For anyone asking why it’s strange, from the article
Traditionally, the dollar would strengthen as tariffs sink demand for foreign products.
If you’re looking at the dollar with supply and demand, if international trade to the u.s. decreases with tarriffs, then the amount of dollars leaving the u.s. also decreases and thus the supply of dollars on the international market. Assuming demand remains constant then the strength of the dollar should go up.
For this decrease in strength you have to look to demand which has to decrease enough to counteract the tarriffs plus more. This decrease in demand is coming from both decrease in demand for assets priced in dollars (u.s. companies stocks, treasury bonds, real estate etc.) And retaliatory tarriffs which lower demand for u.s. goods.
While this has been historically true, it’s not working this time.
But the dollar not only failed to strengthen this time, it fell, puzzling economists and hurting consumers. The dollar lost more than 5% against the euro and pound, and 6% against the yen since early April.
As with most things happening under this US administration, he pushes things to the breaking point to see how it reacts. He’s stress testing the global economy. From there, I would guess that he’d back off just before the breaking point and move on to something else.
Exactly, when people and organizations are selling their American stocks and companies and customers around the world stop buying American, there is less need for dollars. When the demand decreases, the price decrease.
For anyone asking why it’s strange, from the article
If you’re looking at the dollar with supply and demand, if international trade to the u.s. decreases with tarriffs, then the amount of dollars leaving the u.s. also decreases and thus the supply of dollars on the international market. Assuming demand remains constant then the strength of the dollar should go up.
For this decrease in strength you have to look to demand which has to decrease enough to counteract the tarriffs plus more. This decrease in demand is coming from both decrease in demand for assets priced in dollars (u.s. companies stocks, treasury bonds, real estate etc.) And retaliatory tarriffs which lower demand for u.s. goods.
While this has been historically true, it’s not working this time.
As with most things happening under this US administration, he pushes things to the breaking point to see how it reacts. He’s stress testing the global economy. From there, I would guess that he’d back off just before the breaking point and move on to something else.
Exactly, when people and organizations are selling their American stocks and companies and customers around the world stop buying American, there is less need for dollars. When the demand decreases, the price decrease.