Article by Nathalie Janson, Associate Professor of Economics in the Finance Department at NEOMA

Ever since his second term of office began, Donald Trump has made multiple contradictory announcements concerning tariffs. They are at times applied, at other times suspended, and these protectionist stops and starts sustain an illusion: that of an American trade deficit that is synonymous with decline. Yet to interpret them in this way ignores a more complex reality, closely related to the dominant position of the dollar on the world stage.

The dollar, a cornerstone of American power

Since the end of the Bretton Woods agreement in 1971, the dollar has replaced gold as the standard for exchange. It has become the principal currency of international reserves, supplying the global financial markets. To satisfy this structural demand for dollars, the United States must export its currency – which implies, in parallel, importing goods, services and assets. The trade deficit is therefore not an anomaly, but the logical reflection of the international role of its currency.

Unrivalled liquidity

This phenomenon grew stronger with the financialisation of the economy since the 1980s. The American markets – especially those of Treasury bills – offer unparalleled depth and liquidity. They attract public and private capital from all over the world, reinforcing the dollar’s pre-eminence.

The trade deficit as a driver of growth

Rather than seeking to reduce it by inflicting tariffs, this trade deficit should be seen for what it is: a lever of influence and a driver of growth. It supports the purchasing power of American households and finances innovation by attracting start-ups from all over the world. To seek to suppress it is to give up on one of the driving forces of American economic power.