“Depreciation would add to inflation,” said Mark Sobel, a former longtime Treasury Department official who is now the US chair of the Official Monetary and Financial Institutions Forum. “So would tariff hikes. Plus, a highly expansionary fiscal policy would add to demand pressures.”

Sceptics of a strong greenback say it is responsible for making US exports too costly abroad at the expense of American workers, and seeking to devalue it aligns with the populist ethos of Trump and Vance.

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At a Senate hearing last year, Vance echoed Trump’s concerns while questioning Jerome Powell, the Federal Reserve chair. He said the dollar’s status as the reserve currency, which means it is widely held in central banks around the world and accepted for most kinds of transactions, was a subsidy for US consumers but a tax on US manufacturers.

“I know the strong dollar is sort of the sacred cow of the Washington consensus, but when I survey the American economy, and I see our mass consumption of mostly useless imports on the one hand and our hollowed-out industrial base on the other hand, I wonder if the reserve currency status also has some downsides, and not just some upsides as well,” Vance said.

Powell responded by noting that the United States benefits from its reserve currency status, which makes it possible to buy goods all over the world with dollars. He also said there was no obvious currency to replace it.

The strength of the US dollar has gained global attention this year as its value appreciated compared with other countries’ currencies as a result of higher interest rates. That can complicate matters for central banks worldwide that are grappling with inflation, and by making American exports more expensive, it can widen the US trade deficit, which Trump loathes.

‘It sounds good to stupid people, but it is a disaster for our manufacturers and others.’

Trump on the strength of the US dollar

The 2024 Republican Party platform calls for keeping the dollar as the world’s reserve currency, but Trump and Vance could still try to weaken it if elected this year. Robert Lighthizer, Trump’s former trade adviser, who could be a candidate to be his next Treasury secretary, has been mulling ways to devalue the dollar if the former president wins, Politico reported this year.

Trump could try to devalue the dollar either by signalling a policy shift, appointing a new Federal Reserve chair when Powell’s term ends in 2026 who is likely to cut interest rates, or by trying to use the threat of tariffs to compel other countries to act to strengthen their own currencies.

As part of his reelection agenda, he has called for imposing a 10 per cent levy on all imports and a 60 per cent duty on imports from China.

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“If you punish other countries, hit them with tariffs, reduce the value of their exports, the effect tends to be their currencies weaken,” said Brad Setser, a fellow at the Council on Foreign Relations who served in the Biden administration’s trade office.

Lawrence Summers, who served as Treasury secretary in the Clinton administration, said a move to devalue the dollar could lead to “stagflation” — when prices rise and growth slows.

“If a country’s government does not care about the value of its money, why should anyone else?” Summers said. “Raising tariffs while devaluing the dollar are self-imposed supply shocks.”

Despite his interest in a weaker dollar, Trump has given mixed messages on the matter.

But this April, as the dollar surged against the yen, Trump said the strength of the dollar was going to put US companies out of business.

“It sounds good to stupid people, but it is a disaster for our manufacturers and others,” Trump said on social media.

This article originally appeared in The New York Times.

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