Once upon a time......in an earlier century, a distinguished man wearing thick-rimmed spectacles called the dollar an “exorbitant privilege” for America. His name was Alan Greenspan, the Chair of the US Feds. In those halcyon days, every country wanted the greenback. If India bought oil from Saudi Arabia, it paid in dollars. If Saudi Arabia bought cars from Japan, it paid in dollars. If Japan bought wooden furniture from China, it paid in dollars. America was not on the trade invoice, but the American dollar was omnipresent!This mounting pile of dollars earned by non-Americans were SWIFT-ly shoveled to New York to buy US treasury bonds. That was the “exorbitant privilege”. Global trade happened in dollars; global assets were held in dollars. America just sat back prettily, printing dollars and treasury bonds to feed this insatiable appetite. American costs and interest rates plummeted, the dollar got stronger, egging Americans to gorge on cheap goods supplied by the rest of the world—fancy dresses, cars, toys, phones, computers, all produced in distant lands by cheap labour in low-cost factories, sold at ever-cheaper loans and prices to American consumers.But trouble was brewing in paradise.American factories were closing since it was so much easier and cheaper to import. Shopfloor workers were losing jobs. Yet, this cry of pain was at the fringe, drowned in ever-more cheerful music. Because ever-softening interest rates and a forever-strengthening dollar were fueling another frenzy—galloping asset prices. Stocks. Bonds. Housing equity. People got addicted to the “wealth effect”.It was a delicious double whammy, as Americans consumed with abandon, yet felt richer as personal assets shot up in value. A few people were in pain, victims of globalisation, but most were in a heavenly bubble. Until it burst...In September 2008, the overheated housing mortgage market crashed. Major banks, insurance firms, and manufacturing companies collapsed and received bailouts.Ironically, the US Fed printed even more dollars, issued more bonds, interest rates kept falling, dollar kept strengthening. Eventually, stock prices and consumption roared back to life. The party started again.Until March 2020. COVID-19, the pandemic! Ironically again, new dollars/bonds were printed more furiously than ever before, interest rates fell to near-zero, but the dollar still did not soften. Before long, stock prices started leaping. American tech companies, the fabled FAANG (Facebook, Apple, Amazon, Nvidia, Google) –also Microsoft, Netflix, Tesla – became incredibly valuable.But now there was a new joker in the pack. Inflation. Instead of consumption picking up, consumer prices took off, bolstered by a COVID-disrupted supply shock, and COVID-induced “helicopter money”. The vicious twosome – job losses and inflation – destroyed the magic of globalism. The feel-good sentiment evaporated.November 2024. Into the Valley of Death rode a maverick orange-haired “saviour”. Donald Trump. Real estate czar. Showman. Golfer. Unrestrained by any public policy experience or academic qualms. He did not see any “privilege” in a strong dollar. “Our dollar is too strong and it’s killing us”.Unboxing Trump's Tariff Rationale: Fortress America Seeks Solace in the PastFor Donald, it was an “exorbitant burden”. Manufacturing jobs had fallen by a third from their peak; share in global production had fallen by 40 percent. China could make two-thirds of the world’s cars, and over half of steel, aluminum, and ships. America trailed, with just a fifth of shipbuilding and less than two percent of aluminium capacities. More gallingly, China held 70 percent to America’s piffling 12 percent in the race to produce rare earth metals. In sector after sector, China had de-industrialised and hollowed out America.Now, Donald will have none of it: THIS IS UNFAIR. Our dollar gives the world financial trust and security. Our treasury bonds give them a safe haven. But we suffer. A strong dollar kills exports, gives us humongous and chronic trade deficits. We keep on printing treasuries for them but run up nearly $35 trillion of debt on our balance sheet.American multinationals mint money by building factories overseas, but the American worker suffers. This is an EXORBITANT FRAUD – not “privilege” – against America.2 April 2025. “Exorbitant tariffs”! Most experts called it an “exorbitantly” hasty and destructive assault to lower the dollar and coerce manufacturing jobs back to America. But what followed is a 90-day pause for all countries except China, where an “exorbitant trade war” is in the offing. The outcome is perilously unknown.So, is it an “exorbitant demise” of the American dollar’s fairy tale? Or could it play out better? Only one man can answer it, the orange-haired “saviour”. Donald Trump. Real estate czar. Showman. Mar-a-Lago golf championship winner. POTUS.Just Like Nixon, Trump is Making China Great Again!It’s Donald’s game now.He has a plethora of angelic options to resuscitate his roadkill:Revive American manufacturing in key hi-tech areas by cloning his predecessor’s CHIPS and Science Act, i.e. vigorously push a matrix of incentives, subsidies, and investment tax credits.Stop obsessing about onshoring low-tech, labour-intensive manufacturing; that obsession is value destructive, not accretive.Quadruple Joe Biden’s initial $1.2 trillion infrastructure investments with a bigger Build America, Buy America Act; to be financed by a Sovereign Infra Fund that could issue American paper, an alternative to treasuries, to foreign investors.Use tariffs and hard diplomacy to push American arms’ sales on a much bigger scale.Focus on America’s $1-trillion-plus of services exports, where it’s a global leader and enjoys a surplus even with China! America’s genuine strength is in designing/building modern, hi-tech services for the world. Don’t ignore or belittle that huge advantage.Use the newfound tariff muscle to launch Plaza Accord 2.0, where key trading countries are “persuaded” to allow a fast but sustainable depreciation of the dollar. Softened by coercive tariffs, they will play ball.If Donald takes these angelic steps, the dollar’s “exorbitant” fairy tale will continue. The demons of undervaluation, over-indebtedness, lower exports, higher deficits, and manufacturing winter will get slayed, slowly, painlessly, but surely.Else it shall be the "exorbitant" end!(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)