Bretton Woods, a monetary system established during World War II, sought to stabilize the global economy by making the US dollar the central currency for international trade. Other currencies were pegged to the dollar, which foreign governments could convert into gold bullion at a fixed rate. This framework functioned effectively for decades, however, by the late 1960s, inflationary pressures stemming from the Vietnam War and the domestic spending initiatives of the “guns and butter” era, coupled with a growing accumulation of US dollars in foreign accounts, strained the system’s stability. In 1971, the United States suspended the dollar’s gold convertibility, effectively collapsing the Bretton Woods framework and transitioning to a market-based system of freely floating exchange rates, setting the stage for the dollar’s decline.

Since the demise of Bretton Woods, the US dollar has lost approximately 85% of its purchasing power due to inflation, a monetary phenomenon driven by increases in the money supply. Free trade has exacerbated US economics, including the loss of 6.8 million manufacturing jobs between 1979, the peak of manufacturing employment, and 2019. Many of these jobs shifted to China after its entry into the World Trade Organization in 2001. Middle-class wages have stagnated, remaining at an average of $40,000 per year (adjusted for inflation) since 1970, while housing costs have tripled to $400,000. Meanwhile, the rising costs of child-rearing, $310,000 per child in 2023, have contributed to a declining fertility rate, which has fallen from 2.5 to 1.6 children per woman.

China’s role in US economic decline is significant with a trade deficit of $263 billion in goods and services for 2024 alone. Chinese tariffs protect key industries such as steel and electronics, leaving US manufacturing unable to compete. Federal Reserve policies, including a 40% increase in the M2 money supply since 2020, have inflated asset prices like homes and stocks but failed to meaningfully raise middle-class wages. Wealth inequality has intensified, with the top 1% controlling 40% of the nation’s wealth while Middle America’s share continues to shrink. Trade deficits reached $1.2 trillion in 2024.

Trump’s tariffs can be seen as a reaction to these trade imbalances and loss of domestic manufacturing. Additionally, new measures are seeking to rewrite regulatory and fiscal policies, to address these global inequalities. By 2030, projections suggest 2 million new jobs could be created, including 200,000 to 300,000 directly tied to tariffs, with blue-collar median wages rising to around $60,000. A stronger dollar, inflation below 2%, and a revived manufacturing base could potentially revive the American middle-class, making families more optimistic about the future. Continuing on the same trajectory as the past 50 years risks further erosion of the American dream.