Dollar credibility test after Trump’s 15% tariff threat
Trump’s new tariff threat is a “major credibility test” for the US dollar, which has “just blinked,” warns the CEO of one of the world’s largest independent financial advisory organisations.
The warning from Nigel Green of deVere Group comes as the world’s primary reserve currency slides 0.3% against a basket of major peers, while gold rises 0.6% to $5,133 a troy ounce, after President Trump unveiled a new 15% flat-rate tariff following a Supreme Court ruling that his previous trade measures exceeded executive authority.
Futures tracking the S&P 500 point to a 0.5% decline and the Nasdaq 100 to a 0.7% fall.
“The dollar’s move may look modest in percentage terms, but in currency markets 0.3% in a single session tied directly to a policy announcement is meaningful,” says Nigel Green.
“It signals that global capital is reassessing risk at the sovereign policy level.”
Trump is invoking the 1974 Trade Act to impose the new tariff for up to 150 days after the Supreme Court ruled that earlier emergency powers had been used beyond their lawful scope.
The legal confrontation adds a layer of institutional friction to an already sensitive trade backdrop.
“The issue is not simply tariffs,” explains the deVere CEO.
“It’s predictability. Reserve currency status rests on deep capital markets, rule of law and policy coherence.
“When there’s visible tension between branches of government over economic authority, investors price that into the currency.”
The timing is significant. The dollar’s dominance has already faced gradual erosion through ongoing dedollarisation efforts.
Several emerging and major economies have expanded bilateral trade settlement in local currencies, increased gold reserves, and diversified foreign exchange holdings over recent years.
“While the dollar remains dominant in global reserves and trade invoicing, incremental diversification has been underway.
“As some central banks are already trimming marginal dollar exposure and increasing gold allocations, episodes like this accelerate conversations about dedollarisation,” says Nigel Green.
“No single event dethrones a reserve currency. Credibility shifts through accumulation of doubt.”
Gold’s 0.6% rise to $5,133 underscores that dynamic. Central banks globally have been consistent net buyers of gold in recent years, and renewed trade escalation strengthens the case for hard-asset buffers.
A weaker dollar has direct and varied market consequences.
For US investors, currency depreciation can lift multinational earnings when overseas revenues are translated back into dollars, potentially supporting equity valuations in export-heavy sectors.
At the same time, it can increase import costs, adding to inflationary pressure domestically.
The CEO continues: “Dollar softness is a double-edged sword.
“It can boost the overseas earnings of US corporates, but it also raises the cost of imported goods and commodities priced in dollars, which feeds into margins and consumer prices.”
For global investors, the implications are equally notable.
“A falling dollar typically supports commodity prices, as most raw materials are priced in dollars. The rise in gold reflects that relationship immediately. Energy and industrial metals can be expected to follow if dollar weakness persists.
“Emerging markets often benefit in the short term from a softer dollar, as dollar-denominated debt burdens become relatively lighter and capital flows can rotate into higher-yielding jurisdictions. However, volatility tied to trade disputes can offset that benefit.”
Tech stocks, which have driven record highs on AI and tech enthusiasm, were among the weakest segments in early trading. European technology shares fell 0.9%, and US Nasdaq futures indicated a 0.7% decline.
“AI supply chains are globally integrated. Tariffs increase input costs, disrupt procurement channels and complicate cross-border collaboration. Equity markets are starting to reflect that,” says Nigel Green.
The 150-day window under the 1974 Trade Act provides a defined timeframe, yet markets extend beyond legislative calendars.
“Capital allocators operate on forward expectations. If investors conclude that trade policy can shift abruptly in response to legal setbacks, they demand a higher risk premium on US assets. The premium shows up first in currency markets.”
He concludes: “The dollar is showing vulnerability in a world where dedollarisation is already a strategic objective for some economies, even a 0.3% move tied to credibility concerns is a reminder that confidence is the foundation of reserve currency power.”