According to widespread media reports, Stephen Miran, Trump's chief economic advisor, tried to reassure major bond investors in a recent meeting, but his efforts seemed somewhat ineffective. Miran, who holds a PhD in economics from Harvard University, briefly served as a senior economic policy advisor at the Treasury Department during Trump's first term. In December 2024, Trump nominated Miran to be the chairman of the White House Council of Economic Advisers (CEA), one of the most crucial roles in the president's economic policy.
In November of last year, he authored a report titled A User's Guide to Restructuring the Global Trading System, which the market referred to as the Mar-a-Lago Accord. The report outlined four specific goals: reducing the trade deficit, revitalizing U.S. manufacturing, enhancing the international competitiveness of U.S. companies, and requiring other countries to share the costs of maintaining the dollar's global dominance.
Sources familiar with the matter revealed that on April 25, Miran met with around 15 representatives from financial institutions at the Eisenhower Executive Office Building, adjacent to the White House. Attendees included representatives from hedge funds Balyasny, Tudor, and Citadel, as well as asset management firms PGIM and BlackRock. According to two people familiar with the meeting, Miran's remarks on tariff policy and financial markets were described as "incoherent", "incomplete", and "out of his depth".
On April 2 of this year, following Trump's announcement of the so-called "reciprocal tariffs", the U.S. stock and bond markets experienced sharp volatility. With support from Wall Street, countries such as those in Europe seized the opportunity to launch a geo-financial offensive against the country, prompting a large outflow of capital from U.S. Treasury bonds and pushing yields higher. Subsequently, the Trump administration announced a 90-day suspension of the "reciprocal tariffs" on certain countries, which brought some temporary stability to global markets. However, many investors remained anxious, and no new consensus emerged, thereby prompting Miran to convene a meeting with Wall Street heavyweights to explain the policy.
Miran is the key strategist behind Trump's tariff policy and is relatively well-regarded within conservative circles. However, Miran was, after all, just a PhD student at Harvard, something that is rather common within the U.S. government system. Individuals like him typically serve in assistant roles, using their economic knowledge to draft policy documents and support senators or cabinet members who often come from diverse professional backgrounds and lack a solid grasp of economic fundamentals.
Compared to the seasoned financial titans of Wall Street who battle daily in the capital markets, as well as with those veteran policy experts, young students like Miran lack a systematic understanding, let alone the ability to handle complex, strategic-level policymaking. Hence, it is hardly surprising that he struggled to answer tough questions or got stuck during coordination meetings. In a highly specialized society like the U.S., someone like Miran tends to discuss economics purely in economic terms, or finance purely in financial terms, and cannot be expected to think about using the Ukraine war as a strategic lever to regulate Wall Street's financial markets. After all, such systemic, strategic thinking is not something he would have been taught in university. At most, his professors might cite historical examples and offer theoretical perspectives. Understandably, it is completely reasonable that Miran came across as unconvincing in critical situations.
Given the current global situation, what truly worth comparative study is the impact caused by the "Nixon Shock".
The so-called "Nixon Shock" refers to a series of economic measures announced by U.S. President Richard Nixon on August 15, 1971. These included the suspension of the direct convertibility of the U.S. dollar to gold which effectively closed the gold window, a 90-day freeze on wages and prices, and a temporary 10% surcharge on all dutiable imports. Nixon had his reasons for taking such actions, and they bear some similarity to today's context, particularly the complexities of U.S.-Europe relations. During that time, countries like Switzerland, France, and the United Kingdom were demanding to convert their U.S. dollars into gold. In just July and August of 1971, Switzerland redeemed USD 50 million worth of gold, France USD 91 million, and the UK requested the transfer of USD 3 billion in gold from Fort Knox to the Federal Reserve Bank of New York. These "gold grabs" by European countries placed immense pressure on the U.S. dollar, forcing Nixon to act. This background of dollar-gold decoupling has often been overlooked in the past.
The purpose and design of the tariff increase policy were fourfold: First, to pressure countries like Japan and West Germany into revaluing their currencies by imposing a 10% import tariff, thereby reducing the U.S. trade deficit and safeguarding the dollar's international status. Second, to pursue trade balance by raising the cost of imports, which would reduce import volumes, stimulate exports, and improve the U.S. balance of payments with a target of a USD 13 billion improvement. Third, to secure political support by protecting domestic industries such as manufacturing, thus gaining public backing ahead of the 1972 presidential election. The implementation of these tariffs by the Nixon administration was under the same legal basis later used by the Trump administration, i.e., the Trading with the Enemy Act (TWEA) of 1917.
From the perspective of strategic policy design, the Trump administration could have achieved its policy goals by making slight adjustments based on Nixon's approach. However, driven by his own political considerations, Trump abruptly and aggressively raised tariffs by several times. This led to a completely "uncontrollable situation": the flight of capital, U.S. Treasury yields soared, and the euro seized the opportunity to rise.
Raising tariffs was never solely about bringing manufacturing back. The Nixon administration used tariffs as a negotiation lever, aiming to pressure manufacturing-heavy countries like Japan into allowing their currencies to appreciate. Paul Volcker, the renowned economist who at the time served as an economist on the National Security Council and Deputy Secretary of the Treasury, also viewed tariff hikes as a necessary bargaining strategy that could force competitors to make concessions.
Did the "Nixon Shock" successfully achieve its policy goals?
The answer is partially successful, partially not. In February 1973, the U.S. dollar was officially devalued, and by March, the G-10 nations approved a floating exchange rate regime, marking the complete collapse of the Bretton Woods system. However, in contrast to the policy's original design, the dollar went on to experience a long-term depreciation, falling by about one-third over the course of the 1970s. The direct impact of the tariff hikes on trade balance was also limited; in fact, the improvement was largely due to an "unexpected" factor: a massive and prolonged port strike on the U.S. East Coast in the fall of 1971, which significantly reduced imports. On the exchange rate front, the policy did meet its objective, as the dollar appreciated in floating terms against key currencies like the Deutsche Mark and the Japanese yen but this also made imported goods more expensive.
When it comes to politics, the "Nixon Shock" was a major success. By protecting domestic industries and confronting so-called "foreign price-gougers", Nixon gained strong public support in the U.S., laying the foundation for his landslide victory in the 1972 election. At the time, even the American media acknowledged this, viewing the "Nixon Shock" as a political triumph. On August 16, 1971, the Dow Jones Industrial Average rose by 33 points, marking its largest single-day gain at the time. The New York Times editorial stated, "We unhesitatingly applaud the boldness with which the President has moved".
As for the side effects of the "Nixon Shock", it clearly contributed to the stagflation of the 1970s. Between 1973 and 1975, the U.S. experienced stagflation with inflation reaching 11% and unemployment at 8.5%. From an economic data perspective, this suggests the policy was a failure. However, it is also clear that American society's tolerance for economic pain exceeded market expectations, as public support for Nixon remained strong, leading to his overwhelming re-election victory. This offers a relevant lesson for the Trump administration as well: the political impact of inflation should not be overestimated.
In terms of trade improvement, the "Nixon Shock" had a rather limited effect on reducing the U.S. trade deficit, which still stood at USD 6.5 billion in 1972. Moreover, the subsequent increase in government spending from 1973 to 1975, coupled with stagflation and the instability brought by floating exchange rates, had a negative, not positive, impact on U.S. trade. Therefore, similar strategic policies can also be considered failures in terms of enhancing America's trade position.
How then, can we assess the bottom line of Trump's future policies?
By examining the policy evolution during the "Nixon Shock" period, we can infer potential shifts in Trump's future policies, particularly if his key advisor, Miran, still retains the ability to make strategic adjustments.
Trump's "reciprocal tariffs" originally set a baseline of 10%, which means that even if he were to significantly lower the tariff rate to somewhere between 5% and 10%, it would not create major political trouble and would be relatively easy to justify. At the same time, a "reciprocal tariff" within this range could meaningfully support the return of manufacturing to the U.S. and promote "close produce". This is because the average profit margin for U.S. manufacturing typically falls between 5% and 10%, with high-performing high-tech sectors reaching 10% to 20%, and iconic manufacturers like Apple enjoying profit margins as high as 30% to 40%. Clearly, a 10% increase in cost has a significant impact on net profit for manufacturers and would still incentivize a shift back to core markets.
When countries in Europe, Southeast Asia, and East Asia, including Japan and South Korea successfully shift the focus of Trump's policy toward China alone, his "reciprocal tariffs" could even gain a certain degree of broad support, effectively being legitimized from a geopolitical standpoint. Once the issue of "reciprocal tariffs" is settled, there are, in fact, few fundamental problems left in the U.S. economy and industry. The real uncertainty lies in Europe. Europe is clearly stuck in the quagmire of the Ukraine war, and even if "peace" is eventually achieved, it will still be incapable of bearing the burden of Ukraine's post-war reconstruction. As a result, global capital will have few viable destinations, making a return flow to the U.S. highly likely.
Looking at the competition between Europe and the U.S., what progressive governments across Europe are actually doing amounts to a "last resistance". It is inevitable that deglobalization will impact Europe. Sooner or later, this will become a consensus in global markets. Right-wing conservatism, or even the far right, is bound to rise and become mainstream in Europe, just as it has happened in the U.S.
Final analysis conclusion:
When examining today's economic and policy shifts, the impact and responses triggered by the "Nixon Shock" are well worth comparative study. One can infer the possible trajectory of Trump administration policies, particularly if his key advisor, Stephen Miran retains the ability to make adjustments. This means that there is a real chance that some policy changes could occur. In the context of U.S.-Europe competition, what progressive governments in Europe are currently doing is, in effect, a "last resistance. Deglobalization is bound to impact Europe; this will eventually become a widely accepted view in global markets. As a result, right-wing conservatism, even far-right movements, are likely to rise and become mainstream across Europe, mirroring the political shift already seen in the U.S.
