As a result of the chaotic tariff war initiated by US President Donald Trump, investors have begun to dump dollars and government bonds at the same time, The Economist reports.
If this trend continues, the dollar could fall significantly, which would lead to serious consequences for both the US and global economies.
The combination of rising yields and a declining currency is a worrying signal: if investors are leaving the market despite rising incomes, it means they assess the risks of investing in America as significantly increased. There is information that large foreign asset managers are starting to sell off dollars.
In addition, the situation is aggravated by the deteriorating financial condition of the US. The country’s net debt is about 100% of GDP, and the budget deficit has reached 7% over the past year.
The economic situation is becoming especially alarming amid growing doubts in the markets about Trump’s ability to effectively and consistently govern the United States. Inconsistent and illogical decisions on tariffs have become a parody of public policy. For years, America has shown the world its commitment to a strong dollar. But today, some White House advisers view its reserve currency status as a burden.