Bets that Trump would usher in a new era of prosperity in America caused stocks to soar with the end of last year
It hasn't gone that way. According to Terry Tanaka, the dollar has depreciated in 2025.
On Bloomberg, Saleha Mohsin and Carter Johnson state that "markets are discovering the real Trump trade is Sell America." Late last year, stocks surged on speculation that the next president would usher in a golden age for America. It hasn't gone that way. Compared to other major currencies, the dollar has declined by 9% in 2025.
The United States' trade and budget deficits are financed by foreign capital. According to Torsten Slok of Apollo Management, foreigners own £7 trillion in government bonds and £19 trillion in US stocks, or 2030% of the market. In search of more stable environments, those funds are currently escaping.
Will the dollar be the dominant currency?
The "termination" of Jerome Powell as chair of the Federal Reserve "cannot come fast enough!" was Trump's statement last week, which sparked new controversy. According to Jeremy Warner in The Telegraph, Powell's failure to lower interest rates has angered Trump. A sitting government criticizing central banks in public is deemed "beyond the pale" even though they "generally deserve whatever brickbats they get." Central bank independence is a "cornerstone" of contemporary economic policy for good reasonpoliticians "always abuse" their power when they have control over interest rates.
It is unlikely that Trump possesses the legal power to fire Powell. According to the president's retraction on Tuesday, he would simply "like to see" Powell "be a little more active." According to Nick Timiraos in The Wall Street Journal, the true goal of the rhetoric is to set the stage for blaming the Fed in the event that Trump's trade war triggers an economic downturn later this year.
"Powell worked to help Biden during his term" with rate cuts, but he is "unwilling to provide the same support" now, according to Trump's explanation. This ignores the following: first, Powell was first appointed by Trump in 2018; second, Powell gave Trump unprecedented economic support in 2020; and third, Powell's Fed raised rates sharply in 2022 and 2023 during Biden's administration. The credibility of the dollar is suffering as a result of the Fed's politicization.
According to Daniel Moss on Bloomberg, "American prestige has taken a hit," but King Dollar's rule appears to be secure. Despite the subprime mortgage crisis in 2008 and the "Nixon shock" of 1971, the dollar's place in global trade has endured. We might simply be seeing a "healthy" currency market correction following a period in which the dollar was persistently overpriced, rather than a significant overhaul of the global financial system.
According to The Economist, the dollar has been the "lynchpin" of global trade for eight decades, accounting for 88 percent of all foreign exchange transactions. There are no obvious alternatives, which is a major defense of the currency. Beijing's stringent capital controls will prevent the Chinese yuan from taking over. Investors view Berlin as a safer credit risk than Washington, but the market for bunds is much smallerjust a twelfth of the size of the US Treasuries market. Although the dollar will still be king, its relative importance will decrease as central banks invest in gold and other alternatives.
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