The real drivers of Donald Trump’s aggressive tariff agenda extend far beyond trade policy. In this analysis, I examine how a new world order is taking shape—driven by crypto, AI, energy, and the political realignment behind them.
Over the past several years, I have participated in high-level discussions in Rome, Berlin, and elsewhere, where these transformations have become increasingly clear. Far from being impulsive, Trump’s economic agenda reflects a long-developing strategy—a deliberate response to the collapse of the post–World War II economic consensus and the rise of new elite coalitions.
As Director of Research at the Institute for New Economic Thinking, I argue that what we are witnessing is not simply a trade war. It is the unmaking of a decades-old global order, and the emergence of a new bloc of economic and technological power—what I call ’red tech.’ This coalition is actively reshaping the future of money, energy, and artificial intelligence, with profound implications for global stability and domestic politics.
To clarify these developments, I offer seven key takeaways that explain what is happening, why it matters, and where it is likely to lead.
1. The Tariff Bombshell Didn’t Just Drop From the Sky.
Trump’s plans for changing the world economic system are massive—on the scale of FDR abandoning the gold standard or Nixon closing the gold window in 1971. By contrast, comparisons with the 1985 Plaza Accord, which devalued the overstrong U.S. dollar, are somewhat misleading, since that really represented a lower-order realignment among friendly allied countries. The perception that Trump is simply improvising misses the mark: the DOGE initiative was quietly debated for some time, while the broader international economic strategy was telegraphed several months in advance, with key drafts circulating rather widely.
2. An End to the Post-World War II Global Economic Era Is the Aim.
This crisis of the global economic system is different from earlier ones, for example, in the 1970s. This time, the aim is to terminate a system that allows countries like China and Germany to accumulate large trade surpluses year after year, while the U.S. runs persistent deficits to support global demand. The administration believes that this dynamic has benefited surplus countries at the expense of American manufacturing and workers, hollowing out industries and increasing reliance on debt. As the system unravels, the U.S. risks losing economic leverage and faces rising pressure to rebalance without the global structures that once cushioned the blow. Trump believes domestic dissatisfaction arising from these imbalances was the primary reason he came to power. Objections about how the administration arrived at the various tariff levels it proposed miss the key point: the tariffs are really the first stage of a broader realignment of the whole international monetary system.
3. Key Trump Policies Reveal His Agenda.
Trump embraces a unitary executive theory—the belief that the Constitution grants the president full control over the executive branch, limiting congressional checks on presidential power.
He is devoted to re-balancing the international economy, and he has been executing a diplomatic revolution with friendlier relations with Russia as a tactic to throw China off balance and a decided cooling of relations between the US and Europe.
Trump recognizes that the era of low interest rates is over—4 to 5% poses a serious challenge to funding deficits. But he supports extending his earlier tax cuts, which would balloon deficits without much larger spending cuts. Enter DOGE: a political tool both to target opponents and help fund tax cuts, aligned with his broader goal of rolling back New Deal-era social policy, though I would argue that far more money could be saved by scrutinizing the health care system and defense procurement.
Trump is also fostering an energy counter-revolution, aiming to slow the transition away from fossil fuels—driven in part by the high energy demands of AI, which is critical for defense and other sectors, and his deep support among oil and gas producers.
4. Mainstream Political Science and Economics Have Largely Misunderstood Trump’s Appeal.
Democrats’ failure to improve life for workers slipped under many analysts’ radar.I highlight that, despite many claims..." or "Despite many claims to the contrary, I point out that to the contrary, real wages actually fell during the Biden administration—not because hourly wages didn’t rise, but because average working hours declined, dragging down weekly earnings and real median household income. While Trump’s tax cuts were a boon to the rich, establishment economic analysts failed to pay enough attention to how increased working hours (if not higher wages) raised incomes for many groups during the first Trump administration.
Biden’s Green New Deal rhetoric met party resistance and collided with AI’s energy demands—then, amid inflation, Biden dodged tougher steps like cracking down on commodity speculation. His administration also embraced the geopolitical logic of continuing to promote exports of oil and natural gas even while investing in a more sustainable economy.
Though Biden initially showed interest in tougher bank regulation, he retreated as Trump’s political momentum returned. These issues trace back to Obama, who campaigned on change but largely maintained the status quo—favoring bank bailouts over assistance to the population, extending Bush-era tax cuts, and generally failing to deliver for many voters, as reflected in the steep drop in turnout in the 2014 midterms.
5. The Coalition That Elected Trump Is a New and Evolving Force.
It brings together major industrial sectors like steel and metals with a rising faction of Silicon Valley figures increasingly anxious about China and put off by the Biden administration’s efforts to regulate tech. Tech elites like Elon Musk, Marc Andreessen, and Ben Horowitz, along with defense-focused tech players like Peter Thiel, Palantir (NASDAQ:PLTR), and Anduril, are all part of this emerging bloc. It’s a powerful alliance of industry, tech, finance, and national security interests—united by a shared concern over competition from China and a belief that Trump will back a more aggressive and strategically assertive economic agenda. I refer to this emerging coalition as the ’red tech’ bloc (the color associated with Republicans) bringing together champions of AI, startups in defense, and crypto.
6. There Are Big Crypto Plans Afoot.
Crypto billionaires are rapidly rising—many now appearing on the Forbes 400—and are an integral part of Silicon Valley culture, wherever they locate their home offices. They believe they can run global payment systems more efficiently than traditional banks, and they deeply distrust the Federal Reserve. Their goal is ambitious: to replace the current financial infrastructure, dominate global payments, and profit by controlling the pipes through which money flows. I have observed marked differences within the crypto industry. A major part of it is basically another form of gambling—or, less politely, tulip selling. I doubt that stablecoins can actually remain stable for very long absent regulatory oversight and guarantees, which in the final analysis will depend on intervention by the Federal Reserve or some other state entity. Crypto’s popularity among real criminals—it is the medium of choice for most ransomware—is also deeply concerning and should give conscientious regulators nightmares.
7. The AI Factor Is Key.
Everyone in defense now needs AI—it’s the new backbone of modern military power. We are entering a new kind of 1890s-style race for critical raw materials and minerals, but this time driven by algorithms, not iron. The race is on for rare earths and other essential minerals that power this AI arms race. At present, most rare earths are processed in China—a strategic dependency the Trump administration is clearly determined to change. Its preoccupation with containing China is not subtle. It is a central force behind the administration’s push to restructure the global trading system, and it is likely to trigger major escalations in military spending on both sides.