A Weaker Dollar is Wrong: Atlantic Daily

The US dollar is getting weaker, and that’s just how the president wants it.

During a recent appearance at the Machine Shed Restaurant in Urbandale, Iowa, Donald Trump told reporters the dollar’s declining exchange rate was “great,” Will Gottsegen wrote for Atlantic Daily.

While Trump hopes a weaker dollar will boost exports, he is also taking steps that could offset any gains.

In his first term, Trump tweeted: “As your President, one would think that I would be thrilled with our very strong dollar. I am not!”

His logic is that the weak currencies of America’s competitors, such as China and Japan, can make their goods cheaper in international markets and that the US would do well to replicate the strategy.

The theory is not unfounded — a weaker dollar could boost parts of the economy — but Trump’s unpredictable foreign-policy and global-trade decisions risk eroding America’s economic standing.

When Trump talks about the dollar’s strength or weakness, he is referring to its value in foreign-exchange markets. That’s partly why, despite mixed messaging after he took office in 2017, Trump has long been fixated on a weak dollar.

In 1987, he took out full-page ads in The New York Times, The Washington Post, and The Boston Globe lamenting the currency’s strength against Japan’s “brilliantly” managed yen.

A weaker dollar makes US companies and goods more competitive abroad.

In theory, the incentive to export and the disincentive to import could push companies to invest more in domestic manufacturing, potentially bringing back factory jobs and offering one path toward reducing the trade deficit.

Kenneth Rogoff, former chief economist of the IMF, said that because exchange rates are governed by many factors, a president wishing for a weaker dollar is “like doing a rain dance.”

The Federal Reserve typically has far more influence over the dollar’s value. When borrowing costs fall, the dollar index also tends to decline.

While Trump hopes a weaker dollar will boost exports, he is also taking steps that could offset any gains. His mercurial policies risk pushing away some of America’s long-standing trading partners.