Does Donald Trump want a weak, or a strong, dollar?2017-03-13 16:46
According to anonymous White House insiders quoted by the Huffington Post, Trump himself is unsure. One night, at 3:00 AM, he called one of his advisers with that question. But the advisor did not have an answer and we do not know how the story ended.
The USA has had a “strong-dollar” policy since 1995 and the current Treasury Secretary, Steven Mnuchin, seemed to confirm it in February when he said that dollar strength was "a good thing". In fact, a somewhat strong currency is generally considered helpful in order to fight enemies, and protect friends, around the world. Trump has also described himself as the “king of debt” and people with high debts often like strong currencies and low interest rates.
However, Trump also said in January that the strong dollar was “killing us” in an apparent reversal of official policy. Also, Trump’s voters have probably a preference for a weak currency in order to boost exports and jobs in the Midwest.
The conclusion is that Trump is probably pulled in different directions on the dollar and does not have a strong opinion. The president could tolerate currency strength as long as the economy does well, but would have no problem to talk down the dollar if there was an economic slowdown.
One thing that the current administration certainly wants is more balanced trade. Director of the National Trade Council, Peter Navarro, has argued that several countries sell a lot to the USA but they buy very little from it due to various barriers. The USA has a lot to offer: from financial services to software, airplanes, weapons and foodstuff.
Why can Germany sell cars in the US when Berlin restricts imports of American agricultural products and limits the operations of Uber and Airbnb in the country? Navarro also makes the point that foreigners are accumulating so much US debt that Americans will eventually “wind up working longer hours just to eat and to service the debt.” Of course, the debt is in dollars and the US could inflate it, but that would have negative consequences even for the USA.
Overall, Washington’s priority is to boost domestic activity and employment, be it with trade policy, currency movements, tax cuts or deregulation. And calls for more balanced trade flows are probably going to get more traction than calls for a weak dollar.
Giovanni Polastri, analyst, Multi Asset Management