Many people believe that Donald Trump, the 47th President of the United States, is an unpredictable and eccentric politician. The U.S. dollar is the main focus of Trump’s attention. In certain statements, he maintains that strengthening the American dollar is necessary. In other instances, he argues for its weakening.
Trump’s Advocacy for a Strong Dollar
On July 8, Donald Trump once again asserted that the U.S. dollar must be as strong as it was for many decades following the end of World War II. He was adamant that it should continue to serve as the global currency, as it had been established at the Bretton Woods Conference in 1944. As a reminder, a decision was made at that time to establish the gold-dollar standard as the foundation for the postwar international monetary and financial system.
During the press conference in the White House on July 8, the President of the United States claimed that the dollar’s status as the world’s reserve currency would be likened to the loss of a significant world war. He said it with his usual mix of stupid and smart President analogies.
Perceived Threats to the Dollar: The BRICS Factor
Donald Trump regards himself as a “wise president” based on his assertion that he is capable of maintaining the dollar’s strength and ensuring its status as a world reserve currency. He insists that he is aware of the sources of threats to a strong currency and the strategies to address them. He identified one such peril during the press conference: the BRICS. He stated that the objective of the BRICS organization is to replace the dollar so that another nation can take its place and establish a new standard. Of course, the US will never forfeit its position.
On 13 July, Trump announced on social media that any nation that supported the “anti-American” policy of BRICS would be subject to an additional 10% tariff. He maintained that there would be no exceptions.
Trump has previously called BRICS a threat to the US dollar. The 47th President of the United States expressed concern on social media in November of last year, shortly after his election victory, that the U.S. dollar could be threatened by a BRICS currency, which did not exist at the time and continues to have no existence. He warned that American import duties of 100% would apply to any BRICS countries that dared to use such a currency. He cautioned that any country attempting to replace the dollar in international commerce would have to bid farewell to America.
The Contradiction: Trump’s Advocacy for a Weak Dollar
However, Trump has also advocated the necessity of a weak dollar with the same intensity. What does he mean by that? He is implying that the exchange rate of the U.S. dollar is currently excessively high in comparison to the currencies of America’s trading partners. This erodes the international competitiveness of the American economy. This trend is particularly evident in the persistent, substantial trade deficits of the United States.
The U.S. Trade Deficit: Record Highs
At the end of 2024, the U.S. deficit in trade in goods and services totaled $0.92 trillion—a record high for all years. It exceeded the previous year’s figure by 17%.
It is crucial to acknowledge that the United States maintains a surplus in the trade of services, with a particular emphasis on financial services. However, if we isolate the merchandise trade balance, it resulted in a deficit of $1.2 trillion last year.
The U.S. trade deficit in products and services has already exceeded $522.4 billion in the first five months of this year. For the first time under the 47th president, the United States is on the brink of exceeding $1 trillion in trade deficits in products and services.
Trump’s Economic Initiatives
Trump has unveiled an ambitious initiative to fortify the American economy. It involves reducing business taxation, providing budget support for specific sectors and industries, and removing restrictions implemented under the “green economy” agenda. Trump is also optimistic that the Federal Reserve will eventually reduce the federal interest rate.
However, his main goal is to weaken the currency and implement protectionist import tariffs. He believes that these measures will improve the international competitiveness of American businesses. Trump has already accomplished some results on these two fronts. Estimates indicate that the turnover of U.S. foreign trade will experience a substantial decline by the end of 2025 as a result of the implementation of new trade barriers. Nevertheless, there is considerable disagreement regarding the trade balance. Some experts anticipate that the trade deficit will decrease, while others anticipate that it will increase.
The Dollar Index (DXY) and Recent Trends
The dollar’s exchange rate has been particularly successfully weakened by Trump. This is demonstrated by the Dollar Index (DXY), which evaluates the value of the U.S. dollar in comparison to a “basket” of six main currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Each currency in the basket is assigned a specific “weight.” At present, the DXY is around 97.6 points, which is the lowest it has been in several years. One week before Donald Trump’s inauguration as President of the United States, the local multi-year apogee occurred on January 15, 2025, at 110.1 points.
The index has declined by nearly 11.5% since the start of the year. It has decreased by 10% in comparison to the average of the previous 200 days. This is the most significant deviation from the 200-day average in the past 21 years, as experts have observed.
Historical Parallels: The Dollar’s Previous Collapses
The dollar may have undergone a comparable “collapse” only in the late 1970s and early 1980s, following the establishment of the “paper-dollar standard” and the removal of the dollar from gold. That was an intriguing chapter in the history of the dollar, and it remains largely unexplored to this day. At that time, the dollar was rescued and subsequently reinstated as the global currency.
In my opinion, there are similarities between the current state of the currency and the one that existed nearly fifty years ago. The United States held significant global authority and influence during that period. The U.S. Federal Reserve, central banks of major Western countries, the International Monetary Fund, and others all supported the dollar as the global currency. The U.S. Dollar stopped falling, reached a plateau, and then abruptly rose. It is uncertain whether Trump will be able to stop the dollar’s fall. He doesn’t have the international backing that Ronald Reagan, the 40th president of the United States, had during his rescue efforts.
Expert Warnings and Overvaluation Concerns
In an article for Project Syndicate, Nouriel Roubini, also known as Dr. Doom, cautioned that the trade war initiated by Donald Trump’s administration could result in a 10–15% decline in the dollar’s market value in comparison to other significant currencies.
However, analysts anticipate that the U.S. dollar’s decline may be even more precipitous due to its overvaluation in comparison to a variety of other currencies, including not only reserve currencies like the euro or yen but also non-reserve currencies like the Russian ruble. The U.S. dollar is overvalued by up to 40% in comparison to the Chinese yuan and Japanese yen, according to the most recent research conducted by The Economist.
Measuring Dollar Overvaluation: The PPP Example
There are numerous methods to ascertain the extent of the dollar’s overvaluation. For example, the purchasing power parity (PPP) of a specific currency and the U.S. dollar can be examined through the market exchange rate. The purchasing power parity (PPP) indicator denotes the number of currency units required to acquire a standard set of products and services that are equivalent to the value of one unit of the base country’s currency (in this case, the U.S. dollar). Its purpose is to convert currencies into comparable values, thereby adjusting for variations in price levels between countries. For instance, the official exchange rate of the Russian currency was 78.53 rubles per U.S. dollar, while the PPP was 28.9 rubles per dollar as of July 1, 2025, according to the Bank of Russia. This implies that the U.S. currency is overvalued in relation to the Russian ruble by a factor of 2.7. Interestingly, the Swiss franc is the only currency against which the U.S. dollar is undervalued in the current currency market.
Predictions of a Dollar Crash
Albert Steck’s article, “Diese Gründe sprechen für einen Dollar-Crash: Experten halten einen Einbruch von 30 Prozent für möglich,” was published in the Swiss newspaper Neue Zürcher Zeitung. (“Experts Consider a 30% Drop Possible: These Reasons Point to a Dollar Crash”). The author observes that the dollar remains expensive, despite experiencing its most significant decline in fifty years. Particularly, the heightened level of U.S. government debt implies that there will be more corrections to come. The dollar’s current “correction” is unavoidable; however, it should not be perceived as Trump’s accomplishment. He may only be able to delay or halt the dollar’s decline. However, Trump is not even attempting to do this.
A Historical Reminder: The Dollar as the World’s Problem
Let us recall a historical event that took place more than fifty years ago. In November 1971, the finance ministers of the ten largest countries convened in Rome for an emergency meeting. The global monetary system was on the verge of collapse. John Connally, the U.S. Treasury Secretary, made the notable remark, “The dollar is our currency, but your problem,” during that meeting. The dollar has now become not only the currency of America but also a significant problem, according to Albert Steck. As the title of the article implies, the dollar may experience an additional depreciation of 30%. Trump will not only fail to prevent the dollar’s fall, but he will also actively promote it.
The Dollar’s Resilience and Global Dominance
The U.S. dollar is believed to have substantial resilience that will likely last for many years, or even decades, according to certain experts. At its peak, the U.S. dollar accounted for 71% of global currency reserves. However, that percentage has decreased to 58% as of today, which is still more than half. The dollar remains the dominant currency in the FOREX currency market, with 88% of all currency transactions occurring in dollars (although it is important to note that the total sum of all transactions in currency pairings is 200%, not 100%).
Kenneth Rogoff, a distinguished American economist and Harvard professor, has recently released a new book on the dollar titled “Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance, and the Road Ahead.” He, too, evaluates the dollar’s future with skepticism. Nevertheless, he maintains that the dollar will continue to be the global currency for approximately twenty-five more years.
Pessimistic Predictions and Economic Imbalances
Nevertheless, there are significantly more pessimistic predictions regarding the dollar’s future. In the words of Hegel, numerous experts assert that quantity may at any moment transition into quality. For instance, the dollar may experience a significant decline in value as a result of Trump’s protectionist policies, which could potentially induce a recession in the American economy. According to analysts at JPMorgan, there is a 45% likelihood of a recession in the United States by the end of 2025. They assert that a recession could weaken the dollar, but it will not be destroyed to prevent the public from becoming alarmed.
Albert Steck revisits his article and emphasizes a significant imbalance in the American economy that is seldom addressed: the imbalance in the United States’ international investment position. This position is indicative of the assets that a nation possesses both domestically and internationally, as well as those that foreign residents possess within the country. Before the 2008 financial crisis, the value of foreign assets held by Americans was approximately equivalent to that of foreigners in the United States. However, foreign-owned assets in the United States have rapidly eclipsed U.S. assets abroad under Obama and, particularly, under Trump. Foreign assets in the United States represent America’s liabilities to the rest of the world. These liabilities have now reached $62 trillion, while American assets abroad total $36 trillion. America’s net liabilities to the world amount to $26 trillion, which is nearly equivalent to the nation’s annual GDP.
The Future of the Dollar: Uncertainty Ahead
The U.S. has thrived on credit precisely because the dollar has maintained—and still maintains—its status as a global currency. Ronald Reagan once succeeded in preventing the dollar from crashing and managed to steer it back into the status of a worldwide currency. Today, Donald Trump is acting in a completely different way: he is actively working to weaken the dollar, oblivious to the possibility that the “dollar” could suddenly plummet and crash to the ground.