Trump advisor warns: Is there a risk of a financial crisis due to the weakness of the dollar?

Trump advisor warns: Is there a risk of a financial crisis due to the weakness of the dollar?

In a recent interview, Stephen Miran, the White House's chief economic adviser, commented on his controversial plans to weaken the US dollar. Miran plans to impose fees on U.S. Treasury bonds, suspiciously hoping to devalue the dollar. However, this measure could have far-reaching consequences, including a potential financial crisis that could significantly threaten confidence in the dollar. According to Miran, a strong dollar is seen as the cause of the decline of American industry. Historically, U.S. debt to foreign investors increased while the trade balance was positive in the 1960s.

Miran bases his argument on the work of the Belgian economist Robert Triffin, who predicted the end of the international monetary system in 1960. The Bretton Woods system of 1944 pegged the dollar to gold before it was repealed by President Nixon in 1971 and the peg of currencies to the dollar ended in 1973. However, Miran misinterprets Triffin's ideas on both the need for the trade deficit and the supply of short-term U.S. government bonds to foreign central banks, which is criticized by experts including Tobias Straumann, a professor of economic history at the University of Zurich.

Impact on the US economy

A weak US dollar has both advantages and disadvantages. While it increases the competitiveness of US exports and attracts foreign tourists, it could also increase inflation in the US. The US dollar has gained over 40% in nominal terms since 2011 and is considered overvalued. According to a report by Bretton Woods The dollar lost almost 10% against major currencies between mid-January and early May 2025.

The close trade relations with Canada and Mexico in particular make these countries sensitive to dollar trends. A strong dollar makes U.S. exports more expensive for foreign buyers while imported goods become cheaper - benefiting U.S. consumers but reducing export demand. To reverse this trend, the Trump administration has two goals: maintaining the U.S. dollar as a global reserve currency and weakening the dollar to promote U.S. exports.

Trade negotiations and currency strategies

The currency issue is increasingly becoming part of ongoing trade negotiations, particularly with countries that view their currencies as undervalued. The U.S. Treasury Department's latest currency surveillance report identified seven countries being targeted: China, Japan, Korea, Singapore, Taiwan, Vietnam and Germany.

Additionally, the Trump administration is considering strategies such as the Mar-a-Lago Accord, which would involve swapping U.S. Treasury bonds for longer-term, lower-yielding bonds from foreign central banks. If this plan is implemented, it could not only dramatically impact market conditions, but also challenge the long-term confidence needed in the US dollar.

The consequences of these developments are still unclear, but the political and economic dimensions already suggest that the White House's decisions will have ripple effects far beyond national borders.

For more information about Stephen Miran's plans and their potential impact on the dollar and the U.S. economy, read coverage on the NZZ.