The Dollar Is Weaker. Is That a Good Thing? - The Journal Recap

Podcast: The Journal

Published: 2026-02-03

Duration: 20 minutes

Guests: Greg Ip

Summary

The U.S. dollar has been weakening, and President Trump is not concerned, as it aligns with his strategy to boost domestic manufacturing by making U.S. goods more competitive abroad.

What Happened

For decades, the U.S. dollar has been the dominant global currency, similar to how English is the lingua franca in business. It serves as a global reserve currency, which places a responsibility on the U.S. to maintain its stability. From 2014 to early 2025, the dollar was strong, reflecting a robust U.S. economy. However, since last year, the dollar has been on a downtrend, causing concern among economists.

President Donald Trump, however, is not worried about the weaker dollar. He sees it as part of his broader economic strategy to reduce the trade deficit and encourage the reshoring of manufacturing. By making U.S. goods cheaper abroad, a weaker dollar could potentially lead to increased exports.

Several factors have contributed to the dollar's decline. Trump's tariffs on trading partners have disrupted global trade, while his foreign policy decisions, such as the proposal to annex Greenland, have added to global uncertainty. This uncertainty is something markets typically dislike, contributing to the dollar's weakness.

Furthermore, Trump's interference with the Federal Reserve, advocating for lower interest rates, has also played a role. While it's not a direct cause of the dollar's decline, pressure on the Fed could undermine confidence in the dollar's stability.

Despite the weaker dollar, Trump has signaled since 2017 that he favors this trend, believing a strong dollar hurts U.S. manufacturing. He has even hinted at potential interventions to weaken the dollar further, seeing it as beneficial for the U.S. economy.

However, a weaker dollar has downsides, such as potential inflation from increased import costs and higher prices for commodities like oil and gold. It could also make U.S. bonds less attractive to investors, possibly raising interest rates slightly.

Despite these challenges, the dollar remains dominant due to the lack of a viable alternative. While its value may fluctuate, the dollar is unlikely to lose its status as the world's primary reserve currency any time soon.

Key Insights

• The U.S. dollar has been on a downtrend since last year, influenced by tariffs that disrupted global trade and foreign policy decisions that increased global uncertainty.
• A weaker dollar can make U.S. goods cheaper abroad, potentially boosting exports and reducing the trade deficit, aligning with economic strategies to encourage reshoring of manufacturing.
• Pressure on the Federal Reserve to lower interest rates, although not directly causing the dollar's decline, can undermine confidence in the dollar's stability.
• Despite the weaker dollar, it remains the world's primary reserve currency due to the absence of a viable alternative, although a weaker dollar may lead to inflation and make U.S. bonds less attractive.