Global economics analyst Louis-Vincent Gave said a while ago, “Trump is first and foremost a mercantilist; he clearly wants a weaker US dollar.” Now that statement is being posed as a prediction of what could really happen if the now pro-bitcoin US presidential candidate wins the election next November.
Donald Trump has been promising at his rallies that if he returns to the White House next year (his list includes massive import tax increases, a global trade war and an exploding budget deficit), there will be a weaker US dollar, according to reports. But many are wondering why the Republican candidate thinks a weakening dollar would be good for the US economy?
In an interview with Bloomberg last week, Trump explained why he believes a weak dollar, rather than a strong one as he previously promoted, will ultimately be beneficial to the US economy.
He said the dollar is overvalued compared to the currencies used by U.S. trade rivals such as China, Japan and Europe. A weaker dollar would make imports much more expensive for Americans and make U.S. exports much more attractive in global markets.
“The discrepancy, for example, between the dollar and the yen and the dollar and the yuan is incredible. With the dollar high and the other currencies very low, I realized that others fought very hard to keep their currency low. It doesn’t sound good, but from the point of view of what they do and the manufacturing of products, that’s how Japan was built. That’s how China was built. I think we’re in a very bad position.”
Donald Trump, candidate for the presidency of the United States.
In short, a strong dollar makes it harder to sell U.S. products abroad to buyers with weaker currencies, since they need more money to complete those deals.
A weak dollar favorable for bitcoin?
Trump and his running mate, JD Vance, share the idea of weakening the dollar and this could have a major impact on international trade, increasing the prices of imports.
Several analysts have begun to weigh in on what could happen if Trump wins the presidency. Economist Mark Sobel, meanwhile, warned that a weak dollar and higher tariffs could boost inflation. This comes as Trump proposed high import taxes and tariffs on Chinese imports, raising concerns about their impact on the US economy.
Commodity analyst Michael Kao, meanwhile, offers a contrarian view, suggesting that Trump's policies could be deflationary for oil. Kao believes Trump will reverse Biden's foreign policies in the Middle East, which will help lower oil prices, while weakening the dollar to keep inflation in check.
"The oil price drop may be just what the Fed needs to eventually pivot and weaken the dollar, so the direction of causality is reversed, IMHO," Kao said, suggesting that Trump's potential monetary policy move would help tame inflation.
So far, Trump has not given any major indication of what he would do to weaken the dollar, but what has happened in the past provides a glimpse of what could happen to the US economy if Trump were to become president.
In October 2021, the year-on-year inflation rate was 6.2%, the highest in the United States in 30 years. Two months earlier, Powell had admitted that the Central Bank has created dollars from scratch at an unprecedented rate. The measure responded to the many tools used by the government to rescue the economy in the midst of the coronavirus pandemic.
Therefore, if Trump activates unlimited monetary emission to weaken the dollar, there will be a greater population rapprochement towards bitcoin. This is due to the fact that in times of economic uncertainty, people's response is usually to search for alternatives to secure their economy and many see the potential value of assets such as bitcoin with a transparent and limited supply.
