From Yahoo Finance: 2025-04-17 19:25:00

The recent drop in the dollar has economists worried about a loss of confidence in the U.S. as President Trump reshapes global trade. Since mid-January, the dollar has fallen 9% against a basket of currencies to its lowest level in three years. The dollar’s dominance could be at risk due to tariffs and erratic policy.

Traditionally, the dollar would strengthen as tariffs sink demand for foreign products. However, this time, the dollar fell, losing more than 5% against the euro and pound, and 6% against the yen since early April. A weaker dollar could lead to higher prices for imports, including French wine and South Korean electronics, hurting consumers.

The U.S. federal debt is already at a risky 120% of annual economic output, potentially leading to higher interest rates. China has been making yuan-only trading deals and loans to countries like Argentina and Pakistan, reducing reliance on the dollar. Cryptocurrencies like Bitcoin could also challenge the dollar’s dominance in the future.

Economists debate whether the dollar’s weakness is due to lost faith in the U.S. or anticipation of higher inflation from tariffs. Trump’s erratic tariff policy and threats to the Federal Reserve’s independence add to investor concerns. The Suez Crisis of 1956 is cited as a cautionary tale of how policy missteps can erode trust in a country’s currency.

Read more: Strange sell-off in the dollar raises the specter of investors losing trust in the US under Trump