The Playground President
The president of the United States views the global arena like a school bully views their playground; failing to see that playing the popular kid is a much better strategy. A bully is typically someone with none or very few friends, with little means of getting what they want without violence or threats. The popular kid, on the other hand, has loads of friends. Whether or not they truly like him is unclear, but what is not unclear is the power he wields. People do his bidding, want to enter his inner circle, and do what he is doing simply because their desire for social status trumps their desire for individuality. The popular kid’s power is long-lasting and reliable, as social status is a more ethereal, embedded, and difficult to usurp form of power than simple compulsion. Crucially, he almost never needs to break school rules to maintain it. For a bully on the other hand, it is nearly always just a matter of time until they are either kicked out of school, or defeated by their former victim(s) through: coalition formation, growth spurts, or their learning of karate.
This playground analogy reveals itself in a variety of bizzare ways within the realm of International Relations (IR). Power in IR however, is communicated not through wedgies, party invites, and wealth, but rather through military might, alliances, and, well, also wealth in this case. It is primarily this last factor, wealth, which I will focus on below, as not only is it pertinent in discussions of Trump’s new tariff policies, it is profoundly intertwined with all other aspects of international power. In addition, an understanding of the role that economic power (wealth) plays in the US empire equation reveals how harmful these tariffs will be; not only to our global standing, but to nearly the entire world’s quality of life.
A Most Peculiar Empire
Unlike the kingdoms and colonial conglomerates of old, US empire has been primarily defined not by plunder, violence, exploitation and suffering, but by cooperation, consent, and mutual gains. To get this out of the way, yes, the US absolutely has and continues to engage in, perpetuate, etc. the unsavory phenomena mentioned in the prior sentence. However, taken on the whole, instances of such phenomena have undeniably seen some of their lowest levels in human history since the end of WWII, and especially since the end of the Cold War. More important than our military might has been a global state of affairs in which US power is maintained non-coercively, through mechanisms like free markets, free trade, and international cooperation. The implicit function these mechanisms perform—as it relates to the maintenance/ strengthening of US power—is to reduce the likelihood that potential challengers will have the means or incentives to challenge our preeminence, while simultaneously enriching our firms and institutions.
The process of absorption is simple, a country like China, who in 1980 had an extreme poverty rate of 97% in rural areas and 71.6% in urban areas, with a population of nearly 1 billion, decides to open themselves up to trade and investment, with startlingly positive results. What results you may ask? Well, the two rates mentioned before each fell to less than 1%, and the SSE Index (a proxy for the Chinese stock market) has appreciated 3,100% since 1990. At the same time, trade volume between China and the United States went from $7.7 billion in 1985 to $582 billion in 2024. With this came the proliferation of incredibly cheap goods and inputs, substantially increasing US purchasing power to the tune of $1,500 per-person or $411,464 per job lost (over 10x higher than the average compensation of said jobs). Additionally, the US stock market (as measured by the S&P 500) has seen a 4,965% gain since 1980. With this in mind, the sheer scale of the importance of global economic interdependence is hopefully clearer. If such substantial gains are being felt, particularly by the less powerful party, why would they ever want to return to the old way of doing things? If said party’s success and preservation is so intimately linked to the US’s ravenous consumer base, why would they ever want to harm or even upset the government which has the power to render their exports unviable through protectionism? Relatedly however, because US consumers and firms benefit so extensively from free trade, and the less-hostile world that it and similar mechanisms have fostered, why would we ever want to jeopardize this state of affairs?
The Status of the US Dollar
If you are not yet convinced, allow me to delve into a phenomenon that paints a clearer, more detailed picture of US economic power, shedding more light on why recent tariff proposals, the ideology which underpins them, and the global response we have already seen are so worrying.
For decades, especially since the dawn of the Bretton Woods System, the US dollar has had by far the best claim to being the world’s reserve currency. What this means is that many countries—typically for the purposes of currency price regulation, the purchase of certain commodities, the purchase of dollar-denominated assets, or just general international trade—purchase dollars to keep at their central bank in times of need. The reason why the dollar is given the title of Global Reserve Currency is because it accounts for 59% of the value of all global foreign exchange reserves, far surpassing the second-place euro which accounts for only 19.8%. What this means is that the dollar experiences substantial global demand, driving up its relative price in the foreign exchange market. This higher-priced dollar enables us to introduce a significant amount of them into the market (increasing supply), while experiencing far less depreciation than any other currency would upon the expanding of its supply. As a result, the US has the privilege of running a significant trade deficit (which means introducing more dollars than are taken out) of over $0.91 trillion, while experiencing little to currency depreciation, bolstering global US purchasing power far in excess of any other nation.
A Crisis of Confidence
The US dollar has maintained its reserve currency status largely thanks to the strength, stability, and size of our economy and its accompanying institutions. It is due to these factors that we have been able to, according to China, live beyond our means for many years. However, President Trump seems to believe we have been systematically ripped off in our trade dealings over the years; this could not be further from the truth. In fact, having a nearly $1 trillion dollar trade deficit while experiencing little to no currency depreciation in essence amounts to a siphoning off of that amount from the rest of the worlds’ economies. Though again, this siphoning was achieved not by force or plunder, but simply by virtue of our assets being so in-demand, our currency being so stable, and our institutions so strong that countries trade their productive output for the privilege to acquire such a reliable store of value (the USD) and invest in such a lucrative asset market.
As a result of what I believe is a global response to President Trump’s demonstrated lack of economic understanding, and his erosion of domestic and international institutions, agreements, and coalitions, cracks are beginning to show. The world is responding to a United States that is seemingly no longer willing to participate in a free system of exchange, one where it and other countries benefited to an unprecedented degree, preferring instead to project playground strength for temporary gains. Since mid-January, the dollar (as measured by the DXY index which tracks its value relative to a basket of other currencies) has fallen over 9% as of May 2025. Dollar depreciation, and the fall in demand and/or increase in supply it is contingent upon, can occur for a variety of reasons, with one of them being the market losing faith in the stability of it. In this case, said loss of faith is almost certainly the reason for the drop. I say this because protectionist measures typically lead to a rise in the value of the dollar, as they reduce the supply of dollars on the market. Pair this with rising treasury yields for almost the entire month of April, a signal often indicative of the market perceiving US debt as more risky, and it seems obvious why this depreciation has occurred. This should worry all of us.
The world is losing faith in the free and cooperative order led by the US, an order which was forged meticulously for the past several decades, and whose power rests in its incentivizing of assimilation through positive reinforcement. Our status as a paragon of free markets and economic cooperation was a crucial piece of this equation. To threaten this is to threaten the US’s ability to remain a hub of dynamism and innovation, who attracts talent and capital from around the world. It is to leave us poorer, more isolated, less influential on a global stage, and more prone to employ other forms of coercion like violence. It is to leave the rest of the world to fend for themselves, their industries decimated, their alliances and coalitions severed, and their people vulnerable and dispossessed. These seem to me like ideal circumstances for another great power like China to fill the shoes we once did. If this is the fate the so called America First crowd seek, then so be it, but the consequence will only be a weaker, more threatened, more embarrassed nation.
Featured Image Source: Container News
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