A sharp decline in the value of the US dollar has investors questioning America’s economic and financial stability under President Trump’s trade policies. The recent drop, which has seen the dollar fall 9% against a basket of currencies since mid-January, is considered unusual and alarming by economists.
The dollar’s dominance in cross-border trade and as a safe haven has been a cornerstone of US economic power for decades. However, experts warn that this could be lost if investors lose confidence in the country’s financial management. The erosion of trust could have significant consequences, including higher interest rates on the ballooning US federal debt.
China is already taking steps to reduce its reliance on the dollar, striking yuan-only trading deals with countries and making loans to central banks. This trend has sparked concerns that a new global reserve currency may emerge, threatening the dollar’s position as the world’s premier currency.
Trump’s trade policies have been particularly unsettling for investors, who fear the unpredictability of his actions could lead to a loss of stability in the US economy. The President’s repeated threats to chip away at the independence of the Federal Reserve have raised concerns that he may force interest rates lower, which could stoke inflation and drive investors away from the dollar.
Economists point to historical precedents, such as the Suez Crisis of 1956, where a poorly planned military attack exposed British incompetence and led to a collapse in trust. They warn that Trump’s actions could be similarly damaging if not carefully managed.
As the dollar continues to decline, investors will be watching closely for signs of a new global reserve currency emerging. For now, however, the uncertainty surrounding US economic policy under Trump remains a major concern for those holding dollars.
Source: https://apnews.com/article/dollar-trump-tariffs-trade-safe-haven-china-c108fd36a3122f85872ad34ba5f5d977