In order to replenish the U.S. government treasury, the Trump team raised tariffs and abandoned a strong dollar; economists warned of a U.S. debt default.

The man behind President Trump's lightning tariff war is Stephen Miller, chairman of the White House Council of Economic Advisers. AFP introduced Miller's basic ideas to everyone today through a press release. Miller, trained as an economist at Harvard University, provides a theoretical foundation for Trump's trade war in his 41-page paper, "User Guide to Restructuring the Global Trade System."

In Miller's view, the impact of these two measures—tariffs and abandoning a strong dollar—may be the most far-reaching of all policies in decades, fundamentally transforming the global trade and financial system.

Milan's article argues that a strong dollar weakens the competitiveness of American exports, reduces the cost of imports, and is not conducive to manufacturers investing in factories in the United States.

Milan calls for signing an agreement similar to the "Plaza Accord" signed in New York in 1985 by the United States, Britain, France, West Germany, and Japan. This agreement was milestone; it allowed for controlled devaluation of the overvalued dollar at the time, thereby reducing America's trade deficit.

"President Trump views tariffs as bargaining chips in reaching agreements," Milan wrote.

He said, "It can easily be foreseen that after a series of punitive tariffs, trading partners such as Europe and China will be more willing to accept some form of monetary agreement in exchange for reduced tariffs."

To reduce the value of the dollar, Milan said that America's partners could sell their holdings of dollars.

His other proposal is to convert creditors' holdings of U.S. Treasury bonds, typically short-term loans, into 100-year bonds.

Milan stated that in this way, the United States would not need to repay these bonds regularly.

He also suggested levying a "usage fee" on foreign official holders of U.S. Treasuries to supplement the U.S. government treasury.

Victoria Redwood, senior economic advisor at Capital Economics UK, said forcing U.S. lenders to swap bonds constitutes a "de facto U.S. debt default." Experts at Pictet Switzerland said in a report that charging usage fees for foreign debt repayment seems "very unrealistic" and could be interpreted as a default or quasi-default.

Economists are largely critical of Miller's views. Redwood noted that the risk of rising U.S. borrowing rates has significantly increased in recent days, indicating growing concerns about U.S. economic policy.

Adam Slater, an economist at Oxford Economics UK, told AFP that to significantly narrow the trade deficit, the dollar may need to depreciate by more than 20%.

Original source: https://www.toutiao.com/article/1829607935904779/

Disclaimer: The article solely represents the author's viewpoint.