Washington, [Date] – With U.S. President Donald Trump implementing a fresh round of tariffs, global markets and policymakers are bracing for further economic turbulence as Washington explores new ways to pressure trading partners into compliance.
Trump’s aggressive trade stance has already sparked retaliation, with China imposing countermeasures on April 4, sending U.S. stocks tumbling. As tensions escalate, concerns are growing that the administration may turn to even more unconventional economic weapons, leveraging the United States’ dominant position in global finance.
The ‘Mar-a-Lago Accord’ and Dollar Diplomacy
One key strategy under consideration is a coordinated effort to weaken the U.S. dollar, a move reminiscent of the 1985 Plaza Accord. A recent paper by Stephen Miran, Trump’s pick to chair the Council of Economic Advisers, suggests that Washington could pressure foreign central banks into revaluing their currencies against the dollar in exchange for trade concessions or security guarantees.
However, economists are skeptical about the feasibility of such a deal, particularly in Europe and China. “I think that’s a really unlikely scenario,” said Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics. He argued that U.S. tariffs have already been imposed, removing their leverage as a negotiation tool, while America’s shifting stance on global security has made its assurances less credible.
Even in Japan, where authorities have intervened in currency markets, there is little appetite for significant yen appreciation due to fears of triggering deflation. Meanwhile, China remains focused on economic stimulus, making a stronger yuan undesirable.
Weaponizing the Dollar and Financial Infrastructure
If diplomatic efforts fail, some analysts warn that Trump could resort to leveraging the dollar’s status as the world’s dominant reserve currency. This could include restricting access to Federal Reserve swap lines, which provide foreign central banks with emergency dollar liquidity in exchange for collateral.
Such a move would disrupt global financial stability, particularly in Europe, Japan, and Britain, where banks rely heavily on dollar funding. While the Federal Reserve traditionally operates independently, Trump’s reshuffling of key financial regulators has raised concerns about potential political influence over monetary policy.
“It is no longer inconceivable that in a bigger negotiation this could serve as a nuclear threat,” said Spyros Andreopoulos, founder of Thin Ice Macroeconomics, warning that such actions could erode trust in the dollar’s reliability over time.
U.S. Payment Giants as an Economic Weapon
Another potential pressure point is America’s dominance over global payment systems. Visa and Mastercard, which process two-thirds of card payments in the eurozone, could be used as leverage. The U.S. has previously demonstrated its willingness to deploy financial sanctions, such as when Visa and Mastercard halted services in Russia following its 2022 invasion of Ukraine.
Europe has long been aware of this vulnerability, with the European Central Bank warning of potential “economic pressure and coercion.” While discussions on a digital euro are ongoing, implementation remains years away.
European Countermeasures and the Risk of Escalation
European policymakers are now weighing their response to Trump’s economic maneuvers. Possible countermeasures include imposing retaliatory tariffs or restricting U.S. banks’ access to EU financial markets. However, such moves carry risks, as Wall Street’s global influence could lead to unintended financial repercussions for European banks operating in the U.S.
Despite these risks, international banking executives told Reuters that they are increasingly concerned about the potential for economic retaliation from Europe in the coming months.
With Trump showing no signs of easing his hardline economic policies, global markets remain on edge, fearing that an escalating trade war could spill over into a broader financial confrontation.