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When Lord Cornwallis handed his sword to George Washington at Yorktown, the British band played a tune, "The World Turned Upside Down." This seems to be a fitting description of Donald Trump's approach to the economic order. Tariffs, the price of gold, and other arcane ideas seemingly are on the table. It promises to be a repeat performance of Richard Nixon in August 1971.
Except this performance will be somewhat in reverse. Nixon inherited a strained economic situation due to deficits and the inability to adjust the Gold System established during World War II, known as Bretton Woods, which, among other things, created the International Monetary Fund. This agreement did much to strengthen the United States, with the dollar replacing the British Pound as the currency of measurement, which established the US as the World's premier power.
However, by 1971, gold was worth $44.00 an ounce, and because of the Vietnam War and other international obligations, the US had problems paying its debts. Inflation had led to an increase in printed money, some 30 billion dollars, with only 10 billion in hard cash, in gold.
To alleviate this, Nixon cut all remaining ties to the Gold Standard. On August 15, 1971, he announced a 10% tax on imports, froze wages, and instituted price controls.
His Secretary of the Treasury, John Connally, had warned Nixon that "closing the gold window" might stop "the crisis from our losing assets, but in effect it may create a crisis in the international money markets," he concluded "It will leave them in a chaotic state until something else happens." It proved successful in the short run but disastrous in the long run.
By 1973, it led to stagflation and eventually to the deindustrialization of America. "Nixononomics" proved as chaotic as Trump's policies are now. Both overturned Bretton Woods, but there are differences. Trump, unlike Nixon, does not regard tariffs as simply an instrument to protect US jobs but a way to raise money. He has hinted that he would love to replace the income tax with tariffs and revenues generated by energy production. When he speaks of a "golden age," he means the restoration of a new Pax Americana.
However, like the Nixon administration, there is resistance to any disruption of the world financial setup. Within Trump's government, there are voices such as Scott Bessent, his Secretary of the Treasury, Elon Musk, the voice of DOGE, and Peter Navarro, Trump's Senior Counselor for Trade.
What Trump proposes would set America's economic system on its head. Farmers who depend on export markets will find themselves in the lurch, as will Navarro's approach, which is a zero-sum calculation that dictates that there are only winners and losers. Collaboration is regarded with disdain; it will depend on Trump whether or not America engages in a historic gamble.