The United States dollar is currently experiencing its most significant downturn in over half a century. Between January and June 2025, the currency has depreciated more than 10% against major global currencies. To find a comparable drop, one must look back to 1973, when the US severed the link between the dollar and gold, signaling the end of the Bretton Woods system, as reported by The New York Times and Financial Times. This time, however, it seems the primary reason isn't a shift in the monetary system but rather the policies of President Donald Trump, as suggested by numerous economists and experts.
What is Driving the Dollar's Decline?
The dollar's weakness is not accidental; it is closely tied to President Trump's erratic and aggressive economic strategies. According to The New York Times, the currency "continued to decline despite President Trump retracting his tariff threats." The current slump is attributed to the "aggressive tariff push and a more isolationist foreign policy" from the White House, which has shaken global confidence in the US currency.
Since returning to power, Trump has initiated new trade wars, publicly criticized the Federal Reserve, and approved a massive increase in public spending. These actions have cast doubt among investors about the future stability of the United States.
"The dollar has become the scapegoat for Trump's erratic policies 2.0," explained Francesco Pesole, a strategist at ING, to Financial Times. Some analysts argue that this decline may not solely be a consequence of Trump's decisions but could be a deliberate strategy to weaken the dollar. Why? A cheaper dollar benefits American exporters and makes imports less appealing, aligning with the president's protectionist views.
Analyst Andreas Steno Larsen summed it up: "A US dollar 20% to 25% weaker could solve all of Trump's problems." In his view, Trump employs an "intermittent" negotiating strategy, issuing strong threats and then retracting them. This tactic creates instability and affects the dollar's value. According to ElEconomista.es, this stance has "deeply impacted the markets and intentionally dented the dollar."
Decreased International Confidence, Increased Domestic Issues
Meanwhile, foreign countries and funds are pulling back from purchasing dollar-denominated assets. "Foreigners are no longer buying enough dollar assets to finance the US's enormous current account deficit," states George Saravelos of Deutsche Bank. The concern lies not in them selling their bonds or stocks in dollars, but in their reluctance to buy more.
Additionally, Trump has pushed forward a new tax law that will increase the debt by $3.2 trillion over the next decade. This has raised alarms about the nation's financial sustainability and impacted the dollar's appeal as a "safe haven."
"Liberation Day was a shock to the US policy framework," said Andrew Balls from the investment firm Pimco to Financial Times, referring to Trump's announcement of new reciprocal tariffs in April.
Is the Dollar's Global Role at Risk?
While the dollar remains the world's reserve currency for now, experts caution that its position is weakening. "Large-scale dedollarization is still a long way off, but a dynamic is unfolding that could significantly elevate that risk: the rise of public debt," warned Rick Rieder of BlackRock to The New York Times. There is also concern that in times of international tension, the dollar no longer serves as a refuge. Even during periods of uncertainty, such as in the Middle East or financial markets, the currency continues to lose value, indicating eroding confidence.
"It's not about having a weak or strong dollar. It's about what it tells you about how the world views your policies," cautioned Steve Englander of Standard Chartered.
Key Questions Regarding the US Dollar's Decline
What factors are contributing to the dollar's current decline?
The dollar's decline is primarily driven by President Trump's aggressive economic policies, including trade wars, public spending increases, and an isolationist foreign policy, which have undermined global confidence in the currency.
How does a weaker dollar impact the United States?
A weaker dollar can benefit US exporters by making their goods cheaper abroad, but it also makes imports more expensive, which can contribute to domestic inflation and reduce purchasing power.
Could this decline affect the dollar's status as a global reserve currency?
While the dollar remains the primary global reserve currency, its weakening position and increasing US debt could eventually threaten its status, encouraging countries to seek alternatives.