2025 is just a day away, with a new dawn already promising a variety of new developments. 2025 is pivotal to the US government in many ways, as it marks the initiation of Trump’s official leadership as the 47th US president. The president-elect is currently banking on bolstering the US dollar by imposing tariffs, an idea which, according to many, could further erode the dollar’s value in the long haul. Will de-dollarization prevail in 2025, or will it die down eventually? Let’s find out.
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Tariffs and Trump: A Lethal Combination?
Trump has vowed to impose tariffs on countries that have been moving away from the US dollar. The fact that the rising de-dollarization drives have lately been wreaking havoc on the dollar has compelled Trump to ensure a plan is safely in place to protect the USD. However, several analysts believe Trump’s tariff plan may ultimately backfire, furthering the de-dollarization narratives rather than curbing them.
“The dollar remains dominant for several reasons: the USD is the most liquid currency in the world, trades freely, and it is also the lending currency of the world. If Trump increases the pressure on BRICS, it may well accelerate a move away from the dollar,” said Rodrigo Catril, a strategist at National Australia Bank Ltd. in Sydney.
That being said, some of the countries have already started to issue counter-challenges. Trump has also issued 25% tariffs on Canada and Mexico, addressing the illegal immigrant outflow as the core issue compelling the president-elect to impose such tariffs.
“We will go to the extent of cutting off their energy—going down to Michigan, going down to New York State, and over to Wisconsin. Canadians get hurt, but I can assure you one thing: the Americans are going to feel the pain as well, and isn’t that unfortunate?” Ford told reporters.
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Will Tariffs Push Nations To Ditch The US Dollar?
With Trump exploring a strategic tariff policy to restrict shunning the USD, this plan may ultimately backfire, ending up deteriorating the American currency in the long haul.
“Curious how former President-elect Trump ever became convinced that the nowhere close to happening BRICS currency was a threat to the dollar … It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar.”
Curious how former President elect Trump ever became convinced that the nowhere close to happening BRICs currency was a threat to the dollar …
It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar
1/x pic.twitter.com/MvXSLPiOyo
— Brad Setser (@Brad_Setser) November 30, 2024
Furthermore, a recent note shared by the Deutsche Bank analysts stated how such tariffs may not help the US economy in the long haul.
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“It seems to further point to Dollar strength being a theme of the new administration as against Trump 1.0, where initially they tried to talk the Dollar down,” the Deutsche analysts wrote.
