By Leon Hadar 11/18/25
The question of whether the Trump administration is deliberately pursuing a weaker dollar has become one of the most consequential debates in international economics today. The answer, paradoxically, appears to be both yes and no—revealing deep contradictions within the administration's economic strategy.
The dollar experienced its steepest first-half decline in over fifty years during 2025, dropping nearly 11 percent in the six months following Trump's inauguration. This historic weakness stands in stark contrast to Wall Street's pre-election expectations that Trump's policies would strengthen the greenback. The dollar index fell 10.8 percent in the first half of 2025, while the euro has risen 13 percent to above US$1.17.
Yet this decline cannot be attributed to a coherent, intentional policy. Instead, it reflects the unintended consequences of aggressive and erratic economic policies that have shaken global confidence in American leadership.
Within the White House, there appear to be competing and fractured views about the dollar's role, with Treasury Secretary Scott Bessent maintaining that the strong-dollar policy remains intact, while Council of Economic Advisers Chair Stephen Miran has proposed weakening the dollar through a "Mar-a-Lago Accord".
This internal discord reveals three conflicting approaches:
The Strong Dollar Camp: Bessent publicly affirms America's traditional strong dollar policy, arguing that currency strength reflects global confidence in U.S. economic management and the rule of law.
The Weak Dollar Camp: Miran and others see an overvalued dollar as hindering American manufacturing competitiveness and contributing to persistent trade deficits. They advocate coordinated international action to devalue the greenback while maintaining its reserve currency status.
The Trump View: The president appears to view the dollar's international role through his "America First" lens, threatening 100 percent tariffs on nations seeking to undermine "the mighty US dollar", yet simultaneously complaining that a strong dollar hurts American exports.
Trump's tariff strategy—ostensibly designed to protect American industry—has paradoxically accelerated the dollar's decline. The "Liberation Day" tariff announcement on April 2nd triggered market turmoil, with more than US $5 trillion erased from the S&P 500 in three days.
Traditional economic theory suggests tariffs should strengthen a currency by reducing imports and improving trade balances. Instead, Trump's back-and-forth decisions on tariffs have injected uncertainty into markets and clouded the outlook for the U.S. economy, with investors increasingly uncomfortable with policy unpredictability.
The evidence suggests that while some administration officials may desire a weaker dollar to boost manufacturing competitiveness, the actual decline stems primarily from loss of confidence rather than deliberate policy. Several factors are driving this erosion:
Fiscal Concerns: Trump's tax legislation is expected to add trillions of dollars to the U.S. debt pile over the coming decade, raising concerns about the sustainability of Washington's borrowing and prompting an exodus from the Treasury market.
Policy Unpredictability: The administration's constantly shifting stance on tariffs and trade relationships has undermined the dollar's traditional "safe haven" status during times of uncertainty.
Geopolitical Risks: Trump's tariffs on closest allies, antipathy toward international cooperation, and ambiguous stance on conflicts like Russia-Ukraine have weakened long-standing international relationships.
Loss of Safe Haven Status: The dollar declined sharply even as financial volatility soared following Liberation Day—an unprecedented deviation from its historical flight-to-safety behavior.
Perhaps most concerning is the potential long-term damage to the dollar's role as the world's reserve currency. Central banks have begun shifting reserve holdings to other currencies amid increasing doubts about whether the United States is a reliable economic partner.
Foreign investors sold US$63 billion in U.S. equities between March and April 2025, marking a major retrenchment from their record 18 percent ownership share entering the year. This capital flight reflects deeper concerns about American institutional stability and policy coherence.
The administration's threats to use the dollar system as a weapon against adversaries and allies alike may backfire spectacularly. Such threats portend far more economic devastation than tariffs precisely because of the dollar's centrality to the global economy, yet the willingness to use such threats means the administration has little hope of maintaining allied economic support.
The evidence suggests the Trump administration is not deliberately weakening the dollar through coordinated policy. Instead, the dollar's historic decline represents an unintended consequence of:
The irony is profound: an administration that frequently invokes the "mighty U.S. dollar" and threatens nations that seek alternatives has pursued policies that accelerate the very dedollarization it claims to oppose. Whether intentional or not, the result is the same—a weakened currency and diminished American economic leadership.
The question going forward is whether the damage can be contained, or whether we are witnessing the beginning of a fundamental shift in the global monetary order that has underpinned American power for eight decades. If the administration genuinely wants a weaker dollar to boost manufacturing, it may be getting its wish—but at a cost far higher than anticipated.