Former President Donald Trump took the opportunity this past week to repeat his long-standing concerns about the US dollar’s strength. He contends that its dominance would be detrimental to American manufacturing. His statements come in the context of a notable depreciation of the dollar against other major currencies since his inauguration in January.
Weaken the dollar—which Trump repeatedly argues would provide US manufacturing the kick-in-the-pants it needs. By making American goods less expensive, it makes them more competitive in international markets. A lot of times, these fluctuations in currency value seem like academic exercises, but they can be very detrimental to the broader economic landscape. That’s particularly critical for manufacturing sectors that export a high share of production.
Certainly, the weak dollar is a major method that Trump has advocated to aid manufacturing. Still, he can’t help but be concerned about the geopolitical power that currency strength brings. He has long argued that a dominant US dollar gives the country tremendous economic leverage on the global stage. He advocates for a weaker dollar to increase domestic economic gains. At the same time, he underlines the strategic world-beating advantages of sticking with a strong dollar.
Now the compounded effects of Trump’s protectionist tariffs have created a serious new layer of concern for investors. Thousands more fear that these tariffs could trigger the next recession in the United States. This fear leads them to withdraw from markets on short notice. Concerns over a looming recession have sent investors running for the exit in droves. This dollar dump and great dollar escape is complicating the picture surrounding the dollar’s value even further.
Despite continued dollar depreciation, investor confidence is still very tentative. They’re waking up to the danger posed by the chaos of a Trump Administration. Specifically, his tariffs risk hurting not only specific sectors, but the entire economy. This has contributed to intense disruption in financial markets, indicative of uncertainty over the state of the economy going forward.
