Donald Trump and the dollar have become indivisible in recent times. Sometimes it appears that the American currency is completely under the personal supervision of the US President. Having gained in value since the start of the year, the US dollar is nearing highs not seen more than a decade. Furthermore, most analysts give positive prospects for the near future.
However, a closer look at this upward route shows a cause for concern about equally powerful collapse. "The situation today is not unlike that of Trump’s Republican predecessors. Former Presidents Ronald Reagan and George W Bush also each cut taxes sharply, resulting in budget deficits that prompted the Fed to raise interest rates. In each case, the dollar appreciated dramatically (by as much as 60 percent under Reagan between 1981 and 1985), " Benjamin Cohen, Professor of International Political Economy at the University of California in Santa Barbara, recalls. Nonetheless, more expensive dollar inevitably leads to a rise in the value of US exports abroad and a reduction in the value of imports within the country. As a result, US export-oriented producers would suffer, while the trade deficit would start to increase even rapidly. Moreover, Trump’s protectionist political decisions make prospects for the dollar even gloomier.
The belligerent policy of Trump is putting the US currency at risk. Even US allies are thinking about abandoning the dollar. Markets are actively looking for the alternatives to the greenback, among which gold is a leader. "So, despite today’s dollar appreciation, a weakening greenback may be in store over the long term. Far from making America great again, Trump seems to be hastening its economic decline," Cohen believes.
