Trump's plan to devalue dollar faces major challenges, investors warn
Date
7/29/2024 4:43:38 AM
(MENAFN) Donald Trump’s proposal to devalue the US dollar, if he wins the upcoming election, appears highly unlikely to succeed, according to investors and analysts. Trump and his running mate, J.D. Vance, have recently promoted the idea of a weaker currency as a means to boost American manufacturing and reduce the trade deficit. However, experts argue that such a plan would be both costly and ineffective, largely due to conflicting policies such as tariffs and tax cuts.
Strategists caution that while Trump advocates for dollar devaluation, his proposed policies, such as imposing tariffs on foreign goods, would likely have the opposite effect by supporting the currency. Michael Nizard, a fund manager at Edmond de Rothschild, highlighted this contradiction, noting that although Trump has been vocal about weakening the dollar, his policies tend to strengthen it in the short term.
In a recent interview, Trump criticized the strong dollar, calling it a "big currency problem" that burdens American manufacturers trying to compete internationally. Vance, in his speech at the Republican National Convention, echoed this sentiment, emphasizing the need to rebuild American manufacturing and reverse some of the effects of globalization.
Despite these calls for devaluation, the dollar has actually strengthened, rising 15 percent against a basket of currencies since President Joe Biden took office in January 2021. The U.S. trade deficit has also increased, reaching USD773 billion last year, exacerbated by the strength of the U.S. economy and high interest rates, which are at their highest in 23 years.
Shahab Galinos, head of G10 FX strategy at UBS, noted that there is no indication that the U.S. dollar is overvalued, which poses a significant challenge for Trump’s devaluation plans. Furthermore, Trump’s proposed policies, such as imposing a 60 percent tariff on Chinese imports and a 10 percent tariff on other international goods, would likely reinforce the dollar rather than weaken it. This complex policy landscape presents a major obstacle to Trump's goal of devaluing the currency.
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