Trump’s Hidden Economic Weapon: Lessons from Roosevelt and Nixon

Much has been said and written about what will happen on April 2, the so-called ‘day of liberation’ as Trump calls it. On this day, the U.S. will impose tariffs case-by-case against all its trading partners, regardless of whether they are ‘friends’ or ‘enemies,’ who happen to have a trade surplus with the U.S. As we wait for April, economic history suggests that Trump’s arsenal extends beyond mere tariffs. The dollar remains the primary weapon in America’s economic strategy globally, and this hasn’t yet been fully utilized. In 1933, Roosevelt confiscated private gold from Americans to bolster the dollar. Then, in 1971, Nixon effectively seized foreign gold by ending the dollar’s convertibility into gold, nullifying the Bretton Woods Agreement. These actions had significant consequences domestically and internationally, ultimately strengthening the U.S.’s position in global markets. Today, despite pressures, the dollar still dominates financial transactions worldwide. One potential move Trump could make involves controlling the Federal Reserve’s swap lines, which provide dollars to central and commercial banks globally. If Trump were to regain control over the Fed—whether by persuasion or coercion—and alter these swap line policies, it could destabilize the international financial system. While such an action seems unlikely, recent articles in major outlets like Reuters suggest discussions around changing the status quo of these swap lines. As we await the ‘show’ on April 2, only time will tell if Trump intends to wield the dollar in ways reminiscent of his predecessors.