Trump’s Economic Policies: Us Dollar’s Decline And The Shifting Global Investment Trends
NorthAmerica
Markets
President Trump took office in January 2025. During his campaign, he had a strong manifesto on transforming the US and restoring the glory of “The Great US Dollar,” which convinced most people that his win would improve the US economy. The conviction was reflected in the dollar's performance immediately after his inauguration on January 20th, 2025. After he was sworn in, the US dollar triumphed against all major currencies. The abrupt change was a result of the anticipated economic policies that he advocated during his campaign, which included ways of stimulating the US economy and proposed tariffs. An example of USD's glory is its appreciation by 0.8% against the CAD and 0.95% against the Mexican Peso in January 2025. The response was triggered after Trump announced the government's intention to implement 25% tariffs on imports from Mexico and Canada. This was followed by another proposed policy to charge an equal tariff for countries using the VAT system. As of March 2025, the USD continues to decline in the global markets, which raises questions about the stability of the USD against other major currencies. According to the US dollar index (DXY), the currency has declined by 4.5% from January 2025 and is approaching its lowest since November 2024. The euro has touched its strongest streak against the dollar in February 2025 since November 2024, which puts pressure on the dollar. While Trump emphasizes growing the US economy, the US stocks indicate a different scenario. Investors are pulling out of the US markets due to worsening economic data. The US government is aggressively developing and proposing trade policies, the intention of which is to restore the glory of the country. In the short term, the situation is of an unintended outcome as the USD currency is depreciating. However, considering the transition and what is happening locally in the US and the global markets, it is critical to evaluate whether the new and proposed trade policies aim to strengthen the dollar or if it will continue depreciating. Are Trump's policies and sanctions being over-ambitious? According to analysts, the depreciation of the USD reflects the weak momentum in the US economic outlook and decreasing confidence in growth prospects. Many countries looked forward to profitable trading with the US, which seems to have locked itself and chased away businesses and foreign investors. In the past 16 months, the Chinese Yuan has been appreciating compared to the dollar, which is attributed to China's economic resilience and the instability of US markets due to growing economic tensions. Investors have turned away from US stocks and moved to international peers such as the Chinese and European stocks. Investors are opting to shift from US markets to the European market and consider companies like Nestle, Volkswagen, ASML, and others, while for the Chinese market, they go for Alibaba, JD, Baidu, and other competitive stocks. This raises the question of the sustainability of the US without other countries and how it intends to make local trade profitable. Although trade policies are one of the factors to explain the depreciation, the global investment trends are key too. Currently, there are ongoing trade wars and economic uncertainties in the world. In the past decade, the East and the West have been in an economic war that is shifting global investment. Unlike in the past when the US was known as an economic giant, countries such as China are running to overtake, causing a shift and reevaluation of the US assets. The availability of options has led investors to diversify their portfolios and explore new markets, such as Hong Kong and the European market, which have demonstrated growth and resilience. Combining this aspect with the proposed trade policies, the US is likely not to grow its markets but sink it further. Even though Trump wants to restore the economic stability of the US, the depreciation should alarm the US government that economic policies are important in every country; however, to maintain an upward trend, it must keep in check of global trajectory not to isolate itself. The proposed trade policies seemingly meant to isolate the US from other countries. Such actions may not uplift its economic status but rather that of its competitors. The bear is not a good sign for the US and could lead to a shift away from the US markets to other friendly environments. Therefore, the US ambition should not stand to dim their competitors but acknowledge the role of competition in global trade and strategize on ways to stand out and maintain a competitive edge over other markets.
24 DAYS AGO