According to Semafor, a weaker dollar could enhance the competitiveness of US exports, aligning with Trump’s initiative to rebalance trade. However, it also results in higher import costs, exacerbating the impact of tariffs.
A key consideration is whether the dollar will not only continue to lose value but also its status as the central currency in the global financial system. Currently, there are limited alternatives to the dollar.
Although initiatives aimed at de-dollarization—such as central banks diversifying into gold and China increasing its currency use in developing countries through swap lines—have not significantly altered the status quo.
As political economist Ngaire Woods noted in an essay for Semafor, while these efforts haven’t replaced the dollar, it remains protected by the US government’s sound policy and global engagement.
Historically, the year that came closest to the anticipated 2025 levels of dollar depreciation was 1973, which resulted in then-President Richard Nixon moving the US off the gold standard. According to Morgan Stanley’s Wilson, substantial fluctuations in the dollar often lead to periods of instability.
