Stop talking down the dollar

A strong dollar is not just a symbol of American power; it is central to our global dominance

Photo by Giorgio Trovato on Unsplash

By David Leblang

In recent months, the U.S. dollar has experienced a notable decline, worsened by President Donald Trump’s persistent rhetoric advocating for a weaker currency. Just last month, while speaking to reporters in Iowa, Trump dismissed concerns about the dollar hitting a four-year low, stating, “No, I think it’s great,” and added that the dollar is “doing great.”

Trump explained that he wants the currency to “just seek its own level, which is the fair thing to do,” and said, “I could have it go up or go down like a yo-yo.” Trump has long favored a depreciated dollar, arguing in July 2025 that “It doesn’t sound good, but you make a hell of a lot more money with a weaker dollar ... than you do with a strong dollar,” claiming a strong dollar hampers U.S. suppliers who “can’t sell anything.” While such talk may appeal to short-term political gains—promising increased exports and job creation in key swing states—it overlooks the deep and long-term impacts on U.S. economic, financial, and military leadership.

A strong dollar is not just a symbol of American power; it is central to our global dominance. Pursuing policies that intentionally weaken it risks undermining the foundations of U.S. influence, inviting challengers like China, and speeding up a shift to a multipolar world where America no longer sets the rules.

The dollar’s strength has been the foundation of U.S. economic dominance since the end of World War II. As the world’s main reserve currency, it provides the United States with an “exorbitant privilege,” enabling us to borrow at lower interest rates than any other country. This status results from global trust in America’s economic stability, rule of law, and extensive financial markets. A strong dollar reduces borrowing costs for the government, businesses, and households, each of which are estimated to save 10 to 30 basis points on interest rates. This amounts to billions in yearly savings, supporting investments in infrastructure, innovation, and defense. The dollar’s status as a global currency likewise makes imports more affordable, boosting consumer purchasing power and helping to control inflation—benefits that directly raise living standards. In a time of ongoing inflationary pressures, a robust dollar serves as a natural stabilizer, lowering the cost of essential commodities like oil, which are priced in dollars.

Financially, the dollar’s dominance underpins U.S. leadership in global markets. It is involved in nearly 90% of foreign exchange transactions and accounts for about 60% of worldwide reserves, far surpassing its 25% share of global GDP. This hegemony enables the United States to exert unmatched influence through sanctions, as dollar-denominated transactions often pass through American banking infrastructure. The ability to freeze assets or block adversaries from the global financial system has been crucial in countering threats from Russia, Iran, and North Korea. Without a strong dollar, this leverage diminishes, reducing our capacity to enforce international norms and defend allies. Additionally, the dollar’s role as a safe haven during crises—the dollar generally appreciates during global turmoil—strengthens investor confidence in U.S. assets like Treasuries, providing a liquidity premium that keeps borrowing costs low even as national debt surpasses $35 trillion.

The relationship between dollar strength and military power is just as important. History shows that influential currencies are often tied to powerful militaries, from the pound sterling during the British empire to the dollar after Bretton Woods. U.S. military dominance enhances the dollar’s role as a reserve currency, allowing for cheaper financing of defense spending—currently over $800 billion a year. This “dual hegemony“ helps America maintain global alliances, deter enemies, and project power without the economic burden that countries like China or Russia face. A strong dollar supports America’s military presence abroad as well as its international partnerships, which boost economic growth and stability. Losing this currency strength could force difficult choices, like scaling back military commitments overseas, signaling retreat, and encouraging adversaries.

Compare this with the political benefits of a depreciated dollar, which offers short-term political gains but creates long-term vulnerabilities. A weaker dollar increases the competitiveness of U.S. exports by lowering their prices in foreign markets, potentially boosting manufacturing jobs and reducing trade deficits. Imports become more expensive, encouraging domestic production and lessening dependence on foreign goods. It also makes debt expansion easier: as the dollar declines, foreign investors might buy more U.S. Treasuries to hedge against their own currency appreciation, helping Washington to finance deficits more smoothly. Trump and his allies have emphasized these advantages, claiming that the dollar’s overvaluation—estimated at 20-25%—has weakened American industry. In the Rust Belt, this message has great appeal, providing a quick economic fix without tackling deeper issues like workforce skills or automation.

However, these gains are temporary and come with a high cost. A weaker dollar increases import prices, making everything from electronics to energy more expensive for consumers, which worsens inequality and reduces purchasing power. Multinational companies, earning over 40% of their revenue from abroad, see profits squeezed when converting foreign earnings into dollars. More concerning, ongoing dollar weakness damages global confidence in it as a safe store of value, speeding up de-dollarization efforts by countries like those in BRICS (Brazil, Russia, India, China, South Africa) and others. China, already encouraging the use of the renminbi in trade, might exploit U.S. policy mistakes to diminish dollar dominance. Over time, this could raise U.S. borrowing costs by 1% or more, adding $80 billion annually to interest expenses and limiting fiscal flexibility.

Framing the dollar’s value as a policy choice highlights its strategic importance. Choosing short-term export boosts through depreciation is like borrowing from future prosperity: it might help win elections but it risks undermining long-term leadership. Trump’s strategy—combining tariffs, Fed pressure, and deficit-financed tax cuts—undermines the core strengths of the dollar: fiscal discipline, central bank independence, and allied trust. Growing debt without limits, along with attacks on institutions, could initiate a “doom loop“ of instability. In a world of increasing geopolitical tensions, a weakened dollar encourages fragmentation, where alternatives like digital currencies or gold become more prominent, reducing U.S. sanctions power and military financing.

The long-term implications for U.S. global leadership are significant. A strong-dollar policy maintains our ability to influence global outcomes, from climate finance to security alliances. It keeps America as the essential nation, attracting capital, talent, and influence. Weakening it risks a gradual decline, similar to Britain’s post-imperial fade, when the pound lost reserve currency status. Developing countries, already struggling with dollar strength, could experience even more instability from U.S.-caused depreciation cycles, leading to resentment and alliances opposing American interests.

The dollar is weakening. Policymakers must resist the tempting call of devaluation and reaffirm that a strong dollar serves the national interest. This involves sound fiscal management, maintaining Fed independence, and promoting international cooperation to address the challenges of dollar dominance. By doing so, we protect not only economic benefits but also the core of American leadership in a uncertain world. The dollar’s future is our future—let us choose strength over short-term gains.

David Leblang is the Miller Center’s Randolph P. Compton Professor and director of policy research. He is also the Ambassador Henry J. Taylor and Mrs. Marion R. Taylor Endowed Professor of Politics and professor of public policy at the University’s Frank Batten School of Leadership and Public Policy.