Strange Dollar Sell-Off Raises Global Trust Concerns Amid Trump Tariffs/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The dollar’s recent sharp decline has alarmed economists, who say the unusual sell-off reflects growing investor concerns about U.S. stability under President Trump’s trade policies. The loss of trust could threaten the dollar’s global dominance.
Falling Dollar Under Trump – Quick Look
- Dollar drops 9% since January, hitting 3-year lows despite global trade tensions.
- Economists say the sell-off reflects loss of confidence in U.S. leadership and fiscal policy.
- Trump’s tariff rollout seen as erratic and damaging to U.S. economic stability.
- A weaker dollar could lead to higher borrowing costs, rising inflation, and global realignment away from U.S. financial systems.
- Some fear the U.S. could lose its reserve currency dominance, similar to the post-Suez collapse of the British pound.
Confidence in U.S. Dollar Falters Amid Unusual Sell-Off Under Trump
Deep Looks
NEW YORK (AP) — In a troubling turn for the global economy, the U.S. dollar has plunged nearly 9% since mid-January — a rare and steep decline that analysts say reflects deeper fears about America’s stability and trustworthiness under President Donald Trump.
This strange downturn comes as Trump rolls out sweeping tariffs and promises to overhaul global trade. But instead of the dollar rising, as it often does during trade disputes, it’s falling. And that, economists warn, could be a sign of waning global confidence in the U.S. itself.
Dollar Weakness Defies Expectations
Traditionally, trade wars cause investors to seek refuge in the dollar. But this time, markets have moved in the opposite direction. Since early April alone, the dollar has fallen more than 5% against the euro and pound, and 6% against the yen — declines that economists are calling both alarming and puzzling.
“You’d expect the dollar to strengthen during trade disruptions,” said economist Barry Eichengreen of the University of California, Berkeley. “But this move suggests something more concerning: a shift in trust.”
Why Dollar Dominance Matters
The U.S. dollar’s status as the world’s primary reserve currency underpins the country’s economic strength. It allows the government to borrow at low rates, boosts consumer spending, and gives the U.S. powerful tools to enforce international sanctions.
But this dominance isn’t permanent. Eichengreen warns that the trust built over decades “can be lost in the blink of an eye.”
The recent dollar sell-off, some analysts say, could be the first crack in that foundation.
Signs of a Crisis in Confidence
In a note to investors, Deutsche Bank said the dollar’s role as a safe haven is “being eroded,” while Capital Economics called its dominance “at least somewhat in question.”
Capital flight could raise interest rates on mortgages, car loans, and credit cards, while also increasing borrowing costs for the federal government — a dire prospect with U.S. debt already exceeding 120% of GDP.
“This only works because the world needs dollars,” said Benn Steil of the Council on Foreign Relations. “If that changes, it could cause a full-blown debt crisis.”
China and Crypto Emerge as Alternatives
China has been working for years to undermine dollar dominance, striking yuan-only trade deals with Brazil, Russia, and South Korea, and offering yuan-based loans to countries in crisis. Even cryptocurrencies like Bitcoin are being floated as potential future alternatives.
“America risks losing its dominant position,” wrote BlackRock Chairman Larry Fink in his latest shareholder letter. “Digital assets could be next in line.”
Trump’s Policies Fuel the Downturn
Trump’s latest round of tariffs and trade threats has injected a deep sense of unpredictability into global markets. While he argues the measures will shrink the trade deficit, most economists say this is a misguided and outdated view of international trade dynamics.
The erratic rollout of policies and repeated threats to fire Federal Reserve Chair Jerome Powell have further rattled markets. After Powell recently suggested a cautious approach to rate changes, Trump responded by calling for his immediate dismissal.
“Powell’s termination cannot come fast enough,” Trump posted on social media.
This political interference in the Fed, traditionally seen as an independent pillar of U.S. credibility, has shaken confidence further.
Economists Warn of a Historical Parallel
Some experts are drawing comparisons to the 1956 Suez Crisis, which marked the downfall of the British pound as the world’s dominant currency. A poorly executed military intervention and subsequent economic fallout eroded global faith in the UK, much like Trump’s chaotic tariff agenda is doing now with the U.S.
“If Trump isn’t careful, April 2 — what he’s calling ‘Liberation Day’ — may go down as the day the world started walking away from the dollar,” Eichengreen said.
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