President Biden recently raised tariffs on Chinese imports, including steel, aluminum, and components for electric vehicle batteries. The tariffs on Chinese goods give China even greater incentive to challenge the dollar’s world reserve currency status. China's share of the global economy has more than doubled in the last twenty years, while the US share has fallen. If the dollar loses its world reserve currency status, the US government would lose the ability to 'weaponize the dollar' and other countries would have less incentive to abide by US demands. This would increase pressure on the Federal Reserve to monetize the debt, leading to a major economic crisis. Ron Paul argues that this could result in a return to limited, constitutional government. [2c44febc]
President Biden raised tariffs on Chinese imports, including steel, aluminum, and components for electric vehicle batteries. Tariffs on Chinese-made semiconductors are rising from 25 to 50 percent, and tariffs on Chinese-made electric vehicles are rising from 25 percent to 100 percent. The costs of these tariffs will be borne by Americans wishing to purchase electric cars and American electric car manufacturers. China and Russia are strengthening their alliance to challenge US military and economic hegemony, and they are using the Chinese yuan and Russian ruble for over 90 percent of their trade. China's share of the global economy has more than doubled in the last twenty years, while the US share has fallen. If the dollar loses its world reserve currency status, the US government would lose the ability to 'weaponize the dollar,' and other countries would have less incentive to abide by US demands. This could lead to increased pressure on the Federal Reserve to monetize the debt, creating more price inflation and a major economic crisis. The end result may be a return to limited, constitutional government. [217553a9]
According to Jamie McGeever from Investing.com, the U.S. dollar is likely to be the only winner in a potential all-out trade war between the West and China. The uncertainty around global trade policy is currently high, and further tariffs on imports from China and likely retaliation seem inevitable. The U.S. has layers of protection that other countries don't, including a relatively closed economy, the global importance of U.S. equity and bond markets, and the ubiquity of the dollar in international reserves. While the U.S. would still suffer from slower growth and possible inflation, other currencies would be more vulnerable. Goldman Sachs economists estimate that a rise in trade policy uncertainty to 2018-2019 levels would likely lower U.S. GDP growth by three-tenths of a percentage point, while the estimated hit to euro zone growth would be three times greater. The U.S. economy is less open than its European or Chinese counterparts, meaning disruption to trade would have a relatively limited impact. The U.S. trade deficit has also decreased, and onshoring and domestic manufacturing revival efforts indicate that the deficit will not be as much of a drag on the dollar as before. The euro would be hit hard by trade tensions between China and Europe, given the close trade ties between the euro zone and China. Deutsche Bank analysts predict that the dollar will stay strong this year and into next year, with a more belligerent stance on trade from the U.S. likely pushing the euro back down towards parity. [8a2e1df3]