Zafar Iqbal
The world watches as American foreign policy grows increasingly aggressive while trade barriers rise higher each year. These shifts did not emerge from nowhere. They reflect something more fundamental than political ideology or nationalist fervor. America faces an economic crisis rooted in decades of structural transformation, and what we call Trumpism represents one response to this reality.
Trumpism prioritizes American interests through protectionist trade policies, deregulation, and strict immigration controls. The philosophy promises to revive American industries and protect domestic jobs. Yet these policies create uncertainty across global markets. They disrupt established patterns of international trade and investment. They challenge the assumptions that guided capitalism and free markets for generations.
To understand this crisis, we must trace how American economic dominance evolved and then began to crumble. Several pivotal moments reshaped the global financial system in ways that now threaten American stability.
The story begins with Bretton Woods in 1944. After the conference, Britain and its allies abandoned the gold standard for their currencies. But the dollar remained convertible to gold at thirty-five dollars per ounce for foreign governments. This arrangement lasted three decades. The Bretton Woods system required other nations to make their currencies convertible into dollars, establishing American currency as the global reserve. The International Monetary Fund emerged to monitor exchange rates and provide emergency lending. This system introduced a new form of international finance that would shape development for decades.
By 1971, cracks appeared in the foundation. American inflation rose while confidence in the dollar fell. Gold reserves drained away. The United States abandoned fixed-rate dollar convertibility and embraced fiat currency. The Bretton Woods system formally ended in 1976. Currency values began to fluctuate wildly. Some nations even returned to barter trade, seeking stability in the chaos.
Oil producers suffered immediate losses as the dollar’s value deteriorated. Their oil sold in dollars, so dollar depreciation cut their real income. They considered pricing oil in gold instead. Then came the crucial 1974 petrodollar agreement between America and Saudi Arabia, later joined by other oil exporters. Oil would be priced and sold exclusively in dollars.
This arrangement transformed American economic reality in profound ways. Other nations needed dollars to buy oil. They also wanted American goods and services. America therefore had to maintain trade deficits, allowing dollars to flow outward. In return, cheap goods and services flowed back to American consumers. Oil producers recycled their surplus dollars through American investments, buying Treasury bonds, equities, real estate, and other financial assets. They parked their wealth in American banks and built sovereign wealth funds around American financial instruments.
The mechanism was elegant: trade deficits converted automatically into financial account surpluses. Oil exporters used their petrodollars to purchase American products, build assets in America, and invest in American markets. For decades, this system sustained American living standards while American manufacturing declined.
Then came free trade. The removal of quotas and tariffs in 2000 marked another turning point. Competition intensified as barriers fell. Companies needed to produce at the lowest possible cost to offer competitive prices internationally. Labor costs became paramount. Large corporations shifted production to countries where wages were lower and regulations lighter. Developing nations offered both cheap labor and large domestic markets that provided economies of scale. Environmental, social, and governance regulations made production in developed countries increasingly expensive and complicated.
Capital flowed predictably from developed to developing nations. American companies invested more than nine trillion dollars outside America by 2024. From 1990 to 2000, foreign investment flowed into America exceeded outflows. But from 2001 to 2024, the pattern reversed. Meanwhile, oil exporters began accepting euros, yuan, and other currencies for their oil. The dollar’s exclusive claim on global commerce weakened.
Developing countries, excluding China, now host more than twelve trillion dollars in foreign capital. These same countries have invested only six trillion dollars abroad. Business in the developing world became more profitable than business in developed economies under free trade rules. Slower GDP growth, rising unemployment, and persistent inflation in industrialized nations reflected this capital diversion.
Today’s American economy bears the cumulative weight of these transformations. The current account deficit reached 1.2 trillion dollars in 2024, equal to 4.1 percent of GDP. The trade deficit stood at 3.2 percent of GDP. Paradoxically, America remains less globally connected through trade than most developed nations. Total American trade equals just twenty-five percent of GDP compared to over sixty percent in other Western countries. American exports constitute only eleven percent of GDP, lower than almost every nation except the poorest and most isolated.
Yet foreign investors hold 15.6 trillion dollars in American equities. This investment demonstrates continued dollarization and foreign capital dependence simultaneously. Government debt reaches 118 percent of GDP, exceeded globally only by Singapore and the United Kingdom. Fiscal deficits drive this debt higher each year. The government pays more than twenty percent of revenue as interest on existing debt while collecting taxes equal to only eleven percent of GDP.
Financing these deficits requires selling Treasury securities to domestic and foreign investors. Foreign holders owned 9.4 trillion dollars in American Treasuries at the end of 2025. Japan leads with 1.2 trillion dollars. Western nations hold more than forty percent of the total: Britain holds 888 billion dollars, Canada 472 billion, France 376 billion.
These numbers reveal the truth behind aggressive American behavior internationally. American leaders operate under severe economic pressure. They seek to prevent economic collapse through any means available. The threatened attack on Venezuela to control its oil industry through American corporations makes sense in this context. So does the demand for control over Ukrainian agricultural land. The interest in acquiring Greenland and plans for Gaza reconstruction and tourism development all reflect economic rather than ideological motivations.
High tariffs, tourist restrictions, and immigration crackdowns form parts of a broader economic protection strategy. This is not religious war or racial conflict. This is economic desperation dressed in nationalist rhetoric. America built its prosperity on a specific global financial architecture. That architecture is crumbling. The petrodollar system weakens as alternatives emerge. Manufacturing departed long ago and will not easily return. Foreign debt accumulates while domestic tax revenue stagnates. The wealthy world that once sent its capital to America now finds better returns elsewhere.
Trumpism responds to these realities with tariffs and aggression, with promises to restore what was lost. Whether these methods can reverse decades of structural change remains uncertain. What is certain is that American economic anxiety will continue shaping global politics until these fundamental imbalances resolve themselves, one way or another.
