Trump’s economic policies and the decline of the US dollar
TOI World Desk | TIMESOFINDIA.COM | Jul 05, 2025, 00:50 IST
( Image credit : ANI, TOIGLOBAL )
The US dollar is weakening this year because of Donald Trump's policies. The dollar has already fallen, and experts predict further decline. This situation is creating uncertainty among global investors. Imported goods are becoming expensive for Americans. However, US exports are getting a boost. Some nations are exploring alternatives to the dollar.
The US dollar is experiencing significant depreciation in 2025, largely driven by President Donald Trump’s economic policies. The dollar has already fallen more than 7% this year, with analysts warning it could drop another 10% by the end of the year. This sharp decline has been fueled by global investor uncertainty, with many moving away from holding dollar-based assets.
The weakening of the dollar has immediate implications for the US economy. Imported goods are becoming more expensive, which could lead to higher costs for American consumers. On the other hand, US exporters are seeing a boost, as the depreciating currency makes American goods more competitive in the global market. This shift aligns with Trump’s broader goal of rebalancing US trade by addressing what he perceives as an overvalued dollar that harms US workers and industries.
As the dollar weakens, concerns are rising about its long-term role in the global financial system. While some countries have started to diversify away from the dollar, investing in alternatives such as gold or regional currencies, there is no clear challenger to the dollar's status as the world’s primary reserve currency. In particular, China has been increasing the use of its currency in international transactions, particularly with developing nations, through swap agreements.
However, despite these efforts, experts argue that the US government has taken steps to protect the dollar's global position. Political economist Ngaire Woods noted earlier this year that, while alternatives are being explored, the US dollar remains dominant due to sound US policy and international engagement.
The current situation evokes comparisons to the 1970s, when President Richard Nixon took the US off the gold standard, a decision that significantly altered global financial dynamics. Nixon’s move, known as the “Nixon shock,” was driven by the US's inability to back its dollar with sufficient gold, leading to a decline in the currency's value and a period of inflation and stagnation. Similarly, Trump’s policies have been criticized for contributing to the dollar’s decline, with some analysts warning of a potential “Trump shock,” a reference to Nixon's dramatic reshaping of global finance.
If the current trends continue, the global financial system could face increased instability. Morgan Stanley’s Michael Wilson has warned that significant fluctuations in the dollar often lead to periods of volatility. Cryptocurrencies, too, are beginning to challenge the dollar's dominance in certain sectors, further complicating the outlook for the greenback.
Despite these challenges, it remains unclear whether the dollar's status as the world's dominant currency will be usurped in the near future. While countries are exploring alternatives, the dollar’s position remains strong for now, bolstered by US policy and its central role in global finance. However, the events of 2025 may signal a turning point for the US dollar, much like the shifts that occurred following Nixon’s move more than five decades ago.
The weakening of the dollar has immediate implications for the US economy. Imported goods are becoming more expensive, which could lead to higher costs for American consumers. On the other hand, US exporters are seeing a boost, as the depreciating currency makes American goods more competitive in the global market. This shift aligns with Trump’s broader goal of rebalancing US trade by addressing what he perceives as an overvalued dollar that harms US workers and industries.
As the dollar weakens, concerns are rising about its long-term role in the global financial system. While some countries have started to diversify away from the dollar, investing in alternatives such as gold or regional currencies, there is no clear challenger to the dollar's status as the world’s primary reserve currency. In particular, China has been increasing the use of its currency in international transactions, particularly with developing nations, through swap agreements.
However, despite these efforts, experts argue that the US government has taken steps to protect the dollar's global position. Political economist Ngaire Woods noted earlier this year that, while alternatives are being explored, the US dollar remains dominant due to sound US policy and international engagement.
The current situation evokes comparisons to the 1970s, when President Richard Nixon took the US off the gold standard, a decision that significantly altered global financial dynamics. Nixon’s move, known as the “Nixon shock,” was driven by the US's inability to back its dollar with sufficient gold, leading to a decline in the currency's value and a period of inflation and stagnation. Similarly, Trump’s policies have been criticized for contributing to the dollar’s decline, with some analysts warning of a potential “Trump shock,” a reference to Nixon's dramatic reshaping of global finance.
If the current trends continue, the global financial system could face increased instability. Morgan Stanley’s Michael Wilson has warned that significant fluctuations in the dollar often lead to periods of volatility. Cryptocurrencies, too, are beginning to challenge the dollar's dominance in certain sectors, further complicating the outlook for the greenback.
Despite these challenges, it remains unclear whether the dollar's status as the world's dominant currency will be usurped in the near future. While countries are exploring alternatives, the dollar’s position remains strong for now, bolstered by US policy and its central role in global finance. However, the events of 2025 may signal a turning point for the US dollar, much like the shifts that occurred following Nixon’s move more than five decades ago.