By Marc Chandler
About the author: Marc Chandler is chief market strategist at Bannockburn Global Forex, a division of First Financial Bank.
There is an old maxim in trade theory that says free trade is the strategy of the confident. Nations that believe they can outcompete anyone, anywhere embrace open markets as a matter of rational self-interest. The strong have little to fear from a fair contest.
Sphere-of-influence politics, by contrast, is a consolation prize. It is what countries reach for when they can no longer trust the outcome of open competition. They move from trying to win markets to controlling them. Seen through this lens, the Monroe Doctrine was more a defensive crouch than the posture of a global hegemon. The "Donroe Doctrine" is no different. America is crouching.
The implications of that are profound. For the first time in 30 years, the value of gold held in central banks' reserves exceeds their holdings of U.S. Treasuries. The U.S. dollar has been declining for more than a year. Dollar stalwarts like economic historian Barry Eichengreen and former Treasury official Mark Sobel, who have long defended the currency's supremacy, now warn that could be changing.
It would be convenient to pin this story entirely on President Donald Trump, but it is more bipartisan. President Joe Biden didn't reverse the tariffs Trump imposed in his first term and expanded Trump's "Buy America" mandates, even as his administration spoke of alliances and multilateralism. The Chips Act and the Inflation Reduction Act, whatever their merits, were instruments of industrial policy that any neoliberal, Washington-consensus economist of the 1990s would have found startling.
What changed is China. The scale of its manufacturing capacity, its move up the value chain, and its state-backed technological ambitions have eroded America's confidence. China now poses a structural challenge to American primacy that even the most aggressive tariff schedule can't answer.
No moment captures this shift more vividly than Trump's embrace of the "G2." Before a summit last year with Chinese President Xi Jinping, Trump declared on Truth Social that "THE G2 WILL BE CONVENING SHORTLY!" The term "G2," which evokes parity between Washington and Beijing, is China's preferred framing of a new world order centered on two superpowers, not one.
For years, American officials dismissed the term. The U.S., they insisted, wasn't merely first among equals; it was in a category of its own. For a sitting U.S. president to now echo Beijing's lingo is a concession to the Chinese. A hegemon that insists on parity has already relinquished its claim to supremacy.
The same logic animates the administration's posture toward the Western Hemisphere. Where past administrations wrapped interventions in Latin America and the Arctic in the language of human rights and democratic norms, Trump's revival of the Monroe Doctrine has been refreshingly, if alarmingly, direct. His administration hasn't dressed up its pressure campaigns against Canada, Greenland, Brazil, or Venezuela as "promoting liberal values." They plainly justify them as managing America's backyard.
This is a nervous regional hegemon making sure its neighbors know their place. When confidence in winning a fair contest wanes, the temptation to exchange universalism for particularism becomes irresistible. Protect your patch. Control your neighborhood. Broker deals based on proximity.
Americans' preference for Trump in the 2024 election was, in part, a democratic expression of their reappraisal of the country's global standing, which appeared to be slipping. The Trump administration has channeled voters' unease into action against other nations -- loudly and idiosyncratically, with no regard for diplomatic conventions.
The electorate may be starting to react against that. Polls show public support for free trade has increased sharply over the past year. Voters have begun to appreciate what they once took for granted -- cheap goods, integrated supply chains, and the quiet efficiency of globalization -- now that the effects of a less open world are becoming visible in consumer prices.
And, as it turns out, Americans' way of life and defense requires supply chains the U.S. doesn't control. Indeed, rebuilding the U.S. military arsenal will require critical earths that China has a near monopoly on.
The U.S. took up the banner of free trade after World War II and then spent the better part of eight decades building the global order around it. It did so for the same reason Britain championed free trade when it was at its zenith of industrial power in the 19th century: It knew it was going to win.
But the long American century is now drawing to a close. That is not a partisan observation. It is a structural one.
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March 20, 2026 11:09 ET (15:09 GMT)
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