The writer is a professor at Johns Hopkins University and co-author of ‘Underground Empire: How America Weaponized the World Economy’ with Abraham Newman, who also contributed
Donald Trump claims that he alone can protect America from being “ripped off” by greedy allies. However, his desire to replace the foreign-subsidized cornerstone of national security with a system that would burden American consumers raises questions.
In recent weeks, Trump has expressed his intention to move away from US financial sanctions against Russia and China. He argues that these sanctions undermine the dollar and make China’s currency more attractive. Instead, Trump wants to rely on tariffs as America’s primary tool for coercion. The threat of 100% tariffs could potentially force reluctant governments to stick with the dollar or pressure Nato members into increasing military spending.
America’s reliance on financial sanctions does have its drawbacks. However, it has been able to avoid most of the costs associated with them by making foreigners pay instead. Trump’s proposal would abandon this advantage and replace US sanctions power with a costly imitation of Chinese economic coercion.
It is unlikely that Trump is concerned about the long-term risks associated with excessive use of sanctions. His motives may be related to relieving pressure on Russia and cryptocurrency or addressing conflicts between cryptocurrency and US security interests. Nevertheless, there may be some truth in his argument.
The power of the dollar allows the US to leverage foreign banks and financial actors into cutting off adversaries’ access to the global financial system, making American financial sanctions highly effective. However, as former Treasury secretary Jacob Lew has pointed out, overexploiting this power will only push other countries towards finding alternatives.
China faces different challenges when it comes to coercion tactics due to its lack of control over global finance. Instead, China weaponizes access to its markets in order to inflict economic pain on other countries. This approach not only harms China’s targets but also undermines its own trade and prosperity by limiting market access for Chinese businesses and consumers.
Trump aims to adopt this approach by using substantial tariffs as a means of cutting off market access instead of relying on regulations alone. In doing so, he would essentially replace America’s key economic security weapon with an inefficient “sales tax” imposed on American consumers and businesses – an idea reminiscent of Kamala Harris’ criticism during their political rivalry.
If implemented at scale as promised by Trump – “bigger tariffs than you’ve ever seen in this country before” – such measures are likely not only directed towards adversaries but also allies according JD Vance’s suggestion.
