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author A great colleague of Carnegie International Peace

There was justified concern this month that the chaos it launched on financial markets all over the world through the “Tahrir Day” tariff in the Trump administration may ultimately undermine the global credibility of the US dollar. But this should not turn attention from a more serious discussion on how the global role of the dollar affects the American economy.

Maintaining the role of the dollar as the dominant “safe” currency requires that the American economy absorb what the economist Danny Roderick described as what he described as Inherent Between global integration and national sovereignty. It indicates that countries that choose more global integration must abandon control of their local economies, while countries that choose to maintain local control must limit the extent to which their economies are open to commercial and capital flows.

In the world of Globalise creates this trade tensions. It is one thing if all countries choose to give up the same degree of control of their local economies in favor of more globalization. It is completely different if some major economies choose to keep controlling their local economies.

This is because in every country, internal and external economic imbalances must always be in line with. When some countries restrict capital and trade flows to maintain favorable local conditions by controlling their external imbalances, they can actually impose their internal imbalances on their commercial partners who retain the lowest control of their commercial and capital accounts. British economist Joan Robinson He called these The beggar-Maybur trade policies, and said that it will eventually lead to a rise in the global trade conflict.

For example, when the local demand state is suppressing to support its manufacturing, in an open global trading environment, it can usually reverse commercial surpluses caused by market forces. But by restricting its commercial accounts and capital and interfering in its currency, this country can prevent such amendment. In this case, the surplus of manufacturing trade should be absorbed by its partners who are in much lower control of their commercial accounts and capital. What is more, with its share of global manufacturing in relation to its share of global demand, and more open commerce The partners should decrease.

For this reason, it is not just a coincidence that the United States, with its deep and good financial market Much lower than the global averageUnlike economies like China with ongoing surpluses, which have much higher manufacturing shares than the global average. Industrial policies aimed at restructuring local economies that are also greatly controlled in restructuring the economies of their most open business partners.

Obviously, trade and capital policies in Washington were irregular-President Donald Trump announced on Wednesday a 90-day stand in a “mutual” tariff for most countries except China. These policies are unlikely to be effective in dealing with the causes of American economic imbalances and leave the door open for increases in forms other than fire subsidies.

But realizing defects in these policies should not mean rejecting the structural problems they seek to address. The truth remains that global economic imbalances are real. The challenge is not whether the United States should work to correct these imbalances, but how it should do it in an effective and sustainable way. The best solution lies in a more coordinating approach to global economic rule, perhaps in forming a new customs union along the lines proposed by Keynes in 1944. To join, countries must recognize the external results of their policies and must take steps to maintain local demand and local offer in the total balance.

However, if the world is unable to reach such an agreement, the United States is justified in unilateral behavior to reflect its role in absorbing politics abroad, as it is now. It is possible that the most effective method by imposing controls at the expense of American capital that limits the ability of the two countries to achieve a balance between their surpluses by obtaining American assets. While this may initially contradict the current American policy during the Trump era, which wants to increase foreign direct investment, if done properly, capital controls will actually have a major impact on direct investment. There is a less effective method that is through controls at the expense of American trade, with bilateral definitions in particular a breach to address the root causes of commercial imbalances.

The domination of the dollar in global trade and financing has always been a clear benefit to the American economy, but this assumption is increasingly challenged. Although he takes advantage of Wall Street and the global owners of the transporting capital, these benefits come at a cost to American manufacturers and American farmers.

In a world in which some countries manage the activity of their external imbalances, while others are not, the role of the US dollar as the basic safe currency has made America the head of empowerment for global economic distortions. Treating these imbalances requires a basic reassessment of the rules that govern global trade and capital flows.