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New York Post
2 days ago
- Business
- New York Post
US dollar suffers worst start to a year since 1973 over Trump tariff concerns
The US dollar suffered its worst first-half decline in more than 50 years as fears over President Trump's tariff policies have driven down the world's principal reserve currency. The greenback weakened 10.7% in the first six months of the year compared to a basket of currencies from major trading partners – the worst drop since 1973 when President Nixon stopped tying the dollar to the price of gold. 3 President Trump unveiled harsh tariffs during a 'Liberation Day' press conference in April. AFP via Getty Images But its decline could be part of Trump's broader vision to devalue the dollar — an idea floated by Stephen Miran, recently appointed Chairman of the US Council of Economic Advisers in what has been dubbed the Mar-a-Lago Accord. A weaker dollar makes US exports much cheaper, and could aid Trump's oft-stated goal of boosting manufacturing at home, as well as reducing the nation's trade deficit, the thinking goes. When he was campaigning for a second term, an official in the first Trump administration told Politico that 'currency revaluation is likely to be a priority' because of 'the viewpoint that [an overvalued dollar] contributes to the trade deficit.' Trump has not weighed in on the speculation about devaluing the dollar. 'President Trump has repeatedly affirmed his commitment to the dominance of the dollar as the world's reserve currency,' White House press spokesman Kush Desai told The Post on Tuesday. 'Ten-year Treasury yields rallying down nearly 40 basis points since Inauguration Day, four consecutive expectation-beating inflation reports, and the trillions in historic investment commitments that have poured into the United States since Election Day are all indicative of the confidence that investors and markets continue to have in our economy and currency.' But many experts claim Trump's hefty tariffs are putting pressure on the dollar and forcing global investors to rethink their ties to the currency. 'Trump is definitely playing with fire,' Stephen Miller, a consultant for GSFM, a unit of Canada's CI Financial Corp. in Australia, told Bloomberg. While a weaker dollar should theoretically help US exporters, there's still a lot of uncertainty when it comes to global trade because of the Trump administration's ongoing negotiations with key nations, which are staring down a fast-approaching July 9 deadline. The dollar's fall comes after it soared on Trump's re-election win and peaked in mid-January on hopes he would bring a pro-growth mindset to the White House. 3 The US dollar has weakened 10.7% in the first six months of the year when compared to a basket of currencies. SOPA Images/LightRocket via Getty Images But in April, Trump's 'Liberation Day' announcement revealed tariffs that were much stiffer than analysts and economists had predicted, spurring a broad shift away from US investments. 'Full-scale de-dollarization, if it ever comes, is still a long way away,' Rick Rieder, chief investment officer of global fixed income at BlackRock, said in the company's most recent forecast. But the drop in confidence in the US dollar, which is typically seen as a safe haven asset, is concerning – and could worsen with a rise in government debt, according to Rieder. Trump's massive budget bill, which is projected to add $3 trillion in national debt, narrowly squeaked through the Senate on Tuesday. It awaits final approval in the House. 3 Investors are fearful that President Trump's tariffs could keep inflation and interest rates higher for longer. Getty Images The concerns over higher inflation and debt have have pushed long-term Treasury yields lower. The 10-year yield started near 5% this year and has steadily fallen, reaching 4.267% on Tuesday. 'I think we're going to continue to have this higher pressure on the low end of the yield curve because we haven't really dealt anything away with the deficit or inflation for that matter. In fact, there's more risk now than anything,' Ben Emons, founder of FedWatch Advisors, said on CNBC's 'Fast Money' Tuesday. 'I do think it's related to Treasuries, that if Treasuries get more under pressure, the dollar will get weaker.'
South China Morning Post
11-04-2025
- Business
- South China Morning Post
Trump's tariffs could mean saying goodbye to US dollar profits
April Fool's Day fell on April 1, but the next day US President Donald Trump unleashed 'Liberation Day' , imposing sweeping tariffs on nearly all US trade partners. The US stock market fell 4 per cent on April 3, wiping out more than US$9 trillion in market value in just two days. Advertisement According to JPMorgan, the new US tariff rates are higher than the infamous Smoot-Hawley tariffs of 1930 which exacerbated the Great Recession. The increase is equivalent to a tax rise of about US$700 billion, or 2.4 per cent of US gross domestic product. That would be the largest tax increase since 1968, lifting the chances of recession this year from 40 per cent to 60 per cent. While Trump has now suspended his 'reciprocal tariff' tariffs on most nations, it is worth looking at their possible impact on the global economy, the US dollar and global markets. JPMorgan suggests that the rise in US tariffs, combined with retaliation by China and the European Union , could reduce US GDP by 2 percentage points and global GDP by 1 percentage point through 2026. This would put the US into recession territory and Europe at zero or negative growth, while fast-growing emerging economies such as Bangladesh and Vietnam would be badly affected with tariff increases of 37 and 46 per cent, respectively. Stephen Miran, the chairman of the US Council of Economic Advisers, laid out in a report last November three key tariff objectives related to the future of global trade and the US dollar: to serve as a negotiating tool, tax revenue source and a wall to protect onshoring of US manufacturing. Miran understood that US influence depends not just on military might but also the power of the US dollar. As the world's reserve currency – accounting for about 60 per cent of international payments and 58 per cent of official reserves – the real carrot in using the dollar lies in its higher rate of return, superior liquidity and safe-haven status. Advertisement While the United States has a large external debt, most of it is denominated in US dollars, meaning it can repay its debt by printing more of its own currency. Given that US dollar liquidity is superior to euro or yen interbank market liquidity, having the largest military power reinforces US dollar hegemony over rivals such as the euro, yen or yuan.
