Weak US dollar complicates who bears the cost of Trump’s tariffs

The US dollar is sinking, and that’s making Trump’s tariff strategy even messier. Investors aren’t feeling good about where the economy is headed, and they’re dumping the dollar. That’s bad news for the White House, especially when tariffs are supposed to make the currency stronger. Instead, the dollar is doing the exact opposite of what economic models predict.

The theory behind tariffs is simple: make imports more expensive so that American-made goods look better. And if the dollar gets stronger, it offsets some of that impact by making foreign products cheaper. But the dollar is sliding, not rising. That’s exposing a serious flaw in the argument Trump’s team keeps pushing—who is actually paying for these tariffs?

Tariffs hit, but the dollar isn’t moving as expected

Treasury Secretary Scott Bessent has been out defending the tariffs, saying that weaker foreign currencies mean other countries bear the cost. His argument? A strong dollar should make imports cheaper, so it’s not Americans who are paying. But there’s a big problem—the dollar is not strong right now.

The Bloomberg Dollar Spot Index—which tracks the US dollar against major currencies—is down 1.7% in a month. Against the Swedish krone? Down more than 5%. That’s not what’s supposed to happen when tariffs are raised. A weaker dollar does the opposite of what Bessent is claiming. It pushes up import prices even more, making American consumers take the hit.

“China’s manufacturers will eat the tariffs. I believe that the currency adjusts,” Bessent said on NBC’s Meet the Press. But the numbers don’t back him up. China’s renminbi hasn’t moved much at all—down just 1.5% since Trump’s last round of tariffs. That’s barely a dent.

Other currencies, like the Mexican peso and the Canadian dollar, have dropped more, but even they haven’t weakened enough to match the 25% tariffs imposed. The numbers just don’t add up. If foreign currencies aren’t weakening as much as expected, then who’s paying the tariff costs?

US consumers feel the pressure as tariffs expand

Trump’s team is still selling the idea that these tariffs shift the tax burden onto foreign companies. The public isn’t buying it. Polls and consumer sentiment reports show growing skepticism. People see higher prices, and they don’t believe China is picking up the tab.

Meanwhile, the next big tariff move is coming. On April 2, Trump is rolling out his largest tariff expansion yet. The new “reciprocal” tariffs aim to match the taxes, tariffs, and trade barriers that US companies face overseas. Trump’s advisers have been pointing at foreign value-added taxes as the next target, expecting duties of 20% to 25% or more.

But there’s a big unknown—will the dollar react the way Bessent expects? Based on recent trends, probably not. Investors aren’t convinced the plan will work. Instead, the market sees a slowing economy weighed down by Trump’s tariff policies.

“With 25%-50% tariffs, we are in a very different situation, and with the dollar now in fact falling against most currencies, the mathematics simply don’t work,” said Padhraic Garvey, head of Americas research at ING. His report noted that past tariff hikes boosted the dollar, but this time, the opposite is happening.

Stock markets struggle as economic uncertainty grows

Wall Street isn’t loving Trump’s tariff rollercoaster. The S&P 500 fell into correction territory last week, down over 10% from its record high. The Nasdaq dropped, while the Dow Jones gained 302 points, helped by Walmart and IBM.

Retail sales came in lower than expected—up just 0.2% in February, missing the 0.6% estimate. Investors were relieved it wasn’t worse, but the numbers weren’t good either. The economy isn’t collapsing, but it’s not thriving, either.

American manufacturers have long complained about a strong dollar hurting exports. Now, with the dollar weakening, their products should be more competitive overseas. But instead of helping, the uncertainty around tariffs is making things worse.

There’s even a theory floating around that Trump is deliberately weakening the dollar. Economic adviser Stephen Miran once pitched a “Mar-a-Lago Accord” to drive the dollar lower, making US goods more attractive abroad. Whether that’s actually happening or not, the markets aren’t impressed.

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