Stephen Miran and the “Trump Put”

“There is a path by which these policies can be implemented without material adverse consequences, but it is narrow, and will require currency offset for tariffs and either gradualism or coordination with allies or the Federal Reserve on the dollar. Potential for unwelcome economic and market volatility is substantial, but there are steps the Administration can take to minimize it.” Stephen Miran, - A User’s Guide to Restructuring the Global Trading System

Markets are currently experiencing a violent adjustment in expectations from where they stood after the Presidential election results. Recession fears are rising as uncertainty has grown around tariff and trade policies. It was exacerbated last week when the President and Treasury Secretary both told investors on national television to prepare for "short-term pain for long-term gain." This included stating explicitly that there is no “Trump Put.”

The “Trump Put” comment was the one that struck me the most. As a former Macro Portfolio Manager, Treasury Secretary Bessent knows very well the psychological role the word "Put" has played in stabilizing markets. It has supported the buy-the-dip crowd for years, so his statement that there is no “Trump Put” is significant—even though personally, I don’t fully believe it. However, it clearly indicates that, for now, uncertainty is intentionally part of the plan.

Back in December 2024, when the dollar rallied after the election, I looked for a podcast explaining why this made sense. I eventually discovered a Forward Guidance podcast with Stephen Miran, who had just published a paper titled "A User’s Guide to Restructuring the Global Trading System." At the time, he was working for Hudson Bay Capital; now, he is the nominee for Chairman of the Council of Economic Advisers. Today, as part of his nomination process on the Senate floor, it was stated, “As Chair to the Council of Economic Advisers, Dr. Miran will be instrumental in advising President Trump as he enacts policies that will foster economic growth.”

Few people I speak with seem to know Miran or understand his apparent importance to our lives right now as we watch markets move and hear there is no “Trump Put.” Within that November paper, Miran outlined a strategic approach to addressing global economic imbalances primarily through tariffs and currency adjustments, arguing these measures can correct distortions caused by unfair trade practices. He advocated targeted tariffs to compel key trading partners, particularly China, to rebalance trade flows, alongside coordinated currency policies to address persistent undervaluation.

He also emphasized that tariffs can be strategically employed to address national security concerns by reducing dependency on adversarial nations for critical goods, technology, or resources. Selectively imposing tariffs on strategically important sectors—such as technology, defense, or critical supply chains—can protect domestic industries, enhance national resilience, and mitigate vulnerabilities arising from geopolitical tensions.

Additionally, Miran stressed the urgency of addressing the United States' escalating debt-to-GDP ratio, now surpassing 120%. He warned that the current trajectory is unsustainable and necessitates immediate action to prevent severe economic repercussions. Miran advocated a comprehensive approach, including strategic tariffs to generate revenue and correct trade imbalances, alongside currency adjustments to address the overvaluation of the U.S. dollar.

He highlighted the "exorbitant burden" associated with maintaining the U.S. dollar's global reserve status, noting this status often leads to persistent trade deficits, currency overvaluation, and excessive borrowing. According to Miran, having the reserve currency creates unique pressures, forcing the U.S. into continuously absorbing global savings, thereby fueling rising debt levels. He suggested strategically employing tariffs and other trade tools could alleviate some pressures by reducing trade imbalances and easing economic strain.

Tariffs are clearly the tool being used to force the regime shift. They have seemingly been employed as strategic leverage in addressing specific national security issues, including curbing fentanyl flow from China and Mexico by pressuring these nations to strengthen enforcement and control drug production. Additionally, tariffs have been implied as geopolitical tools related to the conflict in Ukraine, signaling diplomatic resolve and exerting economic pressure on countries indirectly supporting Russian interests or benefiting from the war.

President Trump recently made statements suggesting potential reconsideration of the United States' commitment to NATO. He expressed concerns about NATO allies' financial contributions, emphasizing the U.S. might not honor defense obligations to member countries failing to meet defense spending targets. Specifically, Trump indicated the U.S. might not defend NATO allies unless they fulfill their financial commitments.

To Miran’s credit, he underscored the importance of implementing these measures thoughtfully and in coordination with monetary policy to mitigate potential economic disruptions and market volatility. Miran's analysis highlights the critical need for timely and decisive policy interventions to manage the nation's debt burden and ensure long-term economic stability. He stressed using tariffs thoughtfully, clearly defining security rationales, and transparent communication to minimize economic disruption and diplomatic friction.

While recognizing these measures as necessary for restoring fairness and stability, Miran warned they carry significant risks, including economic disruptions, heightened market volatility, and potential retaliation from trading partners. To manage these risks, Miran emphasized that tariffs and currency adjustments must be carefully designed, clearly communicated, and executed in a coordinated manner, ideally alongside supportive monetary policy from the Federal Reserve. Ultimately, he argued navigating this challenging transition carefully can lead to a more balanced and sustainable global trading environment.

As I've mentioned in my YouTube videos and recently with Anthony Pompliano, my concern about this tactic involves unintended consequences arising from trying to do this quickly before the Midterm election clock starts ticking loudly. This is not a small endeavor and being overly focused on rebalancing the global economy and high debt-to-GDP without adequately considering the importance of the stock market is risky in my opinion. When we allowed Lehman Brothers to fail to support Main Street at Wall Street's expense, we learned the world is far more interconnected and less transparent in lending, finance, and asset ownership than we had realized. As an example, we missed trade finance drying up and underestimated the hedge fund fallout from prime brokerage positioning across borders.

Now we have the cross border ownership of the U.S. stock market which now represents a historic 200% of US GDP compared to approximately 130% before Lehman. It is currently 73% of the MSCI World benchmark. It was below 45% just before Lehman. Whether or not everyone likes it, the U.S. stock market has become the new global risk, making it dangerous to experiment with. Currently, we see signs of instability in the U.S. stock market's foundation. I am hopeful that somewhere in the tariff conversation within the White House, this quote from Miran's Forward Guidance interview proves accurate with regards to a “Trump Put.”:

“I think that President Trump is somebody who cares deeply about financial markets…he's somebody who cares deeply about the economy…and don't forget financial markets can drive the economy…if you had significant unwanted volatility in financial markets, it can create a drag on the real economy that you probably don't want. So he is somebody who was very attentive to financial markets in his first term, and I would expect him to continue being attentive in his second term. That means I would expect him to implement these policies in ways that didn't derail financial markets and didn't introduce too much volatility.”