(3 July 2025 – United States) Over the first half of 2025 the US Dollar has fallen over 11 percent compared to a basket of major trading partners currencies, something the greenback has not done since 1973 as it stoops to a three-year low.
President Donald Trump is determined to force the US to increase exports and lower imports through hostile tariff policy, targeting Japan with a 35 percent tax on goods such as rice and cars in his latest onslaught of protective measures. Thanks to a historic decline in the value of the US Dollar he may get his wish but at a cost he may not have anticipated.
Put simply, global investors no longer expect the US economy to outperform the rest of the world with a forecast dip in economic activity in the next 18 months according to Fitch.
In theory, the advantage of a weaker greenback is more attractive US exports. Yet it is too soon to say whether that is occurring given the behavioural response by US firms to aggressively stockpile inventory and increase imports in the first three months of this year to avoid incurring new duties. Upcoming Q2 data will be closely examined for any sign in strain among importers and exporters grappling with heightened uncertainty.
“We’re talking Nixon-era bad. Trump’s erratic policies have led global investors to trim back on the greenback in favour of other currencies like the euro. Policy chaos is damaging the dollar’s safe haven status for first time in decades. Fed independence is under assault with Fed Chair Powell getting handwritten notes from Trump demanding rate cuts. There’s also some global capital flight with BofA research showing the lowest USD exposure since 2005” commented Eeagli Founder James Eagle.
Video Credit: James Eagle
“An emerging theme in asset management is the rotation out of US assets into Europe as investors seek non-US exposure. Sentiment toward US markets has turned negative due to mounting concerns over protectionist trade measures, abrupt policy shifts, a rising deficit, and a proposal for taxes targeting foreign investors in the US” Bank of America Analysts Hubert Lam and Christiane Holstein said in a late June note.
“As such, investors are starting to diversify out of the US in both public and private markets. Many international investors are reallocating their investment choices to their home markets, especially in Europe, for policy stability and ‘patriotic’ reasons.”