Just imagine — the US dollar has revealed its worst performance in half a century! Analysts have come to the conclusion that US President Donald Trump is once again to blame.
According to analysts at the Financial Times (FT), the greenback has slumped by 10% since the beginning of 2025. It is the sharpest drop since 1973. The main driver behind this collapse was President Trump's tariff policy. Amid trade wars initiated by the White House, the US currency fell by 10% against a basket of six major global currencies.
Experts at FT believe that the outcome of Trump’s tariff initiatives took markets by surprise. As a result, investors, facing market turmoil, flocked to European assets, pushing the euro up by 13%.
After a series of tariff hikes, market participants began speculating about a potential loss of the dollar's status as a reserve currency. However, the situation later stabilized, and the greenback reached a relative balance. Nevertheless, the fundamentals of the US dollar have been shaken. In the meantime, the dollar is no longer seen as a "safe haven." Market participants around the world rush to hedge their dollar-denominated assets, putting more pressure on the US currency.
There’s also an alternative view of the situation, which suggests that the dollar’s weakness, if not directly initiated by the Trump administration, still fits into a broader plan to eliminate the US trade deficit. According to this view, to minimize the “gaping trade deficit”, which amounted to $918 billion in 2024, a devaluation of the US dollar by 20–30% might be necessary. Implementing such a measure would take at least two years.
It is generally accepted that the American trade deficit is closely tied to the dollar’s status as the world’s reserve currency and the US role as an exporter of reserve assets. Capital inflows typically support the dollar’s value despite a current account deficit, but the flip side of this process is the need to export US Treasuries to sustain global growth. This is precisely the issue criticized by Trump’s supporters, who argue that the overvalued dollar makes American exports less competitive. As a result, the country becomes increasingly dependent on foreign goods, including in areas critical to national defense.
