Trump 2.0: Will America's strengthening dollar rattle the rest of the world?
Donald Trump coming back to the White House, one such big swings may be on the cards. The economic policies proposed by the US-President elect look set to help the US economy, it might spell trouble for the rest of the world, reports The Economist.
Trump laid out a broad array of ideas aimed at providing tax relief, cutting prices, hiking tariffs and strengthening the economy, which ranks at the top of voters’ concerns. However, what parts of economic agenda Trump implements is still unclear, but the unsteadiness in the American stock market is enough to give us a clue what the investors expect (the S&P 500, an index of large American firms, hit successive records on November 6, 7 and 8).
ALSO READ: Donald Trump is back: What it would mean for US economy and rest of the world
How a strong dollar affects global economy
It is pertinent that a strong dollar often starts to depress global trade growth, as it is the “invoicing” currency of the world and holds the most purchasing power. This simply means when the dollar appreciates, other currencies essentially depreciate, making the world poorer and less able to engage in trade.
It also makes countries that have dollar-denominated debt less creditworthy, as it makes it harder for them to purchase the U.S. currency to manage their debts. Moreover, a strengthening dollar is also more likely to cause inflationary upward pressures for emerging markets because they typically purchase their raw materials in U.S. dollars.
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