A $1.7 trillion asset manager is flipping bearish on the US dollar, warning Trump’s push to revitalize America’s industries by increasing tariffs is eroding the USD’s dominance.
Analysts at bond giant Pacific Investment Management Company (PIMCO) say in an investment note that President Trump’s trade war has triggered uncertainty about the status of the dollar and US Treasuries as safe-haven assets, reports Reuters.
[adinserter block="1"]The PIMCO market strategists say that investors are now questioning whether US assets will remain the anchor of the global financial system amid Trump’s abrupt policy shift that his administration claims will bring manufacturing jobs back to America.
“The US has long enjoyed a privileged position, with the dollar serving as the global reserve currency and Treasuries as the go-to reserve asset. However, this status is not guaranteed. If global capital flows into US assets dwindle, it could point toward a more multipolar world with a diminished reliance on a singular reserve currency.“
With investors beginning to doubt the long-standing trend of US exceptionalism, PIMCO warns that the door is now open for investors to move their capital away from the US dollar and Treasuries into bonds issued by Europe, Japan, the UK and emerging economies.
Earlier this month, Trump signed an executive order that imposed a 10% tariff on all imported goods entering the US, with the stated aim of safeguarding domestic manufacturing. The president also issued a proclamation that slapped reciprocal tariffs on dozens of countries.
The move has triggered a steep decline in the US dollar index (DXY), which measures the strength of the USD against a basket of other major foreign currencies weighted by volume.
The DXY dropped as much as 6% this month, from an April open of 104.18 to as low as 97.92. The last time the DXY slid by about 6% was in May of 2009, when the US economy collapsed due to the 2008 financial crisis.
The DXY has bounced since and is trading at 99.58 as of Friday’s close.
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