Amid the financial market fallout which followed Donald Trump’s “Liberation Day” tariff announcement on April 2, the value of the US dollar has plunged.But while United States stock markets have largely recovered since then, the greenback – which typically gains in value during periods of financial turbulence – has continued its downward trajectory.
This is because the severe nature of Trump’s international trade policies has raised the possibility of a US recession later this year, denting demand for America’s currency.
Trump’s tariff blitz is also forcing investors to confront the possibility that the dominance of the dollar might be fading, or even coming to an end.
“The world is facing a dollar confidence crisis as the repercussions of ‘Liberation Day’ continue to reverberate,” Deutsche Bank analysts wrote in a recent note to clients.
For close to a century, the US has been the world’s investment “safe haven”. Dozens of countries still maintain a peg to the greenback, meaning their currency prices are correlated. Advertisement
But investors are now starting to worry about the long-term safety of the dollar, and the consequences could be dramatic.
A board displays the exchange rates of the Mexican peso against the US dollar outside an exchange house in Mexico City, Mexico, on March 4, 2025 [File: Raquel Cunha/Reuters]
What has happened to the dollar?
On April 2, the Trump administration unveiled punishing tariffs on imports from dozens of countries around the world, denting confidence in the world’s largest economy and causing a selloff of US financial assets.
More than $5 trillion was erased from the value of the benchmark S&P 500 index of shares in the three days after “Liberation Day”.
US Treasuries – long considered the archetypical safe investment – also saw selloffs, lowering their price and sending …
