Bad News Thanks to Trump’s Tariff War: The U.S. Dollar Is in Trouble

Did Donald Trump Damage the U.S. Dollar? Last week, as a result of the chaotic week of tariffs being imposed and pulled back, the value of the U.S. dollar slipped last Friday to its lowest level since April of 2022, according to Forbes. It was a bit of bad news for what’s traditionally been one of the safest investments.

The U.S. Dollar Index, which on election day last year was at 103.42, reached as high as 109.96 in mid-January. But it began to drop in late March, leading up to the “Liberation Day” tariff announcement on April 2, and by April 14, it had dropped below 100, to 99.50 on Wednesday.

The Euro, meanwhile, has gained in value of late, as has the Swiss franc.

“The U.S. dollar’s fall versus the euro despite U.S. Treasury yields rising relative to yields on German government bonds, the de facto eurozone benchmark, has raised alarms,” William Watts wrote for MarketWatch on Wednesday. Watts went on to describe it as “a pretty ominous sign” if it does not rebound versus the Euro soon.

And while the 90-day pause on most non-China tariffs has brought a stop to the market volatility, at least for now. But the damage to the dollar, this time, could last longer.

Donald Trump’s Tariffs and Trade War Could Damage the Dollar

Per a separate MarketWatch analysis, investors often reach for currencies when they lose confidence in other investments.

The U.S. dollar has traditionally been seen as a safe investment, but that hasn’t always been the case, such as in 2007, heading into the financial crisis that followed the collapse of the housing bubble.

“During the [financial crisis], there wasn’t a movement in the U.S. to dismantle the international trade system or the international financial system,” Thierry Wizman, a financial-markets economist at Macquarie Group, told MarketWatch. “We had a financial shock, but if anything, the U.S. policymakers were proactive in trying to save the system, including through the use of diplomacy.”

As the New York Times put it in their own analysis, the dollar’s status as a “safe haven” has become questioned following the tariff blitz.

Treasury Secretary Scott Bessent had said that he expected the tariffs to lead the dollar to rise, at least enough to offset inflation, but instead the opposite has happened.

Per the Times, Krishna Guha, vice chairman at Evercore ISI, described the combination of stocks, government bonds and the dollar all dropping at the same time as “rare, ugly, and worrying,” even in addition to the existing worries of a recession.

The Dollars Is In Trouble Thanks to Trump

The Wall Street Journal, meanwhile, warned last week of an “ominous message” from both the dollar and the bond market in response to Trump’s tariffs, and that “the U.S. is no longer seen as safe.”

According to Bank for International Settlements data shared by the Times, the dollar is on one side of nearly 90 percent of all foreign-exchange trades.

Christopher J. Waller, a Fed governor, said this week that he would support cutting rates “sooner and to a greater extent,” in the event of further signs of a recession.

What Will the Fed Do?

Fed Chairman Jerome Powell spoke this week and pointed to the tariffs, stating that the policy could pose a challenge when it comes to both controlling inflation and supporting growth, per CNBC. Both are within the Fed’s mandate.

There may be, Powell said, “different time horizons over which those respective gaps would be anticipated to close.”

While tariffs, per CNBC, typically cause a one-time hit to prices that are not sustained, that is different with Trump’s levies, which are widespread, ever-moving, and frequently reversed.

“Tariffs are highly likely to generate at least a temporary rise in inflation,” Powell said in the speech.

As for whether there will be changes to interest rates in the near term, Powell said the Fed plans to “wait for greater clarity” before acting on that.

Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter