Some reflections on how extraordinary the US dollar declines are today. Tariffs are supposed to strengthen the US dollar, not weaken it. But that is not what is happening here so far. 1/ - ThreadSky

sandertordoir.bsky.social • 4 days ago

Some reflections on how extraordinary the US dollar declines are today. Tariffs are supposed to strengthen the US dollar, not weaken it.

But that is not what is happening here so far.

1/

Reposted from Sander Tordoir

Well, the first innings are interesting, and in fact the precise opposite. The US dollar is sliding on concerns Trump's tariffs will batter the US economy.

Bloomberg’s dollar index dropping more than 1% to a five-month low.

- Euro up 1.3%
- Yen up 1.4%
- Offshore yuan fell 0.3%
- GBP up 1.1%

Comments

jurjen13.bsky.social•4 days ago

But this is going according to the plans of Stephen Moran?

oldlibrarian.bsky.social•4 days ago

Would never call you 'naive' but explaining these policies within a purely economic framework comes to a screeching halt right now.
These are two voices that I find helpful, me being not an expert on anything but interested in everything.

lipstickscribbles.bsky.social•4 days ago

Part of problem is in economists constantly reading a situation based on what they learned in school without have one bit of detail on how who actually make and move shit globally work, and certainly not asking any of them.

henninghampress.bsky.social•4 days ago

Historically, fascist governments create a planned economy that gives a feeling of job security and wealth to citizens, while disenfranchising their enemies.

This seems closer to Trussonomics, where think tank pipedreams are rushed into policy without key players under control or incentivised

rdarf.bsky.social•4 days ago

📌

lipstickscribbles.bsky.social•4 days ago

This is like being surprised people just don't start burning dollars in the streets.

Who invests in manufacturing (a years long enterprise) in a country that changes its mind every 72 hours?

There are tons of better bets to play than setting your money on fire trying to cosplay a manufacturer.

sandertordoir.bsky.social•4 days ago

In principle, tariffs increase the attractiveness of investing in the US to make goods for the American market and decrease the appeal of investing abroad to make goods for export to the US - more actors then want dollars.

2/

sandertordoir.bsky.social•4 days ago

Tariffs also act as a tax on imports, discouraging US businesses and consumers from purchasing foreign goods, which reduces the need for foreign currencies to pay for these imports. This shifts demand toward the US dollar, strengthening its value.

3/

lipstickscribbles.bsky.social•4 days ago

Imports, unless you are running an arbitrage scheme on currency fluctuations on top of buying/producing goods, were already being priced out in dollars.

Haven't wired RMB/YEN in years. Neither has anyone else I know importing to the US from overseas. Covid moved producers to price in dollars.

sandertordoir.bsky.social•4 days ago

Typically these factors stoke USD strength, which offsets some of the impact of the tariffs, by lowering the import bill for the US, whilst trade partners recoup export competitiveness.

But these effects to stymie the impact of the trade war seem to be outweighed for now by other factors...

4/

sandertordoir.bsky.social•4 days ago

For one, concerns about the US economy getting hit far harder than the others - which may reduce growth and short-term interest rates, which in turn depreciates the USD.

Mind the assymetry: the US is waging trade war on everyone, everyone else just on the US (thread)

5/

https://bsky.app/profile/sandertordoir.bsky.social/post/3llrivu46s22g

sandertordoir.bsky.social•4 days ago

b) An even more profound question here whether the US dollar exorbitant privilege is waning.

Since the dollar is the world’s primary reserve currency and is widely used for global trade and as a reserve asset, demand for it is consistently high.

6/

sandertordoir.bsky.social•4 days ago

This gives the US ‘exorbitant privilege’ – allowing the country to borrow at lower costs and run larger government deficits without facing the same financial pressures as other nations.

7/

rcdavies.bsky.social•3 days ago

USD Dropping ~1.5% to a low of 5 months is just market noise and knee-jerk reactions. It will only matter if it keeps going down and then stays low for, say, 12 months.

I expect it to recover as traders become more accustomed to the news.

wsctb.bsky.social•4 days ago

Inflation up, unemployment up, exchange rate down, exports down.

The GOP are happily marching towards Stagflation, hopefully they'll do a left turn soon. They can't go much further right.

okongas.bsky.social•4 days ago

If the usd is weaklening, isn't it going exactly to the plan as outlined by Miran? Isn't a weakening of the usd a major component of the entire Trump 2.0. economic vision?

sandertordoir.bsky.social•4 days ago

Correct! See last tweet. Or the President just likes tariffs :)

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