The ironies of Trump’s tantrums about the dollar

US president-elect Donald Trump wants a weaker dollar in order to boost exports, protect American jobs from foreign competition and reduce the trade deficit. He also wants a strong dollar and will not brook any challenges to its dominance in global finance.

If that is not enough of an inconsistency, the new administration’s policies could well be at cross-purposes with both of those intentions. Its actions will probably boost the dollar’s value in the short run while its status as a reserve currency may well become shakier.

What it means for the world, though, is a great deal of uncertainty on US trade policies — accompanied by turbulence in global capital flows and exchange rates. Volatility in US policies and financial markets invariably spills over into other countries’ economies and markets. In the greatest irony of all, this will encourage flight into dollar assets, which are still perceived as the safest investments.

The president-elect has talked about devaluing the dollar, but the imposition of tariffs on imports from key US trading partners would have the opposite effect — driving up the dollar’s value and making it harder for US exporters to compete in global markets.

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