One overlooked aspect of the tariff debate has been tariffs’ potential impact on the U.S. dollar, the most widely used currency in the world.
Good evening,
President Donald Trump’s universal reciprocal tariff policy is still on hold until August 1st.
But, hopefully, the administration will ditch this tax on American consumers (which is what a tariff really is) before then.
One overlooked aspect of the tariff debate is their potential impact on the U.S. dollar—whose global dominance undergirds American borrowing costs and geopolitical leverage.
A global trade war could weaken the dollar’s leverage abroad, as trading partners diversify away from U.S. currency and payment networks.
When other countries impose retaliatory tariffs on the goods Americans buy, prompted by our own tariffs, it weakens the value of the dollar in your pocket, as you will need more of them to make purchases. If countries stop trading in U.S. dollars, that reduces demand for the U.S. dollar, further weakening the market for USD.
A weaker dollar generally raises the cost of imported goods—from smartphones and clothing to your morning coffee—cutting into Americans’ purchasing power.
If Inflation rises even further, it will hurt American households who are still reeling from years of high prices.
Watch our latest explainer on how trade wars are detrimental to the U.S. dollar and to American consumers.
