Donald Trump's promise to “Make America Great Again” took a protectionist turn with sweeping retaliatory tariffs on nearly every trading partner.
Yet, in a twist of economic irony, the very weapon long considered his nation’s financial stronghold — the US dollar — is weakening.
The dollar has been depreciating for months, but the slide accelerated notably after 2 April, when Trump announced fresh tariffs on imports from nearly all nations.
On 18 April, the US Dollar Index closed at 99.23, down from 110 in January — a sharp 9.31% fall. For the first time since July 2023, the index dipped below 100 on 11 April, The Guardian reports.
Since the beginning of April, the greenback has lost 5% against the euro and the pound, and 6% against the yen. This downturn reflects a broader erosion of trust in US economic policy, particularly under the spectre of recession triggered by tariff warfare.
In Bangladesh, where the dollar rate remains partially regulated, the recent depreciation has yet to ripple through the currency market. Though the exchange rate has edged closer to market-based dynamics, the system remains sufficiently controlled to buffer against global fluctuations.
Even in India, where the rupee had been weakening in recent months, the dollar has stumbled. Last week saw a consistent drop in its value throughout the Indian trading sessions. Investors, sensing growing risk, are pulling back from dollar-denominated assets — a signal that faith in the US economy is beginning to fracture.
A telling indicator lies in the declining appetite for US Treasury bonds — long hailed as one of the safest global investments. As demand wanes, yields have risen. Analysts believe this spike in rates compelled Trump to delay implementation of the announced tariffs.
Economists such as Benn Steil from the Council on Foreign Relations argue that the dollar, like gold, is seen as a crisis-safe asset. Its status underpins demand for US debt, even with a fiscal deficit exceeding 120% of GDP. The dollar’s dominance in global trade has long afforded Washington outsize influence in international markets. But if investor confidence continues to slide, that dominance may be eroded.
Major institutions including JPMorgan and the International Monetary Fund are now flagging the spectre of a US-led global recession. Any significant contraction in American trade or global commerce would further reduce demand for the dollar, worsening the situation.
The tariff strategy is, in effect, boomeranging back on its architect.
Meanwhile, new threats loom. The global financial infrastructure, particularly SWIFT — the interbank messaging system for international transfers — is ageing rapidly. Speaking recently during a visit to India, American economist Jeffrey Sachs warned that central bank-issued digital currencies could soon render both SWIFT and the US dollar unnecessary for cross-border trade. Countries could bypass the dollar entirely, engaging in direct currency exchange.
Sachs argues that Trump’s tariff policy may have inadvertently accelerated the decline of American hegemony.
China, in parallel, is expanding trade in yuan, including with nations like Brazil. India and several others are actively seeking to reduce reliance on the dollar. While no single alternative currency has yet emerged to challenge the dollar’s supremacy, the tide appears to be turning.
The age of dollar dominance, once unquestioned, may well be entering its twilight.
