The U.S. Dollar isn’t Dead, it’s Just Getting Started...

What Happened?

Two down, one to go.

Last week, president-elect Donald J. Trump warned foreign nations he would impose tariffs on their imports to the U.S.

Soon after, European Union president, Ursula von der Leyen told Europeans to ‘buy American’.

Around the same time, Trump warned Mexico to stop sending ‘refugees’ across the border. After a day of the mainstream press saying the Mexican president was a tough cookie, and not to be messed with… she agreed to close the border with the U.S.

Now Trump is warning the BRICS (Brazil, Russia, India, China, and South Africa) nations to not pursue developing a non-U.S. dollar trading currency.

If they go ahead anyway, Trump says he’ll impose a 100% tariff on their imports into the U.S.

How long will it take them to agree to Trump’s terms…?

Why it Matters

Our role here isn’t to cheerlead for Donald Trump, but nor is it to oppose everything he does.

Instead, our role is to give an objective take on what’s happening and why. If Trump’s policies make sense, we’ll say so. If they make zero sense, we’ll say so.

The key thing to remember with Trump is that anything can happen.

It’s also important to remember how government works. Normally, politicians make big and bold promises when they’re not in government. Then when they get into government, the bureaucracy will tell them certain things aren’t possible.

Inevitably, the politician will back down and do what they’re told.

Other governments know that. So normally, if one foreign government promises to go against the grain, or threatens to impose a tariff, the other governments know it will never happen ­— their bureaucrats to will to the other country’s bureaucrats, and they figure out a way to help them ‘save face’ and back down.

That’s not how Trump works… and foreign governments and bureaucrats know it.

That’s why the E.U. president said what she said…

It’s why the Mexican president said what she said…

And more than likely, it will be why the BRICS nations will be sure to make it clear they ‘have no current plans’ (or words similar) to develop a currency to challenge the dollar’s reserve currency status.

How it Affects You

Make no mistake, the power of the reserve currency is a big deal.

Whether intentional or unintentional, the policies of the government and Federal Reserve have an impact on the value of the dollar.

And the value of the dollar impacts America’s trade with the rest of the world. Not only that, but because the dollar is used at the basis for commodity prices and most cross-border trading, the dollar’s value effects trade even when America isn’t directly involved.

But over the past few years, many folks have gotten to thinking that having a weak currency is best because it makes exports cheaper, which is better for American business.

That’s a bad way to look at it. A strong dollar means American business can get better value for input costs to produce products and services, which will allow domestic companies to innovate and grow.

As long as America remains a place that encourages entrepreneurs, Americans and foreign citizens, companies, and countries will want to continue holding dollars.

That demand will only make the dollar stronger, and with more capital flowing into the U.S. that can only make an even brighter future for American capitalism.