In the Age of Trump, the Dollar No Longer Seems a Sure Thing
There’s the risk that at 3 a.m., Trump tweets something and the dollar gets hit.”
Before Mr. Trump was even sworn in, many investors were buying into the so-called Trump trade, a bet
that the new president’s plans for tax cuts, deregulation and a hefty dose of infrastructure spending would spur economic growth.
“The potential for serious investment and tax reform
and economic growth in the United States is unlikely to be realized,” said Ian Goldin, a former World Bank vice president and now professor of globalization and development at the University of Oxford.
Yet the Trump trade was also a wager that the dollar would climb as investment flooded into the United States to exploit fresh growth opportunities.
But given that the United States imports more than it exports, a cheaper dollar effectively
increases prices on wares for American consumers, from clothing to electronics to tools
Yet on Wednesday, in the hours after President’s Trump’s threat to unleash “fire
and fury” on North Korea if it continued to menace the United States, global investors sold the dollar.
“Foreign exchange markets were persistently discounting Europe’s strength,” said Adam S. Posen, a former official at the Bank of England,
and now president of the Peterson Institute for International Economics in Washington.
A weaker dollar also makes vacations in the United States cheaper, attracting more international tourists
and bolstering employment in the hospitality industries.
