In an era where multipolar currencies are gaining global momentum, the US dollar is already under significant pressure to keep its reserve currency status steady. On the other hand, many countries are already in line to strip the US dollar of its current stature by either supporting de-dollarization or looking forward to transacting with other currencies. Trump’s tariff regime has further weakened the dollar, putting catalytic pressure on the currency. Will the US dollar finally be on the verge of breaking down?
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Deutsche Bank Predicts US Dollar Doom
Deutsche Bank, a leading financial giant, has predicted a new ominous prophecy concerning the US dollar. Per a new Bloomberg report, the bank stated how the US dollar may soon lose its “safe haven status” if it continues to weaken and face challenges against the changing global order.
“We do not write this lightly. But the speed and scale of global shifts are so rapid that this needs to be acknowledged as a possibility. It is hard to overestimate the scale of change taking place in global economic and geopolitical relations in a matter of days.” As stated by George Saravelos, the bank’s global head of FX strategy, in a note to clients
Deutsche Bank’s ominous prediction has primarily been forecasted due to the dollar’s plunge documented on Tuesday. The USD fell 0.7% soon after Trump’s tariff deployment efforts caught pace.
“What stands out in today’s market reaction is that the dollar is not strengthening materially. We would not have expected these market moves at the start of the year.” Saravelos stated
The bank stated how it is expecting the current US dollar slump to continue in the long haul.
“Bringing it all together, we are starting to become more open-minded to the prospects of a broader, weaker trend unfolding” for the dollar. Two pillars of America’s role in the world are being fundamentally challenged: the US’s security backstop for Europe and the respect of rules-based free trade.” Saravelos reiterated
Also Read: US Dollar & Stock Market Weakens as Trump Tariffs Go Live
Why Is the USD Falling?
The US dollar is declining due to many reasons. First and foremost, the rising de-dollarization drives have compelled nations to adopt a cautious stance when transacting with the dollar. Many nations have already started to look for alternatives, weakening the dollar in the process. At the same time, Trump’s tariff regime is also sparking widespread trade war fears, pivoting investor interest away from the dollar economy.
For example, a 25% tariff on Canada and Mexico raises costs for US automakers.
— The Kobeissi Letter (@KobeissiLetter) February 26, 2025
This tariff would add ~$3,000 to the price of some of the ~16 million cars sold in the US each year.
Food costs are set to rise as well, with Mexico supplying over 60% of fresh produce to the US. pic.twitter.com/QyP9N8O4m0
In addition to this, the US is also encountering counter tariffs imposed by other nations, which is also playing a key role in the US dollar erosion.
“The moment U.S. tariffs came into effect this morning, so did the Canadian response. Canada will be implementing 25% tariffs against $155 billion of American products. Starting with $30 billion worth of goods immediately, and the remaining $125 billion in 21 days’ time.”
BREAKING: President Trump will announce intent to impose reciprocal tariffs on countries who impose tariffs on the US, per Fox News.
— The Kobeissi Letter (@KobeissiLetter) March 5, 2025
Trump is expected to say "whatever they tariff us, we tariff them," per Fox News.
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