Donald Trump is adamant on imposing tariffs on nations. His aggressive tariff policies are gaining widespread notoriety primarily due to the colossal impact that they hold in the long run. For instance, nations are currently adopting a cautious stance against the US, which in turn is influencing the dollar negatively. That being said, experts are also suggestive of how this phenomenon may end up expediting de-dollarization narratives. Is Trump’s tariff ordeal truly helping the US economy or eroding it up a notch? The results support the latter.
Also Read: AI Forecast: How High XRP, ADA, SOL May Surge Post The Crypto Summit
Three Ways Trump’s Tariffs Are Eroding The Dollar
1. US Dollar’s Wobbly Stance
The US dollar’s performance this year remains largely volatile. Per the experts, the tariff regimen was supposedly initiated to stabilize the US economy, which in turn would help the US dollar strengthen in the long haul. But it’s the opposite that has been happening as of late. A Reuters poll outlines how the dollar is losing its sheen and has declined 5%, dubbing it a serious issue to ponder.
A recent Deutsche Bank report outlined how the dollar’s declining stance may jeopardize its “reserve currency status.”
“We do not write this lightly. But the speed and scale of global shifts are so rapid that this needs to be acknowledged as a possibility. It is hard to overestimate the scale of change taking place in global economic and geopolitical relations in a matter of days.” As stated by George Saravelos, the bank’s global head of FX strategy, in a note to clients
2. Reciprocal Tariffs Undermining The American Currency
Trump has levied a 25% tariff on Canada and Mexico, followed by levying 20% tariffs on China. This has compelled the nations to respond back more aggressively, levying counter tariffs on the US. This development has sparked a rising trade war narrative, which is further pushing the US dollar down. At the same time, if this continues, it may propel nations to look for alternatives, inciting de-dollarization narratives in the process.
The moment U.S. tariffs came into effect this morning, so did the Canadian response.
Canada will be implementing 25% tariffs against $155 billion of American products.
Starting with $30 billion worth of goods immediately, and the remaining $125 billion in 21 days’ time.
— Justin Trudeau (@JustinTrudeau) March 4, 2025
Also Read: Dogecoin or Shiba Inu: Which Will Recover Faster?
3. Rise of Gold and Change in Investor Sentiment
One of the key markers denoting a change in investor mindset and perspective is the rise of gold at a rapid pace. The yellow metal is giving stiff competition to the dollar after breaching $3000 briefly. This development is indicative of how investors are also cautious of the US economic current stance and have started to pivot towards gold, treating it as a dependable hedge for now. If the dollar decline continues, it may ultimately push investors to look for other assets to invest in, primarily lowering their dependence on the dollar. This may also spike de-dollarization narratives to an extent.
Also Read: Ripple’s Kangaroo Phase Analysis: XRP Is Targeting $13, Here’s How
