How has the dollar performed since President Trump came back to power?

US President Donald Trump’s second term started on 20^th January, 2025. On that day the DXY dollar index was at 109.35. DXY is an index that measures the value of dollar against other major currencies. Yesterday, 15^th August, 2025, at the close of day, the DXY was at 97.84. That is a depreciation of 10.52% in this period.

Higher tariffs not causing the dollar to appreciate

When President Trump came to power, his Treasury Secretary, Scott Bessent had said that with higher tariffs imposed by USA on imports, the dollar would appreciate against major currencies. This, he said will happen because imports to America will come down because of higher tariffs. This in turn will reduce the demand for other currencies by American companies and consumers to pay for imports. When an American company imports goods from other countries, it effectively sells dollars to buy the currency of the country, from which it is importing, to pay the exporter in that country. Mr. Bessent said that this selling of dollar and buying of other currencies will go down with higher tariffs. This in turn will appreciate the value of dollar against other countries. This has not happened till now.

Dollar’s safe haven asset status has weakened

One reason for the continued depreciation of dollar since President Trump came to power, in his second term, is that the currency has lost some of its safe haven status. This has happened because of President Trump’s sudden and disruptive policy actions such as imposition of such high tariffs at such short notice.

Dollar’s safe haven status meant that whenever geopolitical or other risks increased, investors would rush to buy more of dollar assets. This in turn would increase the value of dollar. The period since Mr. Trump returned to power has also been one of high certainty and risk. The Russia- Ukraine war is continuing. The three day India- Pakistan war happened in this period. The war between Israel and Iran happened in this period. In spite of all this, the dollar depreciated in this period, instead of appreciating.

It will be a double whammy for inflation in America

The effect of dollar’s depreciation against other major currencies is that it makes America’s exports cheaper and its imports dearer. Now due to higher tariffs, imports have already become more expensive for American firms and consumers. The dollar depreciation will make them even more expensive. This will be a double whammy for inflation in America.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.

Source: DXY index