Even biggest bully's lose if they fight all in the playground
Nov 15 (Reuters) -Even the biggest bully will lose if they try to fight everyone in the playground which seems to be the aim of the policies of new U.S. president whose threats are aimed at both friends and foes.
The plan to impose massive tariffs on goods imported into the United States has driven up the dollar's value, which has made a situation the new administration deems to be bad, much worse.
Fears of tariffs have also driven up inflation expectations which make it harder for the Federal Reserve to lower the U.S. interest rate, and the much stronger dollar is tightening monetary policy at the precise point that the U.S. central bank is trying to support the economy.
His words alone have exacerbated the situation - and his actual actions, which will likely fuel even bigger dollar gains, are still to come.
The problem for the U.S. is that the dollar is the global reserve currency and any war, whether military or trade, that fuels risk aversion boosts its value.
The rise seen now could be dwarfed by a surge from a trade war with the rest of the world, where the U.S. already has plenty of enemies and also seems determined to challenge its fiends.
If the world fights back, the battle could send the dollar - which reached 129.11 at the end of October - far beyond the long-term peak achieved at the height of the U.S. tightening cycle in 2022 at 133.36, leaving the U.S. in a much worse position.
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Trade weighted value of the dollar https://tmsnrt.rs/4hRBi0M
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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