The dollar’s slide—down nearly 9% year-to-date—is a shift in investor confidence. Foreign demand for long-dated U.S. Treasuries is drying up, and rising deficits have investors questioning the long-held notion of the dollar as a safe haven.
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Currencies are priced relative to one another based on supply and demand, influenced by interest rates, trade balances, and market sentiment. When the dollar weakens, it takes more dollars to buy foreign goods—raising import prices and contributing to inflation. But for U.S. exporters, it’s a tailwind: American-made goods become cheaper overseas, giving manufacturers a competitive edge. This is precisely the dynamic Trump’s onshoring push depends on.
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His “Buy American” agenda hinges on a dollar that’s weak enough to make U.S. production attractive globally but not so weak that it spooks capital markets or ignites runaway inflation. A strong dollar—like we saw during previous tightening cycles—undermines this strategy by making foreign imports cheaper and domestic production less competitive. It also incentivizes capital outflows as foreign investors chase higher returns abroad.
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Equity markets, too, are highly sensitive to dollar moves. Multinationals benefit from a weaker greenback as foreign sales translate into more dollars. But for companies reliant on imported inputs or exposed to rate volatility, a falling dollar and rising inflation can eat into margins. With Section 899 looming and tariff escalation back on the table, FX markets have become a frontline policy battleground—not just a consequence, but a constraint.
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In short, the dollar’s direction will determine whether Trump’s economic architecture holds—or cracks under the weight of its own contradictions.
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Now, all eyes turn to the “Big Beautiful Bill”—a sweeping mix of tax cuts, tariffs, and retaliatory measures. Its impact on the dollar could be decisive, either reinforcing the onshoring agenda or triggering renewed inflation and capital flight.

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