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Donald Trump\u2019s plan to force dollar dominance in global trade has a high risk of causing economic disruption that could ultimately weaken the US currency, according to a long-range scenario by a Commerzbank<\/a> AG strategist.\u00a0<\/p>\n In a note on Monday, Ulrich Leuchtmann, the bank\u2019s head of foreign exchange research, analyzed a theoretical chain of events that could play out in US financial markets if Trump\u2019s threat to impose 100% tariffs on countries that shun the dollar, a pledge made at a\u00a0rally in Wisconsin<\/a>\u00a0on Saturday, becomes reality.<\/p>\n In Leuchtmann\u2019s view, investors should pay attention to Trump\u2019s campaign promises. He warned that prohibitive tariffs could have the opposite of their intended effect. It\u2019s possible that the harsh policy would incentive countries to move away from the dollar, which would threaten the safe-haven status of Treasuries and \u201clead to massive dollar weakness,\u201d the strategist wrote. \u00a0<\/p>\n \u201cTrump now wants to change that and force dollar dominance. That changes everything,\u201d Leuchtmann wrote. \u201cIf the US were to impose prohibitive tariffs across the board, they would cause massive disruption to the global economic system.\u201d<\/p>\n To be sure, it\u2019s not uncommon for promises made on the campaign trail to not materialize. There\u2019s also countless calls over the years for the dollar to falter as the world\u2019s reserve currency that so far have been incorrect.<\/p>\n Leuchtmann, a veteran currency strategist with a career spanning more than 20 years, also acknowledged in his note that there are arguments for why the dollar would strengthen under a Trump presidency. This year, he\u2019s largely been bullish on the dollar.\u00a0<\/p>\n Other strategists, such as those at Morgan Stanley<\/a> and Deutsche Bank<\/a> AG, have previously argued that Trump\u2019s tariff platform and focus on driving US economic growth would result in a\u00a0stronger dollar<\/a>. To some extent, the range of scenarios articulated by market watchers underscores the difficulty of making predictions based on shifting political winds. \u00a0<\/p>\n While dollar dominance has lessened in recent decades, the US currency still accounted for 59% of official foreign-exchange reserves in the first quarter of 2024, with the euro second at almost 20%, according to the International Monetary Fund.<\/p>\n Former President Trump led Vice President Kamala Harris by 48% to 47% in a New York Times-Siena College\u00a0poll<\/a>\u00a0published Sunday. While within the margin of error, the result suggests that Harris\u2019 month-long rise in the polls may have stalled and Trump\u2019s support remains resilient.\u00a0<\/p>\n<\/div>\n\nRecommended reading:<\/strong>
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