Five ways Trump is destroying the world’s trust in the US dollar

Targeting the Fed’s independence | President Trump has repeatedly attacked and pressured Federal Reserve officials like Chair Jerome Powell and Governor Lisa Cook to lower interest rates to boost the economy. Concerned about the possible danger to the Federal Reserve’s independence, analysts stated that the action might lead to long-term economic instability and excessive inflation.  In 2010, then-Fed Chair Ben Bernanke cautioned that political intervention might result in destructive ‘boom and bust’ cycles and make inflation more difficult to control, which is not just a domestic problem. Global investors view the Fed and US Treasury bonds as financial safe havens. If they begin to distrust the Fed’s credibility, borrowing costs for the US government may rise, with global consequences because they are used to set asset prices worldwide. (Image Reuters)

Firing the chief of the Bureau of Labor Statistics | Earlier this month, Trump fired Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer after the agency reported that job growth in the country slowed to a near-halt. In a Truth Social post, he accused McEntarfer of being a political appointee manipulating job data. He then nominated EJ Antoni, the chief economist at the conservative Heritage Foundation, as the next commissioner. The move highlights the vulnerability of even the most reputable statistical institutions. Economic experts, former government officials and others criticised the move and stated that this would erode public trust in government statistics and make it more difficult for policymakers, investors and businesses to make decisions. (Image Reuters)

Letting the fiscal deficit balloon | The Budget Lab at Yale (TBL)’s analysis of Donald Trump’s ‘Big Beautiful Bill’ focuses on its economic consequences. Their estimates show the House bill is projected to add significantly to the deficit. According to TBL estimates, the bill would raise GDP by 0.6% in 2027 but cut it by 0.1% in 2034, with no dynamic impact on primary deficits within the budget frame. “The increase in debt and deficits drives up interest rates. By 2054, the 10-year Treasury yield is 1.4 percentage points higher than it would have been if the bill were not passed. By the third decade, the deficit as a percentage of GDP is 3.5 percentage points higher than in the baseline. The increase in net interest outlays accounts for two-thirds of the increase in the deficit in the third decade,” it said. (Image Reuters)

Weakening allies and strengthening China | Since taking office, Trump has imposed aggressive trade policies, including imposing steep tariffs on both allies and adversaries. This includes the recent 50% tariffs on goods from India, which took effect on Wednesday, over its purchases of discounted Russian oil. India claims it has been unfairly singled out for its trading relationship with Russia, and officials warn that as a result, the country will likely work more closely with Moscow and Beijing, The Guardian reported. Under the heat of economic pressure, PM Narendra Modi will travel to China this week to attend a summit hosted by Chinese leader Xi Jinping. Trump’s trade advisor Peter Navarro called on India to stop buying Russian crude oil and accused it of undermining international efforts to isolate Vladimir Putin’s war economy. Describing India’s dependence on Russian oil as ‘opportunistic,’ Navarro said if the country “wants to be treated as a strategic partner of the US, it needs to start acting like one.”  Ahead of the deadline of his 50% tariff threat for India ends, the Republican said, “We are going to have a great relationship with China…They have some cards. We have incredible cards, but I don’t want to play those cards. If I play those cards, that would destroy China. I am not going to play those cards.” Meanwhile, the US has continued to engage with Pakistan, including on counterterrorism efforts. (Image Reuters)

Interference in businesses, both American and foreign  | The Trump administration has openly considered acquiring stakes in major companies, including defence contractors like Lockheed Martin. The US government took a 10% stake in Intel and persuaded Nvidia and AMD to pay the government 15% of their revenue from select Chinese shipments in exchange for export permits. The Trump administration also took a stake in MP Materials, a rare earths company. It has also taken actions to halt offshore wind projects, which is 80% complete off the coast of Rhode Island by Denmark’s Orsted A/S. It is seeking to block the development of another project off the Maryland coast, which was scheduled to begin building next year. “I hope I’m going to have many more cases like it. I want to try and get as much as I can,” the US President said after announcing a 10% stake in microprocessor giant Intel. (Image Reuters)