US President Donald Trump’s economic doctrine reflects a fundamental inconsistency — an attempt to uphold the US dollar’s supremacy in global finance while advocating for historically low interest rates to sustain an ever-expanding federal debt. This inherent contradiction, rooted in a flawed understanding of international financial dynamics, threatens the internal equilibrium of the US economy and the stability of the broader global economic system.
The contradiction is particularly stark when examined through the lens of “the Triffin dilemma”, a theory that posits the impossibility of maintaining a reserve currency and a balanced domestic economy under a single policy framework. The Triffin dilemma has long been used to critique policies prioritizing a currency’s global role over domestic economic stability. While politically resonant for domestic constituents, Trump’s policies reveal a shortsighted approach that risks long-term consequences for American credibility and the coherence of the international monetary order.
At the heart of Trump’s economic posture is the belief that a strong US dollar projects national power, signaling financial strength and geopolitical dominance. A stronger dollar, in theory, reduces the cost of imports for American consumers and encourages foreign investment in US assets, particularly in Treasury securities. However, this dynamic is not without consequences. Persistently high demand for the dollar, due in part to its reserve-currency status, leads to chronic overvaluation, which erodes the competitiveness of US exports, widens trade deficits, and accelerates domestic industrial decline, especially in regions hollowed out by offshoring and deindustrialization, many of which Trump claims to champion. This structural imbalance, long recognized by economists, locks the US into a pattern of borrowing to finance consumption and military expansion while sacrificing long-term productive capacity.
A rational alternative to this confrontational and contradictory posture requires a commitment to long-term fiscal responsibility, respect for multilateral norms, and recognition of emerging economic powers as legitimate stakeholders in global governance. Rather than clinging to outdated models of monetary dominance, the United States would benefit from engaging with structural reforms that allow for a multipolar financial order. This shift is not just a suggestion, but a necessity. Should Washington continue to pursue narrow, unilateral interests through coercive economic measures, it will find itself increasingly isolated in a world swiftly adapting to its decline
Compounding this is Trump’s ambition to lock in ultralow interest rates to finance deficit spending that has reached approximately 7 percent of GDP. Such a policy objective is fundamentally at odds with maintaining a strong currency. Typically, higher interest rates are necessary to attract the foreign capital that supports the dollar’s value. Efforts to suppress rates artificially, especially amid rising deficits, prompt global investors to reevaluate the risk profile of US sovereign debt. Major foreign holders such as China and Japan may seek to reduce exposure by diversifying their reserves — an entirely rational response to fiscal recklessness in Washington. The Hudson Bay Capital Management report, authored by individuals close to Trump’s economic team, cautioned that this unsustainable fiscal trajectory could spark a debt crisis, as markets demand higher yields in response to declining confidence in the United States’ willingness to manage its obligations, not just its ability.
To counter the adverse domestic effects of dollar overvaluation, Trump turned to tariffs — an aggressive trade tool that has historically been used cautiously. Many of these measures were based on prescriptions from “A User’s Guide to Restructuring the Global Trading System”, a policy document authored by one of Trump’s trade advisers. This guide promotes tariffs to correct global trade imbalances and insulate domestic industry from the adverse effects of currency misalignment. While theoretically compelling, the real-world implementation of these strategies has yielded uneven results. Microeconomic evidence indicates that tariffs often compress the profit margins of importers, leading to increased consumer prices. Furthermore, retaliatory responses — particularly from China — may hasten volatility and supply-chain disruption in the US, undermining its broader strategic goals of economic security and stability.
Trump’s flirtation with unilateral currency interventions, including proposals to penalize foreign holders of US debt or manipulate reserve flows, reflects a dangerously simplistic view of global finance. These tactics, aimed at weakening the dollar to boost exports, carry outsized risks. The analysis released by Hudson Bay Capital, a Stamford, Connecticut-based investment management firm, warns that even moderate shifts in investor expectations can trigger capital flight and market dislocation. Such interventions also erode trust in the reliability and predictability of US economic policy — an essential ingredient in sustaining reserve-currency status. Rather than reinforcing American leadership, these measures sow uncertainty and invite calls for alternative financial arrangements.
However, the most significant risk lies in potentially eroding the dollar’s global role. While the euro and the Japanese yen have limitations as reserve alternatives, the renminbi is steadily gaining traction through bilateral agreements, regional initiatives, and digital-currency innovations. As China continues to demonstrate fiscal prudence, long-term industrial planning, and commitment to multilateral financial cooperation, confidence in its monetary institutions is growing. The global trend toward holding gold, increasing use of local currencies in trade agreements, and exploring blockchain-based settlement systems all signal a gradual but significant shift away from dollar dependency. In contrast to the erratic course of US policy, China’s methodical approach offers a credible and stable path toward a more balanced international monetary system.
Trump’s proposal to force allies into converting short-term US debt into century bonds — referred to informally as the “Mar-a-Lago Accords” — illustrates the desperation embedded in efforts to reconcile irreconcilable policy objectives. Attempting to link trade concessions to debt financing arrangements reflects a coercive, zero-sum mentality incompatible with cooperative economic governance principles. Such initiatives fail to recognize that trust and credibility, not intimidation, underpin demand for sovereign debt. Protectionist trade policies, when paired with fiscal indiscipline, only accelerate the erosion of confidence among global partners.
Collectively, these policies do not form a coherent economic doctrine. Instead, they constitute a precarious set of maneuvers that threaten to destabilize the very institutions on which US financial preeminence depends. By insisting on a strong dollar while pursuing unchecked deficit expansion and weaponizing trade policy, Trump places the US at risk of triggering currency wars, fragmenting global trade networks, and undermining investor confidence in American leadership. In stark contrast, China’s emphasis on strategic industrial policy, disciplined macroeconomic management, and deepening international partnerships offers a more credible and sustainable path forward.
A rational alternative to this confrontational and contradictory posture requires a commitment to long-term fiscal responsibility, respect for multilateral norms, and recognition of emerging economic powers as legitimate stakeholders in global governance. Rather than clinging to outdated models of monetary dominance, the United States would benefit from engaging with structural reforms that allow for a multipolar financial order. This shift is not just a suggestion, but a necessity. Should Washington continue to pursue narrow, unilateral interests through coercive economic measures, it will find itself increasingly isolated in a world swiftly adapting to its decline.
The author is a solicitor, a Guangdong-Hong Kong-Macao Greater Bay Area lawyer, and a China-appointed attesting officer.
The views do not necessarily reflect those of China Daily.
