Sometimes it looks like Donald Trump governs on a daily whim, as his ad-lib outbursts and threats come and go. But look closer and more often than not, there’s a plan.

When the president described the US dollar’s plunge as “great” on Tuesday, it looked like an off-the-cuff remark – especially after Scott Bessent, his treasury secretary, went on CNBC the next day to reiterate the White House’s “strong-dollar policy”.

But there does seem to be a masterplan, and it is unfolding play by play.

The objective isn’t modest. Trump and his team want to revive America’s manufacturing rust belt, where so many Maga voters live. And to do that, they want to reshape the entire global financial system – starting with the dollar. Trump and his advisors think a weaker dollar will help to revive factories by making made-in-America goods cheaper to buy overseas.

This blueprint was laid out in a report written by Stephen Miran, Trump’s economic adviser, before the president took office. It now looks like a prophecy.

Miran’s report anticipates the strategy and tactics of Trump’s tariff threats. It flags the new proposed tax on some foreign investors, announced in December. And it presages the speculation this week – denied by Bessent – that Washington and Tokyo were working together to weaken the dollar against the Japanese yen.

“It is a template. The very definite gloss that you get from that report is, ‘We’re OK if the dollar does a bit of weakening here.’ I think that’s exactly where we are,” says Padhraic Garvey, at Dutch bank ING.

But there’s one aspect of the plan that has not yet come to fruition, and is absolutely vital to its success: the White House needs to get a pliable chairman installed at the Federal Reserve.

The importance of a cooperative Fed cannot be overstated. Weakening the dollar is a high-risk manoeuvre that, if done wrong, could blow up the market for US government debt and create a budget crisis in Washington.

To counter this risk, the Fed could intervene by buying bonds to stabilise the market. But there is no guarantee that it would do so.

“There is a path by which these policies can be implemented without material adverse consequences, but it is narrow, and will require ... either gradualism, or coordination with allies or the Federal Reserve on the dollar,” Miran wrote in his November 2024 paper for Hudson Bay Capital, which outlined the masterplan.

Jerome Powell, the current Fed chairman, has not played ball with any of the president’s whims. So Trump has been relentlessly attacking him for the past year, ostensibly for failing to cut interest rates sooner and further.

He has been deliberating openly on whom he’ll name as Powell’s successor, with a choice expected soon, though Powell’s term doesn’t end until May.

In the meantime, Trump is using lawsuits, investigations and insults to try and get what he wants. The president, who appointed Powell during his first term, has used his pulpit to call the Fed chairman a “complete moron”, a “major loser”, “Mr Too Late”, a “numbskull” and this week “incompetent” and a “jerk”.

The president has also attempted to fire Lisa Cook, the Fed governor, in a case that has gone all the way to the Supreme Court, while the Department of Justice has opened a criminal investigation into Powell over his testimony to the Senate.

“He’s trying to intimidate the whole Fed,” says Kenneth Rogoff, a former International Monetary Fund chief economist. “I think the chances that he gains operational control are high ... He appoints a new Fed chair, then he just really needs one or two more votes.”

The chairman sits atop a board of seven governors, all nominated by the president for a 14-year term. Miran himself is one of those board members, having been appointed by Trump last year.

The governors make up a majority of the 12-member Federal Open Market Committee, joined by five rotating state-level central bankers, which sets interest rates.

Speculation about Trump’s pick for chairman has lately centred on Wall Street veteran Rick Rieder, a BlackRock executive who has criticised the Fed for pushing interest rates too high.

Kevin Hassett, Trump’s economic adviser, was considered a favourite until the president recently told him on live television that “I actually want to keep you where you are”.

Kevin Warsh, a former Fed governor, is also in the frame and has repeatedly attacked Powell’s leadership. Christopher Waller, a Fed governor, is also talked up as a contender and wants lower interest rates, but would be seen as less of a Trump loyalist.

Once Trump has his man in place, the White House can, if it chooses, finish enacting the Miran playbook.

Miran’s bugbear is the dollar’s role as the world’s reserve currency. The dollar is the most commonly used currency for international trade, and US Treasury bonds are one of the investment world’s most important and reliable safe-haven assets.

While this gives the US great power over the financial system, in Miran’s view, it also comes at great cost. It drives global demand for dollars, which increases the value against other currencies.

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This makes American exports more expensive. US manufacturers become less competitive, factories close or go offshore, and US trade deficits widen.

Tariffs help to address this by making imports more expensive. But on its own, this is not enough to bring factories back to life.

So Miran’s plan, once tariffs are in place, is to find ways to get the dollar down to stoke not just domestic demand for American goods but overseas too.

In the paper he wrote for Hudson Bay Capital, he canvases the options. One is to get other countries to strengthen their currencies by selling down their dollar holdings.

Many in the market speculated this week that perhaps Japan had signed up to this already. Bessent unequivocally denied this on Wednesday, but investors will keep looking for this plank of Miran’s plan.

A second proposal is to levy a tax or fee on foreign investors buying US Treasury bonds. This either reduces demand for the bonds, putting downward pressure on the dollar, or else compensates the US for being the provider of the world’s go-to reserve currency and asset.

A limited version of this was proposed in December. It is not yet clear how this will wash up, but some commentators see it as a useful signalling device – putting big investors on notice, and making them more wary of the US bond market.

The trouble is that if investors become too wary of US bonds, they will sell them or stop buying them. The price will fall, and the yields will rise. That means higher borrowing costs for the US government. This is not what Trump wants when he’s borrowing heavily to cut taxes and hand out cash.

So Miran’s third, and most significant, proposal concerns the Fed. If driving down the dollar serves to drive up borrowing costs, the Fed can intervene.

He argues that this is within the Fed’s mandate. He notes that it even happened under President John F Kennedy, when the Treasury and Fed worked together to prevent a currency outflow by manipulating short-term and long-term yields.

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The risk, however, is that the Fed’s independence is compromised. That could shake the bond market’s confidence to such an extent that even emergency intervention may not be enough.

On Wednesday, Powell was defiant. Speaking at a press conference after the Fed ignored Trump’s wishes and kept interest rates on hold, he said central bank independence was “an institutional arrangement that has served the people well”.

And asked about his decision to attend a Supreme Court hearing on the Cook case, he told reporters: “That case is perhaps the most important legal case in the Fed’s 113-year history. I thought it might be hard to explain why I didn’t attend.”

As the dollar weakens and Trump prepares to name his man at the Fed, the stakes have never been higher.

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