Tariffs were sold as leverage. The mechanism told a different story.
When April 2025's Liberation Day tariffs landed, the dollar weakened, Treasury yields rose, and investors moved to gold. The opposite of what asserting economic dominance looks like.
The mechanism: dollar reserve status rests on predictability. Extreme policy uncertainty makes foreign holders hedge their dollar exposure. Hedging means selling dollars. That selling is itself dollar-negative.
The tool meant to strengthen US economic position pressured the system that makes US power possible.
A year later, the Supreme Court clipped IEEPA tariff authority. The replacement — Section 122 — is capped at 15%, 150 days. The legal constraint reduces the uncertainty premium.
Structural dollar dominance doesn't come from tariffs. It comes from the predictability of US legal and financial systems. Anything that erodes that predictability taxes the privilege.
When April 2025's Liberation Day tariffs landed, the dollar weakened, Treasury yields rose, and investors moved to gold. The opposite of what asserting economic dominance looks like.
The mechanism: dollar reserve status rests on predictability. Extreme policy uncertainty makes foreign holders hedge their dollar exposure. Hedging means selling dollars. That selling is itself dollar-negative.
The tool meant to strengthen US economic position pressured the system that makes US power possible.
A year later, the Supreme Court clipped IEEPA tariff authority. The replacement — Section 122 — is capped at 15%, 150 days. The legal constraint reduces the uncertainty premium.
Structural dollar dominance doesn't come from tariffs. It comes from the predictability of US legal and financial systems. Anything that erodes that predictability taxes the privilege.