By Michael O’Neill
Proclamations, pronouncements, and provocations from Washington are once again whipping markets into chaos and leaving world leaders scrambling. Is Trump 2.0 an economic resurgence in the making — or the reckless experiment of a megalomaniac?
President Trump’s belittling of Prime Minister Trudeau as the “Governor of the 51st State,” his declaration that “the ownership and control of Greenland is an absolute necessity,” and his January 20 executive order to rename the Gulf of Mexico, the Gulf of America, are dismissed as the bombastic broadsides of a bully.
Since taking office on January 20, he has made 33 significant actions in a bold effort to purge America of what he calls the corrupt practices of the previous administration. He’s gone “whole hog” on tariffs, annihilated 50 years of diplomatic efforts in Gaza, and made a concerted effort to put the “woke” to sleep.
You Have to Break Eggs to Make an Omelet
Trump’s pronouncements and comments seem like the impulsive outbursts of a leader reveling in disruption. But beneath the bluster and bombast lies a strategy — a carefully calculated approach that challenges long-held assumptions about global trade, currency policy, and economic dominance.
Enter Stephen Miran, a 41-year-old with a PhD in economics and Trump’s nominee for the Chair of the Council of Economic Advisors. He is also a former Treasury advisor (Trump 1.0) and currently a senior strategist with Hudson Bay Capital. He is also the author of the November 2024 essay A User’s Guide to Restructuring the Global Trading System.
At its core, this strategy is about breaking the status quo — undoing decades of economic imbalances, redefining trade relationships, and putting the U.S. dollar and manufacturing sector back in the driver’s seat. The key pillars? Reining in the overvalued U.S. dollar, weaponizing tariffs, forcing currency adjustments, and using trade as a geopolitical lever. Wall Street may scoff, and world leaders may balk, but Trump isn’t playing defense — he’s making the first move in a global economic reorganization.
It may be Stephen Miran’s recipe, but President Trump is the chef.
King Dollar to Trade Killer
President Trump has long complained that the U.S. dollar is too strong. For decades, America’s biggest export hasn’t been machinery or oil — it’s been the currency itself. The greenback’s status as the world’s reserve currency has allowed Washington to print money, rack up deficits, and still maintain the world’s trust. But there’s a catch — the dollar’s overvaluation is strangling U.S. manufacturing. A strong dollar makes imports cheaper, exports uncompetitive, and forces American companies to shift production offshore.
Miran’s report lays it out clearly: America’s economic backbone — its industrial base — has been hollowed out, while financial markets flourish on the back of endless capital inflows into U.S. assets.
So, what’s the move? Break the cycle. Devalue the dollar. Force competitors to play fair.
Tariffs: The Trump Trump Card
That’s where tariffs come in. Trump has long touted tariffs as a tool of economic warfare, and Mr. Miran agrees. He argues that tariffs can be used to counterbalance currency distortions, forcing foreign economies to bear the brunt of America’s tax on imports.
Miran’s strategy is behind the White House plan to roll out reciprocal tariffs on every country that charges duties on U.S. imports, which could be imposed as early as today. The global tariffs aren’t just about protectionism — they’re about forcing competitors to shoulder the costs of U.S. dollar dominance.
The Loonie is on the Menu
One of those currencies that will be forced to shoulder the burden of U.S. dollar dominance is the Canadian dollar. Canadians (especially politicians) like to talk about being America’s closest friend and ally with the longest undefended border in the world.
President Trump doesn’t see it that way. He believes that Canada very existence is a direct consequence of America subsiding the economy and that Canada is disrespectful of the US. He told a Davos audience, “We don’t need them to make our cars, and they make a lot of them. We don’t need their lumber because we have our own forests. We don’t need their oil and gas—we have more than anybody. He continues to say that the U.S. has a $200 billion trade loss with Canada, a number he pulled out of his ass.
Canadians can argue until they are blue in the face about the unfairness of Trump’s comments and actions, but the fact remains — Trump is hungry, and a Loonie burger served with a side of poutine is on the menu.
USDCAD Scenarios
Trump’s tariffs on Canadian exports will likely crush the domestic economy. Economists predict GDP could drop by 2.5-5.0%, creating massive business uncertainty and high unemployment, especially in the auto and energy sectors. While Trump seems unfazed by the economic fallout for both nations, auto manufacturers on both sides of the border will be hit hard.
If Trump tears up the USMCA and imposes the threatened 25% (or higher) tariffs on March 4, the risk of recession (or depression) means USDCAD could rally to at least 1.5000.
However, if Trump honors the USMCA and scraps tariffs, USDCAD is likely to trade within the 1.4000-1.4500 range.
Given U.S./CAD interest rate differentials and Canada’s lagging economic growth, the chances of USDCAD breaking below 1.4000 in 2025 are slim. Moreover, with the anti-business, anti-energy Liberal government potentially securing another term, the downward pressure on CAD remains strong.
The madness masks as a method which appears erratic, impulsive, and reckless. But the strategy aligns with Miran’s vision for a realignment of the global economic order and Trump has chugged the Kool-Aid.
Source: A Users Guide To Retructuring the Global Trading System https://www.hudsonbaycapital.com/our_research
