Donald Trump has consistently expressed a desire to weaken the US dollar, primarily to boost American manufacturing and reduce the trade deficit. His rationale hinges on the idea that a weaker dollar makes US exports cheaper and more competitive abroad, while making imports more expensive, thus encouraging domestic production.
A weaker dollar reduces the price of US goods in foreign markets, making them more attractive to international buyers. Trump has argued that a strong dollar puts American companies at a disadvantage, as it increases the cost of US exports relative to goods from countries with weaker currencies. For example, he has cited companies like Caterpillar facing competition from firms like Japan’s Komatsu due to currency valuation differences.
The US trade deficit reached a record $1.2 trillion in 2024, a major concern for Trump, who sees it as a sign of economic weakness. By devaluing the dollar, he aims to stimulate demand for US-made products, create manufacturing jobs, and bring production back to the US.
Trump’s advisors, such as Robert Lighthizer, have explored currency devaluation strategies, including unilateral actions or negotiations with trading partners, potentially using tariff threats to pressure countries into adjusting their currency values.
Trump believes a strong dollar exacerbates the trade deficit by making imports cheaper for US consumers, encouraging spending on foreign goods over domestic ones. A weaker dollar would make imports more expensive, potentially reducing demand for foreign products and narrowing the trade gap.
Some of Trump’s advisors, like Stephen Miran, argue that the dollar’s status as the world’s reserve currency drives up its value, contributing to persistent trade deficits by making US goods less competitive. The proposed “Mar-a-Lago Accord” aims to coordinate with trading partners to weaken the dollar, drawing parallels to the 1985 Plaza Accord.
Economists like Kenneth Rogoff argue that focusing solely on currency devaluation oversimplifies the trade deficit issue. Factors like strong US consumer demand and global investment in US assets also drive the deficit, and weakening the dollar could lead to unintended consequences like inflation.
Trump has accused countries like China and Japan of deliberately weakening their currencies to gain a trade advantage, making their exports cheaper. He has proposed using tariffs or other measures to pressure these countries to stop such practices, which he believes harm US industries.
During his first term, Trump’s administration designated China as a currency manipulator in 2019, and similar rhetoric has continued. His team has discussed using tariffs to force trading partners to revalue their currencies, indirectly weakening the dollar relative to them.
Such actions risk escalating trade tensions, potentially leading to retaliatory measures or global trade wars, which could harm the US economy.
Trump has pressured the Federal Reserve to lower interest rates, which could weaken the dollar by making US assets less attractive to foreign investors. Lower rates would also reduce borrowing costs for US businesses, encouraging investment in manufacturing.
Trump’s public criticism of Fed Chair Jerome Powell, including threats to influence monetary policy, suggests an intent to force rate cuts to devalue the dollar. However, undermining Fed independence could erode investor confidence and destabilize financial markets, potentially weakening the dollar further than intended.
Lower interest rates could fuel inflation, especially when combined with tariffs, which increase the cost of imports. This could offset the benefits of a weaker dollar by raising prices for US consumers.
Some within Trump’s circle, including Stephen Miran, view the dollar’s role as the world’s reserve currency as a “burden” that drives up its value, harming US competitiveness. They argue that global demand for dollars increases their cost, making US exports less attractive.
The “Mar-a-Lago Accord” concept involves negotiating with trading partners to reduce the dollar’s dominance, potentially through coordinated currency interventions. This aligns with Trump’s broader goal of reordering the international monetary system to prioritize US manufacturing.
Trump has also emphasized maintaining the dollar’s reserve status, threatening 100% tariffs on countries pursuing de-dollarization (e.g., BRICS nations). This creates a paradox, as his tariff policies and erratic governance could inadvertently undermine confidence in the dollar, accelerating its decline as a safe-haven asset.
A weaker dollar, combined with tariffs, could drive up import prices, exacerbating inflation. Economists like Maurice Obstfeld argue that this contradicts Trump’s anti-inflation stance, as it would raise costs for consumers.
Trump’s unpredictable policies, such as the “Liberation Day” tariff announcement on April 2, 2025, have already led to an 8-9% drop in the dollar’s value in 2025, raising concerns about its reliability as a global safe-haven asset. This could increase borrowing costs for the US government, given its high debt-to-GDP ratio of 120%.
Efforts to weaken the dollar, such as through currency interventions or undermining Fed independence, could destabilize global markets. Historical parallels, like the 1956 Suez Crisis that weakened the British pound, suggest that policy missteps could erode the dollar’s dominance.
Despite these risks, many economists note that no viable alternative to the dollar exists in the near term. The euro, yen, and other currencies lack the liquidity and stability to replace it, and gold or cryptocurrencies are impractical as reserve currencies.
Trump’s push to weaken the US dollar is driven by a desire to boost exports, reduce the trade deficit, and counter perceived currency manipulation by trading partners. His strategies include tariffs, pressuring the Federal Reserve for lower interest rates, and exploring coordinated currency agreements like the “Mar-a-Lago Accord.” However, these policies carry significant risks, including inflation, loss of investor confidence, and potential damage to the dollar’s global reserve status.
While Trump’s goals aim to revitalize US manufacturing, the complexity of global economics and the dollar’s entrenched role suggest that achieving a weaker dollar without destabilizing effects will be challenging.