," Eichengreen says.
Yes, Eichengreen says, the dollar is slightly stronger because of its central role it plays in international commerce. " But that's like factor number 17 on the list of determinants of U.S. export competitiveness." There are just so many more important factors determining whether American manufacturing is competitive, like the productivity and wages of U.S. workers, the innovativeness of businesses, the inflation rate, the quality of our machines and equipment, and on and on. The higher value of the dollar due to high international demand to hold it in the existing system "is just way down there in the factors hollowing out — or not hollowing out — our manufacturing sector."
Eichengreen says that the special role for the dollar on the international stage is "a significant benefit for America." Sure, he says, economists debate about the size of this benefit. " But I think there is a broad-based consensus that America is better off having the dollar playing this exceptional role."
To be clear, President Trump himself has said that the dollar's reserve status is really important. A month before winning reelection, Trump said in an interview that if the dollar stopped being the reserve currency, America would go to "third-world status." He continued, "We cannot lose it." If any country tried to abandon it, he said he'd tell them, "You're going to pay a 100% tariff on everything you sell into the United States" and force them to abandon those plans.
After taking office, Trump threatened a group of countries known as the "BRICS" group — including Brazil, Russia, India, Iran, China, and South Africa (hence, the acronym) — which has been working to develop an alternative reserve currency to the dollar.
"We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty U.S. dollar or, they will face 100% Tariffs," President Trump said on Truth Social in late January. "There is no chance that BRICS will replace the U.S. dollar in international trade, or anywhere else, and any country that tries should say hello to tariffs, and goodbye to America!" he added.
But, as Miran and Vance have highlighted, having the dollar as an international reserve currency also comes with tradeoffs, including potentially a stronger dollar. And Miran and other Trump officials are making a big deal out of the downsides of that tradeoff. How can they have their cake and eat it too?
"The Mar-A-Lago Accord"
Miran has provided a potential roadmap to maintain the dollar as an international reserve currency while attempting to reduce the costs to America for it. And some observers, including Jennifer Burns, believe this plan might help explain why Trump has been so aggressive in raising tariffs on countries around the world.
About a month before President Trump selected Miran to lead his Council of Economic Advisors, Miran published a long essay outlining a series of potential reforms.
One of his big ideas was what he called a "Mar-A-Lago Accord." The basic idea is to get a bunch of representatives together — like the United States did in Bretton Woods back in 1944 — and rewrite the terms of the global economic system. With this meeting, the United States could get concessions, like helping the United States to devalue the dollar to improve manufacturing competitiveness and reducing America's debt burden.
In his speech this week, Miran argued that the United States is basically underwriting the global economy with their use of the dollar and also global security with protection from its military. He said it's time for the world to share in paying for what he views as a large burden.
Miran offered various ideas for countries to pay the United States for these global "public goods" it provides. They can, for instance, "accept tariffs on their exports to the United States without retaliation." They could buy more from America or invest in factories here. They could even "simply write checks to [the U.S.] Treasury that help us finance global public goods."
It is unclear that this is all the actual strategy behind Trump's sprawling tariffs. Some believe there's no coherent strategy at all. The Trump administration has been throwing the kitchen sink in their arguments justifying their trade actions and different advisors have been saying different things. The rollout of the tariffs has been erratic. U.S. financial markets — including the market for U.S. government bonds — have been freaking out about all of this.
" I hope that the events of the last few days have reminded everybody in the administration that financial markets have a low tolerance for these kind of ideas more broadly and for erratic changes in policy," Eichengreen says.
Despite this turmoil and antagonistic global diplomacy, there's a stickiness to the U.S. dollar as the international reserve currency. Scholars — including Eichengreen — have been warning that the dollar's special status is in danger for decades. But the world keeps using it. There are tremendous benefits to using the dollar because everyone else is using dollars. And there's not a ready-to-go alternative.
Plus, Eichengreen says, the U.S. has — until now — been "a good steward" of the dollar and the role it plays in the international economic system. The world has had faith in American institutions. It's a big reason for the "flight to safety." But that didn't happen during this week's self-imposed financial turmoil. There was an epic stock market downturn, and investors didn't flock to Treasuries and other U.S. financial assets.
Eichengreen says that interest rates on the bond market have moved for all sorts of potential reasons, including the potential of higher inflation because of the tariffs. He's wary about reading short-term price movements as telling us something big about the future of the dollar. But, he says, he is definitely more worried these days.
"I'm very much more concerned all of a sudden than I have been in the past," Eichengreen says. "We have not seen in our lifetimes an effort to blow up the international economic order as we know it. So now we're in a world where anything that we used to take for granted — and that certainly includes the international role of the dollar — is suddenly in doubt."
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