Dollar Decline Raises Concerns Over US Financial Stability

Since Donald Trump returned to the White House, the US dollar has lost over 10% of its value compared to the euro, British pound, and Swiss franc. It’s now down against every major global currency. Experts believe that Trump’s economic approach is hurting investor confidence and threatening the dollar’s long-standing dominance.

Key Policies Driving the Dollar Down

Several factors are causing the dollar’s drop:

• High import tariffs that have disrupted trade relations
• Tax cuts that added to rising national debt
• Pressure on the Federal Reserve to lower interest rates
• Aggressive legal and political tactics targeting critics

These actions are making global investors nervous, prompting them to move money out of the US, leading to a weaker dollar and potentially higher borrowing costs.

Trump’s Team Remains Unconcerned

Despite the dollar’s sharp decline, the Trump administration has shown little concern. While officials occasionally express support for a “strong dollar,” market analysts believe the administration may secretly prefer a weaker dollar to boost US exports and manufacturing.

This approach has caused currency market volatility, including a recent 4% drop against the Taiwan dollar in just one hour.

Dollar’s Fall Threatens Debt Financing

The US now needs to borrow over $4 trillion a year to cover its budget. Much of this funding comes from foreign investors. As the dollar weakens, those investors lose money when converting their returns, increasing the risk that they stop buying US debt.

Experts warn this could create a vicious cycle: falling dollar → higher borrowing costs → bigger deficits → even weaker dollar.

Wall Street Turning Bearish on the Dollar

Major financial institutions like Goldman Sachs and Morgan Stanley predict the dollar will continue to fall. Futures traders have built short positions worth $15.9 billion, betting against the dollar’s value. According to Bank of America, fund managers are the most underweight on the dollar in 20 years.

Gold and Alternatives Gaining Favor

As confidence in the dollar drops, investors are turning to gold and alternative assets. Financial experts like Jeffrey Gundlach and Paul Tudor Jones believe the dollar could fall another 10% in the next 12 months.

Trump’s Tax Bill May Worsen the Situation

The proposed tax plan—often called the “revenge tax“—aims to penalize foreign investors. It would add almost $3 trillion to the US deficit over the next decade, according to the Congressional Budget Office. That could worsen the country’s already fragile financial standing.

The national debt has surged to $29 trillion, nearly 100% of GDP, while the US also lost its last AAA credit rating in May due to ballooning deficits.

Bond Market Also Reacting

US Treasury bonds—once seen as “risk-free”—are now being sold off alongside stocks, showing that even the safest American assets are losing their appeal. Normally, rising interest rates attract dollar investment. Now, that relationship has broken down, indicating deeper issues.

Conclusion: Dollar’s Safe-Haven Status at Risk

Global investors are starting to diversify away from the dollar, which may further accelerate its decline. As Leah Traub from Lord Abbett puts it, once the shift away from the dollar starts, “it’s really hard to put the cat back in the bag.”