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Tariffs, Treasuries, and a Tumbling Dollar: The New Stagflation Threat
President Trump's 2025 tariff package – a 10% blanket import tariff rising to 11–50% on 57 countries – has jolted currency markets. The U.S. Dollar initially sold off alongside risk assets on the tariff announcement, as investors feared stagflation and eroding foreign demand for U.S. assets. Over the medium term, reduced imports mean fewer dollars abroad and fewer foreign purchases of Treasuries, forcing U.S. yields higher to attract capital. While the dollar's safe-haven status lent short-term support during market turmoil, persistent trade frictions raise the risk of a weaker dollar trend if global investors diversify away.