This week has seen sharp, shocking tariff hikes — and then tariff flip-flops — as well as turmoil galore in the financial markets, with the major U.S. stock indexes plunging, rebounding and plunging again.
Through all this, the dollar has fallen sharply against other major currencies. The U.S. dollar index was down more than 0.8% Friday, after sliding at one point below the 100 level, last hit in mid-2023. It also fell to a 10-year low against the Swiss franc — usually considered, along with the dollar, a global safe-haven currency. It’s down to around a three-year low against the euro.
What’s going on?
Usually, when U.S. stocks tank and global investors freak, they look around for a less-risky place — a safe haven — to park their money.
Historically that’s been long-term U.S. Treasury bonds and the U.S. dollar. But those have tanked as well.
“It’s a strange time,” said Capital Economics’ deputy chief markets economist Jonas Goltermann.
“Disconcerting. A crisis of confidence,” added Jay Hatfield, CEO of Infrastructure Capital Advisors.
“We have a real problem here,” said Joe Brusuelas, chief economist at RSM, who explained that with all of President Donald Trump’s unpredictable tariff announcements, “there’s been a loss of credibility and confidence in the safe-haven status of U.S. dollar-denominated assets.”
In other words, a global economic shift is underway, said Hatfield.
“The prospects for growth in Europe have improved dramatically. There is significant loss in confidence in the growth prospects in the U.S.,” he said.
Along with that, Goltermann said, “dollar dominance in the global system is no longer something we should take for granted. If you were looking for some other place to store your money, the euro, Swiss franc and the [Japanese] yen have been going up the most against the dollar.”
Now, a lower dollar could, eventually, help support U.S. manufacturing — something Trump wants his tariffs to do.
“Weaker currency means your exports become cheaper,” Goltermann said.
But that comes at the price of undermining U.S. economic supremacy. Goltermann called the export boost “a silver lining to a pretty bad cloud,” he said.
And the storm might still be gathering.
