Economic Measures by Donald Trump Weaken Confidence in the US Dollar
Under Donald Trump’s economic policies, also known as “Trumpenomics,” ten major currencies have appreciated against the US dollar in 2023, including the Brazilian real. The Russian ruble has seen the most significant gain, advancing by 28.62%, followed by the Swedish krona (12.82%), Norwegian krone (9.78%), Swiss franc (8.76%), and the euro (8.25%). These currencies are considered “strong” currencies.
Currencies Gaining Ground Against the US Dollar
- Russian ruble: 28.62%
- Swedish krona: 12.82%
- Norwegian krone: 9.78%
- Swiss franc: 8.76%
- Euro: 8.25%
- Brazilian real: 8.24%
- Danish krone: 8.22%
- Japanese yen: 8.15%
- Taiwanese dollar: 8.01%
- Mexican peso: 7.7%
Eduardo Loria, coordinator of the Center for Modeling and Economic Forecasting (CEMPE) at the Faculty of Economics, UNAM, attributes this weakening of the US dollar to Trump’s economic strategy, known as “Trumpenomics.”
Relevance and Impact of Trump’s Economic Policies
Trump’s economic policies encompass reconfiguring global trade, imposing uncertainty on tariff management with 200 nations, and proposing a fiscal plan to extend tax cuts from his first term. These measures have contributed to the US dollar’s depreciation, as explained by Loria.
Impact on the US Economy
According to Gabriela Soni, UBS’s Director of Investment Strategy, these tariffs will hinder the US economy’s growth, making fiscal adjustment—as proposed by the Republican initiative—more challenging. The markets are incorporating this expectation.
US Dollar Weakness Against Emerging and Advanced Currencies
In an interview, Soni mentioned that the US dollar’s weakness is evident against both emerging and advanced currencies, such as the Mexican peso and the euro. She highlighted that Mexico offers a higher interest rate among emerging markets with an investment-grade rating, making it more attractive for investors compared to other countries with similar ratings.
Mexico’s Position Among Emerging Market Peer Currencies
UNAM’s professor Diego López Tamayo explained that without US growth, achieving the fiscal adjustment proposed by the Republican initiative—including a 5% tax on remittances—will be difficult. The market perceives this risk, as shown by the weakening US dollar.
No Direct Impact on Mexico’s Credit Rating
Luis Gonzali, Vice President and Co-Director of Investments at Franklin Templeton, dismissed concerns that the downgrade of the US credit rating would affect Mexico’s credit rating or be linked to market perceptions of Mexican debt.
Factors Contributing to US Dollar’s Weakness
Gabriela Soni from UBS emphasized that the US dollar’s weakness is due to its unique position, with concerns over twin deficits, fiscal discipline, and trade deficits continuing to weigh against it.
