Collateral damage: U.S. dollar and Treasuries are first to fall as Trump’s trade war sends shockwaves through markets

As President Donald Trump doubles down on his "America First" trade war, the spillover is striking home in one place no one predicted: the US dollar and government debt, as per a report.

The Trade War’s Unexpected Victims

Since his Inauguration Day, the dollar has fallen almost 10%, with over half of that decline occurring in just the last month, as per the Washington Post.

The reason was the sudden rise in tariffs, at their highest level since 1909, which was announced by Trump earlier this month and then again paused. The uncertainty has unsettled international markets and investors.


Head of macro research for London's AXA Investment Managers, David Page said, “The administration’s approach to policy and its lack of transparency in terms of motivations have all led to a distinct sense of unease in financial markets,” quoted the Washington Post.

The long-term US government bonds, traditionally regarded as one of the world's safest bets, are sending warning signals, as per the Washington Post. Rather than increasing in value during the uncertainty, they've fallen, driving yields to 5%, according to the report.

A Slumping Dollar Means Pricier Travel and Imports

For ordinary Americans, a weaker dollar makes travel overseas suddenly much more expensive. Imported products, from computers to clothes, might soon come with higher price tags, fueling inflation already stretching family budgets, as per the report.

Higher Borrowing Costs Could Hit Your Wallet

While the higher bond yields translate into higher borrowing costs on mortgages, auto loans, and credit cards, for consumers and companies alike, according to the Washington Post.

Chief Asia economist for Hong Kong's HSBC, Frederic Neumann, said, “I don’t think we’re quite out of the woods yet when it comes to bond market volatility, and that, in the short term, doesn’t help the U.S. dollar either,” quoted the Washington Post.

FAQs

Why are investors pulling back from US markets?
Because of inconsistent policy announcements and doubts about how stable the US economy will be during this trade war.

Why is the US dollar falling?
Because tariffs and policy uncertainty are shaking investor confidence in the US economy.