Will Trump's economic policies mirror Nixon's impact on the US Dollar's global dominance?

The US dollar is currently facing one of its worst years in history, and it may even fall further, as US president Donald Trump’s economic policies have driven global investors to sell their greenback holdings, as per a report. The currency is down more than 7% so far in 2025, and the greenback is on the edge of an even steeper decline, with Morgan Stanley warning it could tumble another 10% before the year ends, according to a Semafor report.

What a Weaker Dollar Means for Americans?

For Americans, that would mean more expensive imported goods, but for US exporters, it could provide a strong boost in global competitiveness, potentially aligning with Trump’s push to “rebalance” US trade, as per the Semafor report.

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Could the Dollar Lose Its Global Role?

But beneath the market moves lies a deeper question: could this year’s dollar drop trigger a historic shift in America’s financial system and its role in the global financial system?

According to the report, there are also few alternatives and efforts to de-dollarise, with central banks shifting into gold and China shovelling its currency into developing nations through swap lines. However, as political economist Ngaire Woods wrote for Semafor in an essay earlier this year, “they haven’t dethroned the dollar, but that’s because the US government has protected it through sound policy and global engagement,” as quoted in the Semafor report.

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1973 Flashback: Richard Nixon and the Gold Standard Exit

The last time the US dollar faced this kind of dollar depreciation was in 1973, which happened after the then US president Richard Nixon took the United States off the gold standard in 1971, transforming global finance in the process, as per the Semafor report. That led to a decade of high inflation, low growth, and the weakening of the dollar as European countries delinked from the US currency, according to Foreign Policy Magazine.

Nixon's move effectively dismantled the Bretton Woods system that had been in place since the end of the Second World War, as per the Irish Times report. "It had pegged the dollar to the value of gold, with the rest of the world’s currencies pegged at various (adjustable) rates to the dollar," wrote the Irish Times in its report.

His decision to detach the US currency from gold was because the US did not have enough gold to cover the volume of dollars in worldwide circulation, as reported by the Irish Times. This meant that the US dollar was overvalued and the US had started to have massive trade deficits, and just like Nixon, even Trump believes that the overvalued dollar is hurting US exporters and workers and blames the rest of the world for the US’s unpleasant economic condition, as per the Irish Times report.

Could Donald Trump Trigger a “Trump Shock”?

The “Nixon shock” as it was referred to, was a unilateral attempt to devalue the dollar and rewire the US’s trading relationships while maintaining US economic hegemony, which parallels with today and the “Trump shock," the Irish Times wrote in its report.

Now once again the US will face a similar situation due to the uncertainty caused by Trump's tariff war, which will have a high risk on the dollar, inflation, and growth, as per Foreign Policy Magazine. Currently even cryptocurrencies are eroding the dollar’s preeminence in the underground economy, which is about 20% of global income, as per the report.

Morgan Stanley’s Wilson said that, “Big moves in the dollar tend to create moments of instability,” as quoted in the Semafor report.

FAQs

Why is the US dollar falling this year?
Mostly due to Trump’s trade policies and global investor uncertainty. People are pulling out of the dollar.

How much has the dollar fallen?
So far in 2025, it’s dropped over 7%, and experts warn it could fall another 10%.