If global investors needed a barometer of their growing disillusionment with President Donald Trump’s economic crusade, they have it: the US dollar. Since Trump’s return to the White House, the greenback has shed more than 10% of its value against the euro, pound sterling, and Swiss franc. It has weakened across the board, a remarkable feat for a currency supposedly underpinned by the world’s most powerful economy.

The last comparable collapse occurred in 2010 when the Federal Reserve embarked on an aggressive money-printing spree in response to the financial crisis. But this time, the haemorrhage is self-inflicted. Trump’s barrage of tariffs, his deficit-expanding tax cuts, pressure on the Fed to cut interest rates, and a penchant for legal warfare against dissenters have all fueled market unease.
The administration insists on its support for a “strong dollar,” but actions – or inaction – speak louder. While paying lip service to currency stability, the White House seems quietly content with depreciation, feeding rumours that exchange rates are being used as a bargaining chip in trade talks. Last month’s sharp fall against the Taiwanese dollar – a 4% dive in just over an hour – only reinforced those suspicions.

This is not a harmless drift. The United States is now running annual financing needs of over $4 trillion, a figure inflated by chronic budget deficits. Much of this debt is funded by foreign creditors who are unlikely to remain enthusiastic as the dollar’s slide erodes their returns.
Trump is playing with fire. A vicious cycle looms: fears over debt and currency prompt capital flight, which pushes up borrowing costs, exacerbating both the fiscal strain and the dollar’s decline – a self-reinforcing spiral that few dare predict, but even fewer dismiss entirely.
Washington’s blasé response to this deterioration is striking. Wall Street titans like Jeffrey Gundlach and Paul Tudor Jones are sounding the alarm, forecasting further dollar depreciation driven by fiscal recklessness. Morgan Stanley and Goldman Sachs concur, warning of long-term structural overvaluation and mounting investor pessimism.

Indeed, positioning data confirms this shift: net short bets against the dollar now exceed $15 billion. Fund managers are underweight the greenback more than at any point in the past two decades, according to Bank of America. It seems even the old reliables – US Treasuries – are losing their halo. Traders now treat them as risk assets, buying and selling them alongside equities, a stark reversal from the traditional flight-to-safety logic.

This detachment of Treasuries from the dollar has become a hallmark of Trump’s second term. As yields rise, the dollar falls – a perverse signal for a supposed safe haven currency. Global investors, alarmed by mounting US isolationism and ballooning debt, are quietly walking away.
Incredibly, while the administration considers using exchange rates as a policy tool, Congress debates Trump’s “revenge tax” (Article 899 of his latest bill), which would penalise foreign investors from “discriminatory” jurisdictions. It’s hardly the way to woo foreign capital when one’s fiscal outlook depends on it.
The Congressional Budget Office projects that Trump’s tax plans will add nearly $3 trillion to the deficit over the next decade. The national debt has already surpassed $29 trillion, closing in on 100% of the country’s GDP. And Moody’s has taken notice, stripping the US of its final AAA rating in May.
Even if the tax bill collapses in Congress, the fiscal position remains dire. And with the global economy on edge, energy prices spiking, and military conflict brewing in the Middle East, the dollar is losing its most precious quality: trust.

Once investors begin to question the dollar’s primacy and reallocate their assets accordingly, the trend becomes difficult to reverse. Once the cat’s out of the bag, you don’t just put it back in.