- The US dollar has dropped While President Donald Trump deploys his prices, and he dived after unveiling tasks much steeper than expected on the “Liberation Day”. This goes against what the markets had planned before launching their trade war. The lower greenback makes imports more expensive, which has increased the costs of Trump’s aggressive import taxes.
President Donald Trump’s prices criticized the dollar, defying expectations for a stronger greenback and adding to the price that Americans will pay after the adoption of import taxes.
So far this year, the US dollar index, which follows the greenback against a basket of other global currencies, has dropped by 4.7%, investors increasingly prices in the economic impact of the widening of rights.
After imposing prices in China, Canada, Mexico, Steel, Aluminum and Automobiles earlier this year, Trump shocked world markets on Wednesday with new prices on almost all business partners who were much higher than expected.
Fitch Ratings estimated that the overall effective rate rate will be around 25% –the highest since 1909– Since its earlier estimate of a rate of 18% and more than 10 times the rate of 2.3% of last year. As a result, JPMorgan economists have increased their 60%recession ratings, compared to 40%.
The announcement of the “Liberation Day” sent the dollar index crashing by more than 2%, marking its worst loss of a day in almost 10 years, punctuating an earlier drop while the regular drop of previous prices has eroded opinions on the American economy and American assets.
But it was not supposed to be so. During the presidential campaign and subsequently, the “Trump Trade” of Wall Street included a bet that the prices would incline the balance of exports and imports in favor of the United States and lifting the dollar. Instead, the real prices that Trump has unveiled have been so Draconian that they put an end to “American exceptionalism” that the American economy and the financial markets have been boasted.
Companies should absorb some of the tariff costs and transmit the rest to consumers. According to some estimates, the additional cost of car rates could mean a price increase of $ 5,000 to $ 10,000 per vehicle.
Meanwhile, the former Treasury Secretary, Larry Summers said that the overall net impact of prices will cost a family of about $ 300,000.
In addition to this, a lower dollar will cause even higher prices for imports from certain countries. For example, a German car at the price of 50,000 euros would result in $ 55,000 at the exchange rate on Friday of $ 1.095 per euro, before taking into account the prices.
This premium is about $ 4,000 more than in early January, when Trump’s trade was at its peak and the exchange rate was $ 1.02 per euro, investors specifying that parity could even be possible again.
On the other hand, a stronger dollar would make imports cheaper. During her January confirmation hearing for the secretary of the Treasury, Scott Bessent said The dollar could appreciate 4% In response to a tariff of 10%, “so 10% are not transmitted” to consumers.
For his part, Trump said last weekend that if prices on foreign cars increased, consumers will buy American cars because he has shrugged the shoulders of concerns that automotive prices will raise manufacturers’ prices.
“I don’t care if they increased prices because people will start buying American manufacturing cars,” he said in aInterview with NBC NewsSATURDAY.
“I don’t care. I hope they will increase their prices, because if they do, people will buy American manufacturing cars. We have a lot.”
This story was initially presented on Fortune.com
