Trump Wants a Weaker Dollar. That Will Be Easier Said Than Done
Both Trump and his vice-presidential nominee, JD Vance, have consistently blamed countries like China for ravaging U.S. manufacturing through an artificially weak currency.
They have promised to devalue the exchange rate.
Investors think this would be difficult in practice.
Trump’s plans to slash corporate taxes would likely drive even more overseas money into U.S. stocks, as was the case in 2018.
Contrary to popular belief, budget deficits can end up benefiting the domestic currency, too, because they lead to faster growth and a more hawkish central bank.
Textbook economics suggests that imposing tariffs leads the domestic exchange rate to appreciate, since consumers aren’t sending as much currency abroad to acquire imported goods.
Unilateral dollar sales such as the ones the U.S. did in 1989 have usually had a temporary effect, as opposed to the true regime changes delivered by the 1985 Plaza Accord or the foreign-exchange operations in 1994 and 1995, which were done by American, European and Japanese officials simultaneously.
Wall Street Journal 1 November 2024
Plaza Accord
https://www.internetional.se/plaza.htm
Louvre Accord
An agreement reached in February 1987 by the five countries which comprise the G-5 (France, West Germany, Japan, the UK and US) following an earlier decision to correct an overvalued $US.
They agreed that the $US had fallen sufficiently and that they would take steps to ensure stability in exchange rates.
https://www.armstrongeconomics.com/armstrongeconomics101/economics/louvre-accord-v-plaza-accord/
Kommentarer