economy
January 30, 2026
The dollar is tanking and Trump seems unfazed. Does that make sense?
The US is trying to balance high deficits, high debt, and also the need to provide dollars to the world to maintain reserve-currency status
TL;DR
- The US dollar has experienced a notable decline, dropping 2.3% in January and 9% in the previous year.
- President Trump has expressed contradictory views on the dollar's strength, acknowledging its prestige but also its economic benefits when weak.
- The Triffin Dilemma posits that a country issuing the global reserve currency must run trade deficits to supply it globally.
- High US fiscal deficits (around $2 trillion annually) and substantial national debt (over $38.5 trillion) contribute to the expectation of a weaker dollar.
- A strong dollar can lead to global financial stress, making dollar-denominated debt harder to service and potentially increasing US borrowing costs.
- A strong dollar also makes US assets more expensive for foreign investors, potentially reducing demand for US debt and increasing yields.
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