The US dollar is experiencing a decline as the effects of tariffs begin to take their toll, according to Deutsche Bank’s recent analysis. As reported by Yahoo Finance, the US Dollar Index has reached a three-year low, trading below the 100 mark, signaling potential challenges for the US economy.

Read also: U.S. Dollar Rebounds Amid Tariff Confusion and Market Volatility

Market analysts note that the dip in the dollar’s value is causing international investors to shy away from US assets, which have become less attractive amid ongoing tariff disputes and volatile stock and bond markets. George Saravelos, an analyst, highlights that this shift indicates a global reconsideration of reliance on the US dollar, which has long been the dominant reserve currency. This could pose risks to US economic stability, as the dollar’s status has historically allowed the US to maintain high debt levels, supporting its economic growth.

Data from the IndexBox platform reveals that the US spending deficit reached $1.8 trillion last year, a figure that has been manageable due to the dollar’s stability and its role as a safe haven currency. However, with the current changes, the sustainable level of US fiscal deficits is under pressure, reducing the government’s ability to pursue expansionary fiscal policies.

Despite these concerns, there is potential for a silver lining. A weaker dollar could make US assets more affordable, potentially attracting foreign investors back to the market. This comes as the Trump administration’s tariff policies, initially expected to bolster the dollar, have instead contributed to its decline, reflecting a significant shift in investor sentiment.

President Donald Trump has previously expressed a desire for a weaker dollar to enhance US export competitiveness. However, the current trajectory suggests a more complex scenario, where a decline in US economic dominance might not align with the administration’s intentions.

Source: IndexBox Market Intelligence Platform