NEW YORK — The U.S. dollar remains under sustained pressure following former President Donald Trump’s April tariff announcements, with analysts cautioning that its global reserve currency dominance could face structural challenges despite near-term stability.
Bank of America Global Research strategists warned in a Thursday report that “tariff anxieties, recession risks, and U.S. fiscal policy concerns” are fueling market uncertainty, potentially triggering a “turbulent summer” for the greenback. The ICE Dollar Index has declined nearly 4% since Trump’s April 2 proclamation of sweeping tariffs, despite a recovery in the S&P 500, according to FactSet data.
While temporary relief emerged from the recent 90-day U.S.-China tariff truce, BofA maintains a bearish medium-term outlook, arguing sustained tariffs at current levels will exacerbate inflation and economic slowdown. Strategists highlighted particular concern about the “unsustainable trajectory of U.S. fiscal policy.”
Historical Precedent Meets Modern Policy Tensions
TS Lombard economist Dario Perkins reinforced these concerns in a separate Thursday analysis, noting the dollar’s reserve status—typically lasting a century—now confronts shifting geopolitical alliances and trade patterns. The dollar’s formal dominance dates to the 1944 Bretton Woods Agreement, which pegged global currencies to the dollar-gold standard until President Nixon severed the gold link in 1971.
“The world’s reliance on dollar liquidity has historically shielded the U.S. from sudden capital flight,” Perkins wrote. “But the Trump administration appears to view this ‘exorbitant privilege’ as a liability rather than an advantage.”
Policy Divergence Drives Currency Risks
The reports coincide with growing scrutiny of Washington’s approach to monetary sovereignty. Perkins criticized Trump-era officials for misinterpreting dollar dynamics, noting their claims that global dollar demand “hollowed out U.S. manufacturing” through perpetual overvaluation reflect “fundamental misunderstandings of reserve currency mechanics.”
Market observers suggest current policies could paradoxically achieve the weaker dollar some officials desire—not through strategic design, but via economic self-sabotage. “The administration might get the currency depreciation it wants precisely by pursuing measures that damage U.S. competitiveness while pushing allies to diversify,” Perkins argued.
No Immediate Collapse, But Structural Erosion
Both analyses agree the dollar faces gradual devaluation rather than imminent reserve status loss. Perkins emphasized that while “the era of American exceptionalism is ending,” transition timelines remain fluid. The currency’s safe-haven status during crises continues to provide short-term buffers, even as long-term structural supports weaken.
The Treasury Department declined to comment on the reports. Market participants now monitor whether July’s tariff negotiations produce durable solutions or amplify existing pressures on the world’s primary reserve currency.
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