Is the US dollar in danger of “crisis of confidence”? | Commercial and economic news

In the midst of the fallout from the financial market that followed Donald Trump “Release day“Price announcement on April 2, the value of the US dollar plunged.

But while the American stock markets have widely recovered Since then, the greenback – which generally gains in value during periods of financial turbulence – continued its decreased trajectory.

This is because the severe The nature of Trump’s international trade policies has increased the possibility of an American recession later this year, eliminating the demand for American money.

Trump Blitz’s price also forces investors to deal with the possibility that the domination of the dollar is discolving, or even ends.

“The world is facing a crisis of confidence in dollars while the repercussions of the” Liberation Day “continue to affect each other,” Deutsche Bank analysts wrote in a recent note to customers.

For almost a century, the United States has been the world investment “refuge”. Dozens of countries always maintain an ankle in the greenback, which means that their currency prices are correlated.

But investors are now starting to worry about the long -term security of the dollar, and the consequences could be dramatic.

What happened to the dollar?

On April 2, the Trump administration unveiled punishing prices on imports from dozens of countries in the world, which felt confidence in the largest economy in the world and causing the sale of American financial assets.

More than 5 billions of dollars were erased from the value of the S&P 500 reference index of shares within three days of the “Liberation Day”.

US Treasury bills – long considered the safe archetypical investment – have also seen salesLowering their price and sending debt costs to the US government, which are highly higher.

Faced with a revolt on the financial markets, Trump announced a 90 -day break on prices, with the exception of exports of ChinaApril 9. But investors remain suspicious of the holding of dollar assets.

Until now in April, the dollar has dropped 3% compared to a basket of other currencies to reach its lowest level in three years, aggravating a slide of almost 10% since the start of 2025.

“Investors have sold American assets and the value of the dollar has fallen,” Karsten Junius, chief economist of J Safra Sarasin, said in Al Jazeera.

“But the dollar has not increased as much (the prices of American stocks since April 9) because there has been a loss of confidence in the development of American economic policies,” he added.

Why is the US dollar so important?

Over the past 80 years, the US dollar has held the state of the primary reserve currency – foreign currency held in large quantities by the world monetary authorities.

In large part, the dollar has become the commissioning world currency because of the first and second world wars. While Europe and Japan descended in chaos, the United States earned money.

Then, in 1971, when Richard Nixon removed gold from the value of the US dollar, the role of the greenback in the support of the global financial system increased. His request too.

After the “Nixon shock”, most countries have abandoned the convertibility of gold but have not adopted the exchange rates determined to the market. Instead, they set their currencies to the dollar.

Due to its domination in trade and finance, the dollar has become the anchor of standard currency. In the 1980s, for example, many Gulf countries began to fix their currencies in the greenback.

His influence did not stop there. While the United States represents only a quarter of the Gross Domestic Internal (GDP), 54% of world exports were denominated in dollars in 2023, according to the Atlantic Council.

His domination in finance is even greater. About 60% of all bank deposits are labeled in dollars, while almost 70% of international bonds are cited in the American currency.

Meanwhile, 57% of global currency reserves – assets held by central banks around the world – are held in dollars, according to the IMF.

But the dollar reserve status is largely supported by confidence in the American economy, its financial markets and its legal system.

Trump changes that. “He does not care about international standards,” said Junius, and “investors are starting to realize that they are overexposed to American assets”.

Indeed, foreigners have 19 billions of dollars of American shares, 7 billions of dollars of US treasury bills and 5 billions of dollars in US companies’ obligations, according to Apollo Asset Management. This represents around 30% of world GDP.

If even some of these investors begin to reduce their positions, the value of the dollar could undergo sustained pressure.

What are the consequences of a low value dollar?

Many in the Trump team argue that the costs of the US dollar reserve status prevail over the advantages by making it overvalued – increase the cost of US exports.

Stephen Miran, president of the Trump’s economic advisers’ council, recently said These high dollars assessments place “excessive burdens on our businesses and workers, which makes their products and their non -competitive work on the world stage”.

“The overvaluation of the dollar has been a factor contributing to the loss of competitiveness of the United States over the years, and … prices are a reaction to this unpleasant reality,” he added.

At first glance, a lower dollar would make American products cheaper for foreign buyers, supporting national manufacturing and would help reduce the country’s trade deficits.

“This will also make imports more expensive, injuring consumers,” said former finance minister for Colombia Jose Antonio Ocampo in Al Jazeera. “General opinion is that American inflation will increase.

“Elsewhere, the price of gold has also increased,” said Ocampo. “It seems that there is a growing preference among central banks to hold gold instead of the American treasure.”

Ocampo said he also thought that confidence in the dollar had taken a hit following Trump’s pricing announcements and that his sale was offset by gains for other package currencies.

On April 11, the euro reached a level of more than three years of more than $ 1.14 and earned more than 5% on the dollar since the beginning of the month.

Could another motto take the place of the dollar as a world dominator?

“For the moment, I think the dollar will remain the dominant world currency,” said Ocampo.

But he also said that weakening Trump’s economic foundations, Trump undergoes world dollar domination. For its part, Ocampo mentioned two currencies which benefit from it.

“We recently saw entries in the Swiss franc. But the euro is the real alternative to the dollar,” he said.

The euro currently represents 20% of international exchange reserves – one third of the dollar amount.

“If the EU can agree on a closer budgetary union and, above all, more integration in its financial markets, it will be the currency that could take the coat,” said Ocampo.