Sink the Economy to Save It? Inside Trump's New Economic War

Why would the President of the United States intentionally sink his own country’s economy—and with it, the global one? Why does Trump swing from claiming that everyone is “kissing his ass” to a sudden U-turn in which he suspends all tariffs for 90 days, save for China? What is this obsession with tariffs , even when the stock market plunges?

If you’ve found yourself asking any of these questions in recent days, you’re not alone. So allow me to offer a thread of Ariadne to help you navigate this labyrinth of international geopolitics.

Before we begin, a word of caution to the reader: dismissing Trump as a madman is convenient—but dangerous. It’s political reductionism. Even if the memes about penguin islands getting hit by tariffs make us laugh, underestimating an entire administration behind the mask of madness is a mistake. Understanding the plan—if there is one—is both wise and necessary.

So, is there really a plan?

The logical answer is that yes—a plan that goes far beyond trade wars with the “evil” China. Trump’s true obsession—or rather, America’s—lies primarily in reducing the U.S. trade deficit (which occurs when a country imports more than it exports).

To be clear, this isn’t a recent problem: the roots of this phenomenon can be traced back to the so-called “structural crisis” in the U.S. starting in the 1970s. Simply put, as China began to gradually open up to capitalism, following its own economic crisis, the Americans used this opportunity to expand their markets, and thus their profits: the much-desired “spatial fix”. This alliance of convenience, known as the “Transpacific Harmony”, can in many ways be considered the origin of modern globalization. Then, with China’s accession to the WTO in 2001, Chinese exports to the U.S. exploded—and so did the American trade deficit.

But here comes the real plot twist: even though “deficit” sounds bad, it actually has major advantages for the American economy. Since Chinese products are so cheap, Americans enjoy greater purchasing power—they can buy more stuff. Moreover, if there's no longer a need to produce everyday goods domestically, like shoes, TVs, bags, boxes, wires, t-shirts, etc, then it becomes possible to outsource much of that production and focus instead on high-knowledge sectors: medicine, technology, digital services, finance—fields in which the U.S. remains a global leader.

So yes, they run a massive deficit in goods, but a gigantic surplus in services. In this light, the fact that the U.S. imports so much from the rest of the world is actually... an advantage. Why? Because the dollars they spend abroad come back in the form of investments. The dollars that return to the U.S. are used to finance the government, businesses, and, above all, to cover the huge American public debt.

It’s all a cycle. The dollar is king. And America is seen as the safest place to put money. 

But after the pandemic, something shifted: countries began to see the dollar not just as a reserve currency, but as a tool of political leverage—especially after the U.S. froze Russian assets.. The U.S. net international investment position started becoming increasingly negative. Foreign investments are no longer growing at the same pace as American debt. The share of U.S. debt held by foreign investors has dropped to 24% and continues to decline. China, once the largest creditor of the United States, has reduced its holdings of the U.S. The world has begun to see the dollar not just as a reserve currency, but also as a tool of political coercion.

As a result, the balance that had held for decades is now starting to wobble. The U.S. is living beyond its means, propped up by foreign capital that is becoming increasingly scarce. This creates two problems: on one hand, domestic deindustrialization, on the other, a growing dependence on increasingly uncertain external financing.

This is where the "Miran Plan" comes into play—named after Stephen Miran, current Chief Economist at the White House and author of the paper “A User’s Guide to Restructuring the Global Trading System.” 

Miran proposes an aggressive strategy: to use tariffs not just for protectionism, but as a bargaining tool to pressure other countries into strengthening their currencies against the dollar (so that the US could export more) and financing U.S. debt through ultra-long-term bonds—some as long as 100 years—with near-zero interest rates. It’s an extreme idea: if partners agree, the U.S. gains time and nearly free credit. If they refuse, then tariffs are triggered. 

As Miller personally states, this plan has more than one 'gambling factor’, some of those benign that reindustrialization can't happen in just a few years, tariffs raise costs for American consumers, and inflation risks are high. Moreover, convincing partners to buy 100-year bonds with yields below inflation is an almost impossible task.

Still the problem in the meantime just gets bigger and bigger: U.S. debt has reached $36 trillion. In 2025, $9 trillion will need to be refinanced! Meanwhile, in 2024,interest payments on the debt surpassed defense spending. This could force the government to drastically cut other expenditures, including social and infrastructure programs.

In this scenario, the goal of Trump’s strategy appears to be to muddy the waters, generate uncertainty, and provoke a recession (a period of temporary economic decline during which trade and industrial activity are reduced) in order to push investors toward the U.S. Treasury bonds, still seen by many as safe. 

As of now, is this plan working out?

At the moment it’s not working greatly: yields on 10-year bonds have risen to 4.5%, precisely because investor trust is eroding (the U.S. has to offer 4.5% interest to convince them to buy its bonds). In short, the United States is heavily indebted and increasingly dependent on a foreign sector that is less and less willing to finance it. Interest rates are rising, and confidence is falling.

The Miran Plan—however extreme and chaotic—is an emergency response to a structural crisis. A crisis that signals the decline of American financial hegemony and the need to renegotiate the role of the dollar, the trade balance, and public debt in the new global order.

Will it work? 

That depends entirely on how other countries will respond. But one thing is certain: we are witnessing a historic turning point.