Drew Angerer/Getty Images

Will the Dollar Be Trumped?

Since Donald Trump was elected US president, capital inflows have pushed up the dollar’s value to levels not seen in more than a decade. But appearances can be deceiving; Trump's presidency will almost certainly be bad for the US economy – and thus for the greenback.

SANTA BARBARA – Since Donald Trump was elected President of the United States, capital inflows have pushed up the dollar’s value to levels not seen in more than a decade. At first blush, it might seem that markets are registering a massive vote of confidence in the president-elect, believing that his policies will be good for the US economy and, by extension, for the dollar.

But appearances can be deceiving. Short-term exchange-rate movements are no way to judge a currency’s underlying strength. Longer-term trends in how money is used internationally – particularly as a store of value for foreign investors or central banks – are far more telling. In the context of the coming years, rather than just the next few weeks, Trump’s election will almost certainly be bad for the greenback.

For starters, the dollar has shot up since the election only because Trump has promised to enact deep tax cuts and ramp up spending on decaying infrastructure and America’s supposedly “depleted” military. This will boost near-term economic growth and inevitably push interest rates up. In a world hungry for attractive investment returns, a prospective Trump boom has drawn funds to Wall Street, in turn increasing demand for the dollar.

To continue reading, please log in or enter your email address.

To read this article from our archive, please log in or register now. After entering your email, you'll have access to two free articles from our archive every month. For unlimited access to Project Syndicate, subscribe now.


By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in


Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.