The Dollar Crisis Behind Trump's 'Reciprocal Tariffs': An Attempt to Reset the Global Financial Order
On the surface, it is merely a policy restart of tariff tools, but the intense reactions it has provoked far exceed the scope of trade itself:
1. The Nasdaq and S&P 500 fell in sync by more than 5%, while Hong Kong stocks experienced a near 9% flash crash during trading;
2. Bitcoin plummeted from $83,000 to $77,100 in a cliff-like drop;
3. Traditional safe-haven assets like gold and oil have also not escaped, with capital experiencing large-scale outflows.
The market is not simply 'overreacting', but instinctively capturing a signal: Global capital is reassessing the long-term value foundation of the dollar.
'Reciprocal tariffs' are merely a front-end operation, while the real issue is: in the context of the gradual destabilization of the dollar's credit structure, how will Trump save America's dual hegemony in finance and military through institutional reconstruction?
[Historical Review] How did dollar hegemony rise, and how is it facing a crisis of trust?
To understand the current situation, one must look back at the history of dollar hegemony's establishment:
The Bretton Woods system of 1944:
The dollar was pegged to gold (35 dollars = 1 ounce of gold), and the currencies of various countries were then pegged to the dollar, making the dollar leap to become the 'world's central bank';
1971 'Nixon Shock':
Nixon unilaterally announced the decoupling of the dollar from gold, opening the era of 'credit currency', supported by US debt and military, establishing a dual engine of 'finance + military' hegemony.
However, the foundations of this system have been collapsing over the past decade:
1. The share of the US GDP in the global economy continues to decline, with fiscal deficits and debts piling up;
2. Financialization crushes the manufacturing base, leading to 'industrial hollowing';
3. The wave of de-dollarization sweeps the globe (BRICS promotes local currency settlement, global central banks hoard gold and reduce dollar reserves, major economies significantly reduce holdings of US Treasury bonds).
The United States is facing an unprecedented problem: the cost of maintaining dollar hegemony is rising, while the returns are decreasing.
[Logical Deduction] Why does a strong dollar weaken American power?
'Strong dollar = Strong America' has long been the narrative, but in the current context of globalization retreating and geopolitical confrontations intensifying, this logic is reversing:
1. Export imbalance + manufacturing relocation → collapse of industrial capacity
A strong dollar has pushed up the prices of American exports, leading to long-term relocation of manufacturing and worsening industrial hollowing.
Once key industrial chains are lost, the US will face 'supply chain risks' in military supplies and strategic materials.
2. Continued trade deficits → Global financing for the US → Increased dependency on debt
Long-term deficits lead to dollar outflows, causing foreigners to return dollars to purchase US Treasury bonds, thus creating a 'global financing consumer nation'.
This mechanism can operate in the short term, but in the long term, it forms a vicious closed loop of fiscal deficit - dependence on foreign capital - excessive issuance of dollars - credit overextension.
Trump understands deeply that if this closed loop is not dismantled, the foundation of American hegemony will crumble without a fight.
[Strategic Restructuring] Trump's 'De-Dollarization Risk Response' Combo
In the face of the impending collapse of the dollar faith system, Trump chose to take the initiative, no longer trusting Wall Street-style financial leverage, but turning to an integrated reconstruction logic of industry - finance - military.
Trump's response: A combination of internal and external strategies
In the face of the crisis in the dollar system, Trump has introduced a multi-dimensional policy to try to turn the situation around.
Outward: The multiple effects of tariffs
1. Increased fiscal revenue: Filling the fiscal gap through high tariffs, reducing debt pressure.
2. Industry repatriation: Forcing critical manufacturing sectors like military and chips to return to the US.
3. Allies exerting pressure: Demanding Europe and Japan to open markets and increase military spending to reduce the burden on the US.
Inward: Tax cuts and resource release
1. Tax incentives: Targeting manufacturing and energy sectors to attract investment.
2. Regulatory relaxation: Releasing financial and industrial vitality to promote corporate repatriation.
3. Resource development: Open up land and energy markets to guide private capital into them.
Core objectives
Trump's ultimate intention is to reshape global confidence in the dollar through internal and external linkages, while consolidating America's military and economic dominance.
Financial Paradox: The Trap of Dollar Appreciation
However, this strategy has fallen into a difficult-to-break cycle:
Process:
1. Tariffs and industry repatriation enhance the attractiveness of US assets.
2. Global capital inflows push up the dollar exchange rate.
3. Dollar appreciation weakens exports, and trade deficits resurface.
4. Demand for US Treasury bonds is suppressed, increasing pressure on fiscal debt issuance.
Outcome: The dollar appreciates again, interest rates climb, and fiscal difficulties worsen
This paradox indicates that traditional policies are insufficient to solve the problem. Therefore, Trump proposed a bold attempt - the Bitcoin strategic reserve plan.
The credit experiment of digital assets
The Dilemma of US Treasury Bonds As the pillar of dollar hegemony, US Treasury bonds are facing a crisis of trust: 1. Scale out of control: Over 34 trillion dollars, soaring interest costs.
2. Market weakness: Countries reduce holdings of US Treasury bonds, leading to decreased liquidity.
3. Credit doubts: Global investors are worried about the US's ability to repay its debts.
Opportunities for Bitcoin
Bitcoin, due to its unique properties, has become a potential remedy:
1. Scarcity: A fixed total of 21 million units, cannot be casually increased.
2. Global: The decentralized characteristic gives it high liquidity.
The concept of Bitcoin strategic reserves
The Bitcoin strategic reserve attempts to combine Bitcoin with US Treasury bonds, aiming to reshape the credit system:
1. Reduce the interest cost of US Treasury debt.
2. Establish national Bitcoin reserves.
3. Launch tax-incentive financial tools.
4. Repaying debts through asset appreciation.
Mechanism: Use 10% of fiscal funds for Bitcoin reserves, maintaining 90% for traditional expenditures.
Expected gains: Saving about $70 billion in interest annually, reaching $700 billion in ten years, and if Bitcoin appreciates, the gains will be even more significant.
This plan is not only a financial innovation but also a redefinition of the dollar hegemony model.
The crossroads of the financial order: the old system and the new future
Trump's policy is essentially a defense of dollar faith, while the Bitcoin strategic reserves represent a step into the era of digital assets.
Old Pattern: The dollar relies on military, oil, and debt.
New trend: The wave of de-dollarization and the rise of digital currencies, with financial focus shifting towards blockchain.
Whether the Bitcoin strategic reserve can allow the US to regain financial dominance remains uncertain, but it marks a potential turning point for the global order.
