• Specifically the strategy outlined in Stephen Miran's paper A User Guide to Restructuring the Global Trading System

  • https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf

• Stephen is chairman of the Council of Economic Advisers under the Trump admin

  • https://en.wikipedia.org/wiki/Stephen_Miran

GPT Summary of Miran's paper:

The core argument is that the dollar’s persistent overvaluation, driven by global demand for dollar-denominated reserve assets (e.g., U.S. Treasuries), undermines U.S. manufacturing and export competitiveness while sustaining large trade deficits. This overvaluation stems from the "Triffin dilemma": as global GDP grows, the U.S. must provide more reserve assets through trade deficits, disproportionately burdening its tradeable sectors. Miran ties this economic challenge to national security, noting that the U.S. funds a global "defense umbrella" for allies, which exacerbates the strain as its economic share of global GDP shrinks.

Miran catalogs several tools to address this disequilibrium:

1. Tariffs: He argues tariffs can rebalance trade without causing significant inflation if offset by currency adjustments. Drawing on the 2018-19 U.S.-China trade war, he notes that a 17.9% tariff increase on Chinese imports was largely offset (over 75%) by a 13.7% depreciation of the yuan, limiting U.S. price increases. Tariffs could also generate revenue and incentivize reshoring of manufacturing, with exemptions tied to compliance with U.S. economic and security goals.

2. Currency Policy: Miran proposes weakening the dollar to boost exports, potentially through a "Mar-a-Lago Accord"—a multilateral agreement where trading partners agree to currency adjustments or face penalties like tariffs. Unilateral options include taxing foreign holdings of U.S. Treasuries or forcing longer maturities to reduce demand for dollar assets.

3. Burden Sharing: He suggests linking trade access to contributions to U.S. defense costs or investments in American production, shifting some financial responsibility to allies.

4. Mitigating Risks: To avoid market volatility, Miran recommends gradual implementation, Federal Reserve cooperation to cap interest rate hikes, and forward guidance on tariff schedules (e.g., a 2% monthly increase until demands are met).

Resolution:

Will be based on the how closely it follows Stephen Miran's strategy (minor deviations will be allowed but at a high level it should involve:

1. Restructuring the US Debt via treasuries with longer maturities (e.g. 100 years)

2. Using tariffs selectively based on a nation's compliance with the Trump admin's requests: (e.g. defense spending, not trading with sanctioned countries, purchasing treasuries with longer maturities etc.)