US President Donald Trump has expressed a belief that the strong dollar is hampering American industry and hindering efforts to reduce the trade deficit. He advocates for a weaker dollar to enhance exports and revive manufacturing jobs. However, many economists are skeptical of this straightforward approach. David Lubin, a senior research fellow at Chatham House, explains that a strong dollar makes imports cheaper and US exports more expensive, which contributes to the trade deficit.
In contrast, a weak dollar does the opposite, but the ability to control exchange rates is complex and largely beyond presidential authority. Lubin highlights that the dollar’s value is determined by a vast global foreign-exchange market rather than government policy. Investment strategist Anthony Abrahamian points to the stronger economic growth rates in the US compared to other industrialized nations as a factor contributing to the dollar’s strength. He notes that the US consumer’s high spending relative to other countries primarily drives the trade deficit.
While the US government has tools to influence the dollar’s value, such as adjusting interest rates through the Federal Reserve, the president has limited power to dictate these financial strategies. One possible method for a weaker dollar is through federal action that makes the US a less attractive investment destination, although this comes with significant risks. Historical precedents, such as the 1985 Plaza Accord, show that coordinated international efforts can influence currency values, but a similar strategy today faces numerous challenges, particularly with regard to China’s response. Ultimately, while a weaker dollar could have effects such as higher commodity prices and inflation, it may not necessarily improve American competitiveness if production costs remain high.
This uncertainty raises questions about whether Trump will truly pursue dollar devaluation, underscoring the complexity of currency manipulation.