Following Donald Trump’s ‘Liberation Day’ tariff announcement on April 2, the US dollar has experienced a significant decline. Despite a recovery in US stock markets, the dollar continues to weaken, contrary to its typical behavior during financial instability. This decline stems from concerns about potential US recession risks due to Trump’s aggressive trade policies.
Trump’s tariff measures have erased over $5 trillion from the S&P 500 index within three days and triggered sell-offs in US Treasuries, increasing government debt costs. Although a 90-day tariff pause was announced on April 9 (excluding Chinese exports), investor confidence in dollar-linked assets remains fragile.
Since the start of 2025, the dollar has depreciated nearly 10%, reaching its lowest point in three years. Analysts attribute this to diminished trust in US economic policymaking. For decades, the dollar has served as the world’s primary reserve currency, underpinned by global confidence in the US economy and legal system.
Trump’s actions are altering this dynamic, with investors reconsidering their exposure to US assets. A weaker dollar could make US goods more competitive globally but may also increase inflation by raising import costs. Some central banks are reportedly shifting preferences toward gold instead of US Treasuries.
While the dollar is likely to remain dominant in the short term, experts suggest the euro could emerge as a viable alternative if the European Union achieves closer fiscal integration. \”The world is facing a dollar confidence crisis,\” noted Deutsche Bank analysts.
— new from Al Jazeera