The “deep state” of the United States threatens the ability of President Donald Trump to exercise policy and advance his plan for the transformation of the national and global economy.
Tariffs were included among the measures to address the fact that the United States’ possession of the reserve currency turned from an “exorbitant privilege” into an excessive burden, as it forced the country into massive trade deficits while significantly worsening the fiscal position of the country, with debt soaring above 28 trillion dollars and servicing costs rising above 1 trillion dollars, along with the “twin” deficits.
The judicial decision
The Supreme Court of the United States annulled the extensive global reciprocal tariffs, on average they were weighted above 12% from 1.5% to 2.5% previously, striking his emblematic economic policy and delivering his greatest legal defeat since his return to the White House.
By a vote of 6 to 3, the court ruled that Trump exceeded his authority by invoking the International Emergency Economic Powers Act (IEEPA) to impose his “reciprocal” tariffs against countries on a global scale, as well as targeted import levies which the administration argues concern the problem of illegal fentanyl trafficking.
“It is a disgrace,” the President of the United States stressed, in his first reaction to the decision, while describing the judicial ruling as unpatriotic and driven by political motives.
The judges did not refer to the scope of refunds importers are entitled to, leaving these issues to be examined by lower courts.
If fully permitted, the refunds could reach up to 170 billion dollars, an amount greater than half of the total revenues generated by Trump’s tariffs.
The White House and Donald Trump stated that he is not abandoning the exercise of economic policy, he will quickly replace the tariffs using other legal options, although these alternatives tend to be either more time consuming or more limited compared to the broad powers Trump had invoked under the International Emergency Economic Powers Act (IEEPA).
The Supreme Court’s decision may reduce the average effective tariff of the United States by more than half.
An analysis by Bloomberg Economics prior to the decision concluded that a broad ruling against Trump would reduce the average tariff from 13.6% to 6.5%, the lowest level since March.
The court majority stated that the 1997 law does not permit the imposition of tariffs.
The IEEPA, as the law is known, provides the president with a multitude of tools to address national, foreign, and economic emergencies, but it does not explicitly mention tariffs or taxes.
“When Congress grants the authority to impose tariffs, it does so with clarity and strict limitations,” wrote Chief Justice John Roberts in the majority opinion.
“It did not do so in this case.”
Two judges appointed by Trump, Neil Gorsuch and Amy Coney Barrett, joined Roberts’ majority along with three liberal judges. Justices Brett Kavanaugh, Clarence Thomas, and Samuel Alito dissented.
Kavanaugh wrote in his reasoning that the refund process would be “likely chaotic.”
The United States Constitution grants Congress, not the president, the authority to impose taxes and tariffs.
However, Trump invoked the IEEPA to impose tariffs without Congressional approval.
United States Treasury Secretary Scott Bessent stated that the administration will examine other legal options.
The alternatives include legislative provisions related to national security and the competencies of the Office of the United States Trade Representative (USTR).
Trump revolution - The transition to a post-American economic order
Why, however, is the establishment reacting so fiercely against President Trump’s policy?
The emerging post American phase of the global economy already constitutes a reality.
The economic strategy of United States President Donald Trump, through a systematic revision of the rules governing trade, investment, and geopolitical alliances, is bringing about a structural transformation of the international economic order.
This represents a restructuring of the regulatory and institutional framework that governed the global economy after 1945.
The formulation of the question of whether the United States or China will remain at the center of the global economy, or the primary focus on trade balances, leads to a dramatic underestimation of the scale and consequences of the shift triggered by Trump’s approach, as well as the extent to which the previous American framework decisively shaped the economic decisions of nearly every state, financial institution, and enterprise worldwide.
The postwar American hegemonic framework provided a network of international public goods that functioned as the foundation of global economic stability.
Hegemonic “security” as a global public good at the expense of the United States
The contribution of the United States to maintaining freedom of navigation, the stability of financial markets, the protection of investments from arbitrary state intervention, a stable dollar securing transactions between businesses and the storage of value, as well as the institutional consolidation of a rule based order, can be analyzed as a form of collective security.
Within this framework, the provision of safe dollar denominated assets and the guarantee of access to the American market constituted mechanisms of systemic risk mitigation.
Partner states enjoyed reduced transaction costs and lower uncertainty, strengthening cross border investment and specialization based on comparative advantage.
The United States collected “premiums” from countries participating in the system it led in various ways, including through its ability to shape rules that rendered the American economy the most attractive destination for investors.
In return, countries integrated into the system were relieved of the need to undertake significant efforts to shield their economies from uncertainty, allowing them to pursue commercial activities contributing to their prosperity.
The economic approach of Donald Trump reorders this relationship as it turns toward the recovery of economic sovereignty.
The hegemonic function shifts from the provision of collective security to an instrument of leveraged bargaining.
Market access, military guarantees, and regulatory cooperation are reframed as conditional exchanges, introducing increased policy uncertainty.
Trade policy, tariffs, investment restrictions, and prohibitions on technology transfers function as instruments of strategic pressure rather than neutral tools regulating capital and goods flows.
The reshaping of the landscape
Trump is not the only factor responsible for the collapse of the economic regime that prevailed for 80 years.
The list of contributing factors is long.
The rise of China and the reaction of the United States contributed significantly.
The same applies to climate change, the progress of digital technology, and the understandable loss of confidence of the United States electorate toward the ruling elites, following the country’s interventions in Afghanistan and Iraq, the global financial crisis of 2008 to 2009, and the COVID-19 pandemic.
However, the policies of the Trump administration constitute a clear turning point.
The Trump administration argues that this is simply reciprocity or fair treatment for countries that had been exploiting the United States for decades.
Such as, for example, the fact that China subsidizes its businesses in violation of the rules of the World Trade Organization, in order to gain an unfair comparative advantage, or maintains its currency at a low exchange rate, with a dual exchange system for domestic and external use, while exercising tight control over capital flows.
The new geography of international economic relations
Without the “security” provided by the United States, new links between economies and new investment routes will emerge.
At the same time, each state will shape its own security conditions within a multilateral framework.
At the same time, provisions for economic security are reshaping the field of economic policy, safeguarding supply chains, domestic champions, raw materials, etc.
However, these mechanisms will be more expensive to create and maintain, less accessible, and less reliable.
States will undoubtedly seek to establish their own security regimes, yet these efforts will inherently be more costly, less effective, and above all will face growing insecurity.
The course of the global economy has never been smooth. After the “earthquake” triggered by the shift in the regime of international economic relations under Trump, the ground has become markedly more uneven.
Why the United States will stop providing global public goods
In a speech delivered in April 2025, Steve Miran recorded in detail the pillars of the new policy of economic protectionism. United States international leadership from now on will concern only the national interest.
The Trump administration will no longer tolerate other countries acting as free riders in the American led international order, benefiting from the American contribution to it.
According to Miran, the international order that became possible after the war is not based on a system of internal institutions and international rules, but simply on “American military power that ensures our financial stability and the credibility of United States borrowing.”
He highlights the cost of United States financial dominance. Despite the fact that demand for dollars has kept borrowing rates low in the long term, it has created a distortion in foreign exchange markets, namely the expensive dollar.
This reality imposes excessive long term burdens on businesses and workers, rendering United States goods and labor internationally uncompetitive, leading to a reduction of the industrial workforce by more than one third from its historical peak, as well as a reduction of the United States’ share in global industrial production by 40%.
For Miran, the dollar is also responsible for the fact that foreign states, by purchasing dollar denominated assets, manipulate their currencies in order to keep their exports cheap.
The injection of such large liquidity into the economy from abroad due to the dollar system reinforces economic imbalances and breeds crises, according to Miran.
As an example, he notes that in the years preceding the financial crisis of 2008, China, together with many foreign financial institutions, increased their portfolios in United States debt linked to the real estate market, contributing to the expansion of the housing bubble by channeling hundreds of billions of dollars in credit into the housing sector without assessing whether these investments had any rational basis, adding that China played a substantial role in the incubation of the Global Financial Crisis of 2008/2009.
Tariffs align with the national interest - Why economists were wrong
He argues that the attacks against the tariffs imposed by the Trump administration from nearly the entire body of economists are based on faulty assumptions, because the models used to study international trade either assume that trade deficits do not exist or that deficits are short lived and rapidly self correcting through adjustments in monetary policy.
According to standard economic models, trade deficits should trigger a depreciation of the dollar, which would reduce imports and increase exports until full rebalancing of the trade balance is achieved. In that case, tariffs may be unnecessary, since the balancing of trade flows would occur automatically and, under that view, the imposition of tariffs could only worsen the current situation.
However, this view contradicts real world data, according to Miran.
The United States has experienced trade deficits for five decades, and these have widened sharply in recent years, moving from approximately 2% of GDP during the first Trump administration to nearly 4% of GDP under the Biden administration.
This occurred while the dollar strengthened rather than weakened, contrary to what models and mainstream economic thinking assume, as long term rebalancing of trade flows does not appear to occur automatically.
The most important reason for this, according to Miran, is that the models fail to account for the supply of the global reserve currency by the United States. The reserve currency status matters and because demand for the dollar appears inexhaustible, the dollar remained excessively strong for trade flows to rebalance, even over a period of five decades.
Why the imposition of tariffs will have a positive impact
According to Miran, by imposing tariffs against export oriented states, the United States can improve its economic outcomes, increase revenues, and impose massive losses on the targeted country, even if full retaliatory tariffs are activated.
In this sense, the analysis of what economists call the “incidence of tariffs,” namely who ultimately bears the burden of tariffs, producers, consumers, or exporters, shows that a large share of the burden is paid by the country on which tariffs are imposed.
He explains his reasoning. Countries with large trade surpluses are inherently rigid in their export orientation, meaning they lack the flexibility to easily find alternative sources of demand capable of substituting the United States market.
By contrast, America has numerous substitution options on the supply side. It can rely on domestic production or imports from countries that adhere to fair trade rules, instead of countries which, according to Miran, exploit the international trading system to advance their national interests.
The power asymmetry arising from the fact that the United States is the largest market in the world implies that third countries will ultimately bear the cost of tariffs.
This time, the tariffs imposed on “Liberation Day,” on 2 April 2025, will help finance both tax cuts and deficit reduction, notes Miran.
He clarifies that tariffs are not imposed merely to generate revenue. For example, the President’s reciprocal tariffs were designed to address both tariff and non tariff barriers and other forms of unfair treatment of the United States by its trading partners, such as currency manipulation, dumping, and state subsidies ensuring unfair competitive advantage.
Revenue is a positive side effect and if partially used for tax reduction, it can support measures strengthening domestic competitiveness and productivity, which would push United States exports upward, concluding his argument.
What is certain is that the path toward the recovery of economic sovereignty envisioned by Trump will not be without turbulence.
The judicial blockade shows that the global establishment is prepared to wage a fierce battle to overturn Trump’s plan. However, this is now a rear guard battle.
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