President Donald Trump is one of the few people in the government who doesn’t seem overly concerned about a decline in the dollar’s value or its status as the world’s default currency.
Trump has traditionally favored a weakened dollar based on comments made during his first administration and on the campaign trail. He reemphasized the policy position in early April.
“This is a GREAT time to move your COMPANY into the United States of America, like Apple, and so many others, in record numbers, are doing,” Trump said on Truth Social days after his “Liberation Day” of increased tariffs on dozens of countries.
Yet Trump’s shrug at the falling dollar brings little comfort to Americans staring at the downward spiral of their 401(k) retirement plans. Still, Trump appears dead set on the plan, come hell or high water.
In Trump’s view, a weaker dollar makes American exports more competitive. It increases foreign investment and potentially domestic manufacturing, a main goal of Trump’s tariff agenda in his second term.
That approach defies the thinking of most mainstream economists. In this almost universal view, a strong dollar means cheaper import costs, lower prices for Americans abroad, and increased demand for the U.S. dollar as the world’s reserve currency.
Multiple economists have suggested that Trump’s thinking is flawed and will hurt the American economy.
“His trade policies are making the U.S. a less attractive place to invest,” said Dr. Donald Boudreaux, an economics professor at George Mason University.
Markets seem to agree.
Shortly after Trump’s “Liberation Day” announcement, the Dow Jones fell 1,700 points while the S&P 500 dropped 10% over two days. Those levels of stumbles haven’t happened since the Great Depression.
Boudreaux and other classical liberal economists see the country’s low volatility — up to now anyway — as a key reason why America is already ripe for investment. The tariff spike signaled otherwise.
“The stock market is down close to 15% after the three days of trading since the tariff announcement,” Jai Kedia, a research fellow at the Center for Monetary and Financial Alternatives at Cato Institute, told the Washington Examiner. “This does not signal to foreign investors that America is a better place today than a week ago for their money.”
Trump attempted to calm the waters after the market whiplash.
He temporarily paused tariff hikes for countries on his infamous tariff list and instead opted for a 10% tariff on imports. Unsurprisingly, stocks temporarily rose with investors sensing a return to economic stability.
However, those gains were temporary as the White House continued its trade war with China. Tariff levels between the two countries hit 145% and could reach 245% in the future.
While the White House boasted about possible trade deals over the next 100 days, other nations publicly appeared unwilling to meet the administration’s demands. This caused some investors to worry about how a prolonged tariff war might cause long-term damage to the U.S. economy.
Tariff anxiety also hit the currency markets.
“Uncertainty will persist, and companies will need to invest in resilience and adaptability to handle it,” Karen Harris and Jeffrey Crane at Bain & Company advised. “For those companies that rely on globalized supply chains for goods, matching supply and demand cost-efficiently is now much more critical, with trade policy and uncertainty pushing companies to look for suppliers closer to home.”
The higher tariffs caused a sell-off of U.S. dollars. The U.S. Dollar Index has dropped 8.7% since January, reaching levels not seen since the COVID-19 pandemic.
Banks expect foreign nations to keep weaning off the dollar.
Goldman Sachs projected the dollar would fall about 10% against the euro and 9% against the British pound and the Japanese yen. J.P. Morgan was slightly more optimistic, projecting an 8% decline against the euro.
The Trump administration doesn’t seem worried, at least for now.
Treasury Secretary Scott Bessent told the Institute of International Finance that the dollar sell-off didn’t signal a looming problem.
“It’s natural that the usage [of the dollar] would come down over time, and I think that the U.S. will always, for my lifetime, be the reserve currency,” he said.
Bessent said he believes in a strong U.S. dollar.
“To me, the strong dollar means having the policies in place to deserve capital flows and have confidence,” he said.
His boss feels otherwise.
Trump has long complained about the strength of the dollar.
In 2019, he said the strong dollar damaged the manufacturing sector and kept it from “competing on a level playing field.” During the 2024 presidential election, Trump said America had a “big currency problem” compared to China and Japan.
“That’s a tremendous burden on our companies,” he said.
Most economists and investors aren’t buying Trump’s gripes. However, support for Trump’s approach does exist.
Supporters, such as Oren Cass of American Compass, paint a rosy picture of the American future. He told Goldman Sachs that Trump’s trade policies will boost the economy.
“They should produce a great deal of investment and, more broadly, better economic outcomes for America,” he said.
Morgan Stanley’s Michael Wilson chose a similar refrain on the economy and the stock markets. He predicted on April 28 that domestic and international investors would see the U.S as the best place to buy things.
“Both quality and large-cap relatively outperformance should continue,” Wilson said.
However, skeptics worry that Trump’s decisions will shake the economy.
“The weaker dollar, in short, will be a result of the U.S. being made a less attractive place to invest and not a spur to greater investment on our shores,” Boudreaux argued.
He said a weaker dollar, combined with increased investment, would increase the trade deficit, an outcome Trump routinely criticizes.
David Bahnsen of the Bahnsen Group said Trump’s strategies are dangerous.
“There are a lot of things one could do to weaken the dollar apart from this kind of substantial economic distress and recessionary pressure,” he said.
Karen Karniol-tambour, co-chief investment officer of Bridgewater, the world’s largest hedge fund, observed that the biggest problem remains the volatility in the marketplace.
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She said Trump’s tariffs have yet to close America’s global trade deficit and that tariff fear has caused investors and other countries to sell off the U.S. dollar.
“Capital can move a lot faster,” Karniol-tambour said in a note to investors. “And this is what is starting to happen. This is why US assets are under such risk because of how much faster capital can move than trade.”
Taylor Millard is a freelance journalist who lives in Virginia.
