Trump's plans to weaken the dollar met with skepticism.

Donald Trump has ambitious plans to devalue the US dollar should he win the presidential election once again. His reasoning: A weaker dollar could stimulate domestic production and reduce the trade deficit. However, experts deem this as unrealistic, especially in light of Trump's trade and tax policies. The former president and his vice, JD Vance, emphasize the benefits of a dollar devaluation – a potential renaissance of domestic industry and the mitigation of globalization's effects. Nonetheless, this strategy could quickly backfire. Investors and strategists warn that measures such as import tariffs and tax cuts could have the opposite effect. Michaël Nizard from Edmond de Rothschild sees a fundamental contradiction: "Trump talks about weakening the dollar, but his policies are likely to strengthen the currency, at least in the short term." This view is shared by many experts, including Shahab Jalinoos from UBS, who points out that there is no clear path for a president to significantly weaken the currency. Another obstacle in Trump's plan is the strong US dollar, which has risen 15 percent against a basket of currencies since Joe Biden took office. This reflects the robust American economy and the highest interest rates in 23 years. Export tariffs, as proposed by Trump, could ultimately weaken other countries' currencies, not the dollar. Christine Lagarde from the European Central Bank has already suggested that high tariffs could force the ECB to lower interest rates, which would weaken the euro. Steve Englander from Standard Chartered also emphasizes that Trump's tariff proposal could raise prices in the US by 1.8 percent in two years, driving inflation and leading to further interest rate hikes. James Lord from Morgan Stanley also sees risks in Trump's plans. Higher tariffs could impair global economic growth and further strengthen the dollar. Additionally, Trump plans to extend expiring tax cuts and potentially introduce further reductions, which could exacerbate the budget deficit and hinder the Fed in its rate-cutting cycle. Another point against a successful currency devaluation is the historical rarity of such measures. The last significant example, the Plaza Accord of 1985, occurred under different macroeconomic conditions. Additionally, pressuring the Fed to cut interest rates would unsettle the markets. George Saravelos from Deutsche Bank has calculated that the dollar would need to fall by up to 40 percent to close the US trade deficit. However, the potential market disruptions would be enormous, experts like Edward Al-Hussainy from Columbia Threadneedle warn. Proposals such as using the Treasury's "Exchange Stabilization Fund" for currency stabilization are also viewed critically. Steve Englander notes that even a small intervention by Japan recently cost $70 billion and showed little effect. Even within the Republican electorate, this plan could face resistance. Shahab Jalinoos from UBS says that a dollar devaluation could jeopardize the economic standing of the US. Nonetheless, the dollar remains the world's reserve currency and is considered a safe haven in times of crisis, a status that Republicans also wish to maintain in 2024.