Trump's 'Great' Dollar Dilemma: How a Four-Year Low Undercuts Affordability Push
President Donald Trump's declared mission to make life more affordable for Americans is facing an unexpected headwind: the US dollar's steep decline to its weakest level in four years. While the President has publicly praised a softer currency, market strategists warn it may directly undermine his goal of reducing borrowing costs for households.
Speaking to reporters in Iowa this week, Trump brushed off concerns about the greenback's slide. "The dollar's doing great," he said, adding that he preferred to let the currency "seek its own level." His remarks accelerated the sell-off, sending the US Dollar Index—which measures the currency against a basket of peers—down about 10% over the past year.
Behind the decline are shifting investor appetites away from dollar-denominated assets and the Federal Reserve's ongoing rate-cutting cycle. Historically, a weaker dollar can boost exports by making US goods cheaper abroad—a point Trump highlighted last year when he said companies could "make a hell of a lot more money."
But economists see a looming contradiction. A feeble dollar reduces Americans' purchasing power for imported goods and overseas travel, while raising the cost of imports—potentially rekindling inflation. That could force the Fed to keep rates higher for longer, or even hike them, contradicting Trump's push for cheaper credit.
"The collapsing dollar could be this administration's Achilles' heel," said Joe Kalish, chief macro strategist at Ned Davis Research. In a client note, Kalish warned that if the new Fed Chair moves to cut rates too aggressively, currency traders could "smell blood," driving the dollar lower and inflation expectations higher—a "lose-lose" for affordability.
The dynamic is also tied to what analysts call the "Sell America" trade, where investors retreat from US assets amid economic uncertainty. A key concern is foreign demand for US Treasury bonds. If investors dump Treasuries, yields would rise, lifting borrowing costs across the economy.
"A weak dollar at home doesn't always inspire market confidence," said Nela Richardson, chief economist at ADP. "That confidence is crucial as the US grapples with sticky inflation, high deficits, and the ongoing need to sell Treasuries." She described the falling dollar as a "double-edged sword" for Trump's economic agenda.
Robert Kaplan, vice chairman at Goldman Sachs, echoed the concern, noting that stability is key for funding the nation's nearly $40 trillion debt. "The US is going to want to see a stable dollar… to be able to sell the long end of the Treasury curve," he said.
This week, the 10-year Treasury yield—a benchmark for mortgages and corporate loans—edged higher to around 4.24%, as the dollar index fell further. More forecasters are flagging the risk of a bond market revolt if currency weakness persists.
Voices from the Street
Michael Torres, 52, small business owner in Ohio: "I export machinery parts, so a weaker dollar helps my bottom line. But my materials cost more now, and my mortgage rate just reset higher. It's a mixed bag—Washington can't just cheer a cheap dollar and ignore the side effects."
Linda Chen, 38, financial analyst in New York: "The administration is overlooking basic macroeconomics. A plunging currency imports inflation, period. If they try to force rate cuts while the dollar crumbles, they'll trigger the very price spikes they claim to fight."
David Miller, 61, retired teacher in Florida: "My pension doesn't go as far when the dollar falls. Groceries, gas, medicines—they all feel more expensive. Trump says he's for the little guy, but his dollar policy is hurting people on fixed incomes."
Rebecca Shaw, 45, import-export consultant in Texas: "This is economic malpractice. You can't talk about affordability while letting the currency tank. It's like trying to put out a fire with gasoline. Bond vigilantes will return, rates will spike, and working families will pay the price."
Adapted from original reporting by Business Insider.