Note: Since Trump came to power again, he has launched a series of incredible economic policies, especially the "reciprocal tariff" measure announced on April 2 to impose tariffs on most countries in the world. According to market rumors, these policies are all from economist Stefen Miran, who is currently the chairman of the White House Council of Economic Advisers. In November 2024, Stefen Miran wrote a so-called "Milan Report": "A User's Guide to Reconstructing the Global Trade System". This report is considered to be the behind-the-scenes theoretical guidance for Trump's series of economic policies. On April 7, 2025, the official website of the White House published Stefen Miran's latest speech at a recent event, which seemed to defend Trump's "reciprocal tariffs". AIMan@Golden Finance compiled.
Remarks by Stephen Milan, Chairman of the White House Council of Economic Advisers, at a Hudson Institute Event
Today, I want to talk about the United States’ provision of what economists call “global public goods” to the world. First, the United States has provided the security umbrella that has ushered in the most peaceful era in human history. Second, the United States has provided the dollar and U.S. Treasury bonds, reserve assets that have enabled the global trade and financial system that has supported the most prosperous era in human history.
Providing both of these things has been costly for us. On the defense side, our men and women in uniform have taken heroic risks to make our country and the world safer, defending our freedoms generation after generation. We have levied high taxes on hardworking Americans to fund global security. On the financial side, the dollar’s reserve function has led to persistent currency distortions and, along with unfair trade barriers from other countries, has created unsustainable trade deficits. These trade deficits have hit our manufacturing sector hard, and many working-class families and their communities hard, simply to make it easier for non-Americans to trade with each other.
Let me explain that when I say “reserve currency,” I mean all of the dollar’s international functions, including those related to private savings and trade. The example I often use is that when private institutions in two different countries trade with each other, the transaction is usually denominated in dollars because of the United States’ status as the issuer of the reserve currency. This trade means that savings are in the form of dollar securities, usually U.S. Treasury bonds. So Americans are not only paying for their own peace and prosperity, but they are also paying for non-Americans.
President Trump has made it clear that he will no longer tolerate other countries free-riding on us or taking advantage of us in terms of national security or trade. In its first 100 days in office, the Trump Administration has taken decisive action to recalibrate our defense and trade relationships to put Americans on a fairer footing. The President has pledged to rebuild our battered industrial base and to fight for trade terms that put American workers and businesses first.
I’m an economist, not a military strategist, so I’ll talk more about trade than defense, but the two are closely linked. To illustrate how this works, imagine two foreign countries, say China and Brazil, trading with each other. Both countries’ currencies lack credibility, liquidity, and convertibility, making trade between them challenging. Yet, because they can trade in dollars, which are backed by U.S. Treasuries, they are able to trade freely with each other and prosper. This trade is only possible because America’s military power ensures our financial stability and the credibility of our borrowing. We cannot take America’s military and financial dominance for granted; the Trump administration is determined to preserve them.
But our financial dominance comes at a cost. While demand for dollars does keep our borrowing rates low, it also keeps currency markets perpetually distorted. This process places undue burdens on our businesses and workers, making their products and labor uncompetitive on the global stage, causing our manufacturing workforce to decline by more than a third since its peak and our share of world manufacturing output to fall by 40 percent.
We need to be able to make products here at home, as we saw during the COVID-19 pandemic, when many of our supply chains could not be sustained without reliance on our greatest adversary, China. Clearly, we should not be relying on our greatest adversary for critical equipment to keep our people safe. Nor should we allow our biggest adversary to benefit so greatly from the international security and financial architecture that we financed.
Providing reserve assets has other undesirable side effects. Other countries may buy our assets to manipulate their own currencies to keep their exports cheap. In doing so, they end up pumping a lot of money into the U.S. economy, exacerbating economic vulnerabilities and causing crises. For example, in the years leading up to the 2008 financial crisis, China and many foreign financial institutions increased their holdings of U.S. mortgages, which fueled the housing bubble and poured hundreds of billions of dollars of credit into the sector without considering whether these investments were justified. China played a major role in causing the global financial crisis. It took us nearly a decade to recover until President Trump got us back on track during his first term.
Continuing to provide these two global public goods requires, in my view, improved burden-sharing at the global level. If other countries want to benefit from America’s geopolitical and financial protection, then they need to do their part and pay their share of the costs. These costs cannot be borne solely by ordinary Americans, who already pay a lot.
The best outcome is that the United States continues to create global peace and prosperity and continue to issue the reserve currency, while other countries not only benefit from it but also share the costs. By improving the burden-sharing mechanism, we can enhance resilience and maintain the global security and trading system for decades to come.
In addition, this is not only about fairness, but also about capability. We are under siege by hostile forces who are trying to undermine our manufacturing and defense industrial base and disrupt our financial system; if our manufacturing capacity is hollowed out, we will not be able to provide national defense or continue to provide reserve assets. The President has made it clear that the United States is committed to continuing to issue the reserve currency, but the system must become more fair. We need to rebuild our industry to demonstrate the strength necessary to maintain reserve currency status, and we need to be able to pay for it.
What forms could burden sharing take? There are many options, but here are some ideas:
First, other countries could accept tariffs on their exports to the United States and not retaliate, which would provide revenue to the U.S. Treasury to finance the provision of global public goods. The key is that retaliation will only exacerbate, not improve, burden sharing and make it harder for us to afford global public goods.
Second, they can stop unfair and harmful trade practices by opening their markets and increasing imports from the United States;
Third, they can increase defense spending and purchase more products from the United States, buy more American-made goods, reduce the burden on our military personnel, and create jobs in the United States;
Fourth, they can invest and build factories in the United States. If they make products in the United States, they will not face tariffs;
Fifth, they can make payments directly to the U.S. Treasury to help us fund global public goods.
Tariffs deserve special attention. Most economists and some investors believe that tariffs are counterproductive at best and extremely harmful at worst. They are wrong.
One reason the economic consensus on tariffs is so wrong is that nearly all the models economists use to study international trade assume that trade deficits either don’t exist or that they are transient and will quickly correct themselves through monetary adjustments. According to the standard model, a trade deficit causes the dollar to depreciate, which reduces imports, increases exports, and eventually eliminates the trade deficit. If that were true, tariffs might not be necessary because trade would balance itself out over time, and, in this view, intervening with tariffs would only make the situation worse.
However, this view does not match reality. The United States has been running current account deficits for five decades, and they have widened dramatically in recent years, from about 2% of gross domestic product (GDP) during the first term of the Trump administration to a high of nearly 4% of GDP under the Biden administration. And during that time, the dollar has appreciated, not depreciated!
The long-term picture is clear: the models are wrong. One reason is that they fail to take into account the United States’ role as the issuer of the world’s reserve currency. Reserve currency status is important, and because demand for dollars has always been strong, the strength of the dollar has made it impossible for international capital flows to balance, even after fifty years.
Some recent economic analyses that allow for the possibility that trade deficits may persist and not rebalance automatically are more in line with U.S. realities. These analyses show that by imposing tariffs on exporting countries, the United States can improve economic conditions, increase fiscal revenues, and impose large losses on the countries subject to tariffs even if the other side retaliates comprehensively.
In this sense, analyses of what economists call “tariff burden attribution” show that a large portion of the tariff burden is “borne” by the countries on which we impose tariffs. Countries with large trade surpluses are quite inflexible—they can’t find other sources of demand to replace the U.S. market. Instead, they have no choice but to export, and the United States is the world’s largest consumer market. In contrast, the United States has many alternatives: we can produce products domestically, or we can buy products from countries that treat us fairly, rather than from countries that take advantage of us. This difference in bargaining power means that other countries end up bearing the cost of tariffs.
In 2018-2019, China borne the cost of President Trump’s historic tariffs through currency depreciation, which meant that the Chinese people became poorer and had less purchasing power on the global stage. The tariff revenues paid by China were used to finance President Trump’s tax cuts for American workers and businesses. This time, tariffs will help finance tax cuts and reduce the fiscal deficit.
Tax cuts for the American people, financed in part by revenue provided by foreigners, will usher in President Trump’s new golden age of economic growth, vitality, and unprecedented opportunity. Reducing the fiscal deficit will help lower U.S. Treasury bond rates, which will in turn lower mortgage rates and consumer credit card rates, stimulating economic prosperity.
It is important to note that tariffs are not just about raising fiscal revenue. For example, the President’s reciprocal tariffs are designed to address tariff and non-tariff barriers and other forms of unfair competitive practices such as currency manipulation, dumping, and subsidies to gain unfair advantage. Raising fiscal revenue is a nice side effect, and if part of it is used to reduce taxes, it can be a powerful boost to competitiveness and U.S. exports.
Burden sharing allows the United States to continue to lead the free world for decades to come. It's not just about fairness, it's about viability. If we don't rebuild our manufacturing sector, we will be less able to provide the guarantees we need for our own security and to prop up our financial markets. The world can still enjoy the U.S. defense umbrella and trading system, but it must start paying for them. Thank you, and I'll be happy to take some questions.
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