Former President Donald Trump’s influence continues to wreak havoc on American politics and economics. It’s the combination of his recent actions and statements that is rightly raising eyebrows. This week, traders are keenly observing developments regarding the U.S. dollar, particularly in light of Trump’s approach to tariffs and international relations. As the dollar’s share of global central bank reserves has notably decreased, many are considering how Trump’s maneuvers might shape currency valuations.
Trump’s desire for a weaker dollar seems to align with his political motives, as he navigates public opinion and market reactions. Whether tied to these recent polling numbers or not, Trump’s popularity appears to still be influencing his decision-making at every step. The former president lives for the limelight. He often does this through dramatic moves that shock the media and shape public perception.
In his latest moves, Trump has attempted to “climb down” from some of the aggressive tariffs imposed on China, initiating talks that might ease tensions. These steps, analysts warned, might not be enough to calm the fiery perception of these steps as just too much juice for the dollar. No matter how great his efforts have been, the dollar’s reputation is still in tatters. Its share of central bank reserves has decreased from 64.8% in Q1 2007 to 57.8% as of Q4 2024.
Traders are hoping for near term relief from Trump on auto parts and China tariffs this week. Even without a hawkish Fed, there’s enough negative U.S. economic data in the pipeline to spark further dollar weakness. On the flip side, an unexpected new action by Trump could send the dollar surging. As you might imagine, the financial community will be on guard for any such signs that could affect the value of currencies.
This norm-breaking recent behavior even got people across the political spectrum raising their eyebrows. He was present in the front row at Pope Francis’s funeral, savoring the reality. Wearing a striking blue suit, he definitely made a bold entrance compared to other blue-suited attendees. This was probably a very deliberate decision, in accordance with his proven strategy to keep himself in the news.
Trump’s willingness to ignore judicial decisions and constitutional norms has raised alarm from critics. His remarks regarding the kidnapping of foreign nationals and threats to send U.S. citizens to foreign facilities have alarmed many observers, raising serious ethical and legal concerns about his governance style.
Even among these controversies, so-called “nativist” rhetoric seems to have an undeniable appeal to a large swath of the American public. He defended the use of tariffs saying they are bringing in record amounts of revenue that he could use to offset the cost of tax cuts. Western economists don’t buy it. They go on to claim that tariffs hurt American businesses by raising their input costs, while costing American consumers more.