Trump, tariffs, and the dollar

While President Trump’s return to the White House and the apparent Republican sweep in Congress made a big splash in currency markets – Wednesday saw the largest single day rise in the DXY index since 2016 – some of that rally has since reversed, leaving the greenback only a little stronger on the week. As we set out in the run-up to the election, our view is that Trump’s policies – in particular higher tariffs and pro-cyclical fiscal policy – will lead to substantial appreciation of the dollar.