October 24, 2024

How Donald Trump Could Undermine the U.S. Dollar

By: Edward Fishman

No matter who wins the upcoming U.S. presidential election, one thing is all but certain: The United States will continue relying on sanctions as its go-to foreign policy tool. Each 21st-century American president has imposed more sanctions than the last. Donald Trump issued nearly twice as many sanctions per year as Barack Obama, and Joe Biden has already doubled Trump’s tally.

This points to a structural reality: In a world of rising tensions among nuclear-armed states, economic war is far more palatable than actual war. Yet America’s addiction to sanctions flies in the face of high-level warnings that the habit could have dire consequences. Former Treasury Secretary Jack Lew famously cautioned that “overuse of sanctions” could undermine U.S. economic leadership and herald the demise of the almighty dollar.

The point here isn’t that sanctions can’t hurt the dollar — they can. But the real danger is misuse rather than overuse.

But the past few years have taught us a key lesson: The risk isn’t in using sanctions too much, it’s in wielding them rashly and alone. And this lesson reveals that the next U.S. president’s sanctions policy could have serious ramifications for the dollar’s global role — especially if the next president is Donald Trump.

To understand this, we need to revisit 2018, Trump’s banner year for sanctions. That May, he withdrew the U.S. from the Iran nuclear deal and unilaterally reimposed all Obama-era sanctions on Tehran under the tagline “maximum pressure.” While Iran’s economy tottered as businesses fled the market to avoid U.S. penalties, the sanctions failed to achieve their goals. Without international support or a clear strategy, Iran rebuilt its nuclear program and retaliated with proxy attacks on U.S. forces in Iraq and drone strikes on Saudi oil facilities.

Read the full article on POLITICO.

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