The 47th US President, Donald Trump, is busy forging new policies, starting with his infamous tariff policy imposition on nations to bolster the US economy. Trump’s intention is clear, stating how he wants to strengthen US productivity levels by boosting the narrative of manufacturing in the US. While his narrative is largely appreciated, his idea of imposing tariffs on nations is also gaining widespread criticism, with analysts mulling over how his aggressive tariff regime may end up backfiring, impacting the US dollar in the process.
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3 Reasons How The US Dollar May Deflate Under Trump’s Rule
1. Rising Trade Wars
One of the most obvious reasons that may end up derailing the US dollar is Trump’s tariff policies on various nations. Trump has earlier halted tariffs on Mexico and Canada but has now decided to levy a 25% tariff on imports from both nations, sparking widespread criticism.
At the same time, Trump has also imposed a 10% tariff on imports from China, which again sparked a heavy debate on Trump’s administrative stance. If this tariff war continues, it could eventually end up sparking a global trade war, with nations contemplating retaliating tariff stances. This could end up impacting the US dollar the most, pushing the currency to hit a new low.
2. Geopolitical Isolation and Alienation
Trump’s aggressive tariff policies may ultimately end up pushing nations to search for competitive alternatives. As the US dollar has always been blamed as a tool that has been “weaponized,” such aggressive policies can result in nations dumping the US dollar officially. This may also result in nations investing in other capable financial systems or supporting other currencies such as the euro or yuan.
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3. Investor Sentiment Supporting Hedge Assets Like Gold Impacting USD Usage
Trump’s policies have lately sparked widespread market volatility. His fierce tariff regime has compelled the world markets to note heavy fluctuations, with the crypto market displaying negative numbers. If Trump continues to push aggressive policies ahead, it could end up changing the investor sentiment, with the trading crowd supporting alternative hedge assets like gold instead of the US dollar.
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