B Mirror Desk : In an effort to regain the United States’ former glory, US President Donald Trump placed retaliatory tariffs on commodities from nearly every nation in the globe. However, the opposite result was achieved when those tariffs were announced and then their suspension was announced. In other words, one of his tools, the dollar, has begun to lose its strength.
Naturally, the value of the dollar has been declining for a number of months. The US dollar index was 99.23 on April 18, the last business day of the global market last week. Nonetheless, this index’s value was 110 in January. Consequently, it is evident that since January, the dollar index’s value has dropped by 9.31%. . On April 11, the value of this index fell below 100 for the first time since July 2023. News the Guardian.
Since the start of April, the dollar has depreciated by 5 percent against both the euro and the pound, and by 6 percent against the yen. This decline in the dollar’s value is occurring rapidly following the imposition of retaliatory tariffs on goods from nearly all countries by US President Donald Trump on April 2.
In the Bangladeshi currency market, the dollar’s value has remained stable for several months, as it is not entirely influenced by market forces. While the currency’s value was previously supported artificially, it is now more aligned with market conditions. However, the recent decline of the dollar in the global market has not affected the domestic market due to this lack of complete market dependence.
Additionally, the dollar has recently weakened against the Indian rupee, which itself has been on a downward trend for several months. Throughout the past week, the dollar’s value in India has continued to drop, indicating a decrease in demand. Investors are engaging in less buying and more selling of dollars. This trend reflects a growing lack of confidence in the overall US economy, exacerbated by Trump’s tariff policies. A further indication of this is the reduced demand for US Treasury bonds, traditionally viewed as a safe investment. Consequently, interest rates have had to rise. It appears that Trump may have ultimately paused the tariffs in response to the increase in interest rates on US Treasury securities.
Experts compare the dollar to gold, noting its status as one of the safest investments globally, which contributes to its popularity. However, during times of global economic instability, some investors who previously favored gold or the dollar over stocks and bonds have shifted their focus away from the American currency. Initially, Trump anticipated that the announcement of tariffs would lead to a decline in the stock market index or a drop in the dollar’s exchange rate, allowing him to offset tax cut losses with tax revenue by year-end. This approach suggested that the US government would limit bond issuance to maintain a balance between supply and demand, thereby controlling overall government debt.
However, following the tariff announcement, fears of a recession have intensified, leading investors to perceive lending to the US government as increasingly risky. Additionally, the ongoing conflict with China has raised concerns about prolonged stagnation in both the US and the global economy. Consequently, the reduced demand for Treasury bonds has led to a decrease in dollar investments, resulting in a decline in the dollar’s exchange rate, which is currently evident.
Most economists, including Ben Steel from the US Council on Foreign Relations, argue that the robust dollar is a key factor behind the low interest rates on US debt. This has led to a sustained demand for US bonds, despite a significant 120 percent deficit relative to GDP. Additionally, since global trade predominantly occurs in dollars, the United States maintains considerable influence over the international economy. Experts warn that a loss of investor confidence in the dollar could destabilize the US economy, which would subsequently affect the global market. Concerns about a potential financial recession, exacerbated by tariffs, have been voiced by institutions ranging from JP Morgan to the International Monetary Fund, all indicating a recession risk.
Should global trade or US trade decline, the demand for the dollar is likely to diminish further, raising fears of worsening conditions. Essentially, Trump’s tariff strategy may be backfiring.
Moreover, the international financial transaction system SWIFT is facing obsolescence. This system could become ineffective due to advancements in technology. In a recent interview during his visit to India, US sustainable development expert Jeffrey Sachs suggested that the introduction of a central bank-managed digital currency could render the SWIFT system and dollar-based trade unnecessary, allowing countries to engage in direct trade with one another. He believes that the process of diminishing US dominance has already begun as a result of Trump’s tariff policies.
China is actively pursuing trade in yuan with nations such as Brazil, while countries like India are seeking to lessen their reliance on the dollar. Although no currency has yet emerged as a viable alternative to the dollar, the potential for change in this dynamic is certainly plausible.
