(Kitco News) – Republican presidential nominee Donald Trump continues to make defending the U.S. dollar (USD) a central part of his platform as he told a crowd during a rally in Wisconsin on Saturday that if elected in November, he would do everything in his power to keep the USD as the world’s reserve currency.
“Many countries are leaving the dollar. They not going to leave the dollar with me,” he said. “I’ll say, you leave the dollar, you’re not doing business with the United States because we’re going to put a 100% tariff on your goods.”
The new warning from Trump follows months of debate between the presidential hopeful and his economic advisers on ways to punish countries who actively look for ways to conduct bilateral trade in currencies other than the USD. Along with tariffs, team Trump has explored export controls and currency manipulation charges, but thus far, the threat of tariffs has been Trump’s go-to way of putting trading partners on notice.
While speaking at The Economic Club of New York on Friday, Trump highlighted the ‘carrot and stick’ approach he is taking, telling companies that his plan “is that if you open your factory in Wisconsin, Pennsylvania, Michigan or Minnesota, you don’t pay a tariff tax, but if you move your production outside of the United States and send it back here… you will have to pay a very substantial tariff to get your product back into the country.”
Trump said the dollar has been “under major siege” for eight years and vowed to fight for its status as reserve currency amid the rising geopolitical and economic strength of the BRICS bloc.
The Wisconsin speech was notable as the state is one of the critical swing states in the race between Trump and Democratic rival Kamala Harris.
According to a Bloomberg News/Morning Consult poll released last week, Harris leads the state by 8 percentage points, which represents her strongest showing among the seven battleground states included in the poll.
As for Trump’s focus on the USD, while it’s true that dollar dominance has declined in recent decades, the dollar still accounted for 59% of official foreign exchange reserves in the first quarter of 2024, with the euro second at almost 20%, according to data provided by the International Monetary Fund.
According to Hao Hong, chief economist partner at GROW Investment Group, Trump's threat to impose a 100% tariff on countries that spurn the USD is a “lose-lose” situation for both America and China.
“The U.S. dollar is a sort of privilege that the U.S. economy has been enjoying, and it’s sort of a liquidity tax on the rest of the globe, so I’m not surprised to see this kind of threat,” Hong said during a Monday interview on CNBC’s Street Signs Asia.
“Because the Chinese export sector has been so competitive, it’s been a driving force in lowering global inflation,” Hong said. “If you put a 100% tariff on Chinese exports, for example, one could only imagine how high the U.S. inflation is going to go,” he added, noting that much of the U.S.’s trade deficit would shift to allies like Mexico and Canada.
For China, Hong said implementing such high tariffs would hurt its exports at a time when growth is already stalling, and the country’s manufacturing sector has been suffering from overcapacity.
According to Andrew Tilton, Chief Asia Economist at Goldman Sachs, the tariffs Trump has already proposed for Beijing, including a 60% increase on all Chinese imports, would knock 2% off China's GDP.
