bjcohen9_Joe Raedle_Getty Images Joe Raedle/Getty Images

Trump’s Strong-Dollar Weakness

The Trump administration would like us to believe that the dollar’s rise reflects faster economic growth, driven by deregulation, tax cuts, and expanded defense spending. But, if anything, Trump's economic agenda is creating inflationary pressure and undercutting the "exorbitant privilege" that the dollar has long conferred on the US.

SANTA BARBARA – Having gained more than 8% in value since the start of the year, the US dollar is nearing highs not seen in more than a decade, and market indicators point to even more appreciation in the coming months.

At first blush, this would seem to vindicate US President Donald Trump, who came to office pledging to “Make America Great Again.” A stronger dollar could be taken to mean that his pro-growth economic policies are working. Yet a closer look shows that matters are more complicated; in fact, Trump could precipitate a great decline in the dollar.

For starters, it is not at all clear that Trump can take much credit for the dollar’s appreciation. But even if he could, a strong greenback is not necessarily good for his policy objectives; nor is the exchange rate even an accurate measure of the currency’s true strength.