Trump’s tariffs are helping the world to reprice the dollar from a world reserve currency to a national currency. This is why the DXY is weakening. U.S. inflation was high under Biden, but paradoxically the DXY remained strong thanks to America’s Exorbitant Privilege and trade deficits, which were a feature, not a bug.
Now under Trump, America tries to run a trade surplus, and their dollar is getting repriced as a national inflationary currency for a country with massive debt. That’s the price you pay for not wanting to be an empire but a regular country.
Trump’s isolationist policies are dismantling the dollar strength, which historically used to be America’s best tool to wield power internationally.
Now, people would rather have gold or Bitcoin in their reserves than dollars. Since the dollar inflation is being priced into the DXY, pricing international goods in dollars is less attractive and often goes against the merchant or trader due to the inflation.
You used to be able to charge a fixed USD price for goods being sold internationally. The USD inflation mostly stayed within America. Now, USD prices have to be increased worldwide for the same goods or services to account for the degrading dollar strength.
The S&P has gone up ~14% in 2025 when measured in dollars. But when measured in gold, the S&P has actually declined ~22% in 2025. Food for thought.
Considering the weakening DXY, the increasing Treasury yields, and strengthening safe-haven assets, along with equities all going up together (when priced in USD), it begins to look like a flight from the dollar and systemic fragility.
Trump ended America’s Exorbitant Privilege, which historically allowed it to trade dollars for goods, run a trade deficit, and be the world’s reserve currency. By dismantling this system, America is beginning to look like the United Kingdom post-Brexit and will face similar issues. The only positive is that other nations are even worse off, so in this race to the bottom, America will sink slower than other nations.
Be safe out there and avoid sitting on dollars for too long.