The U.S. dollar index slid to 99.5 on Wednesday, extending its downward trend for the month and hitting its lowest level in three years. The move comes as investors digest a growing list of aggressive trade measures from President Donald Trump, which have heightened fears over the outlook for U.S. economic growth.
Dollar index slides to three-year low
The renewed pressure on the dollar followed the White House's announcement of a new probe into the imposition of tariffs on critical minerals—key components in industries ranging from energy storage to advanced manufacturing. The potential move threatens to reignite trade tensions with China, just days after Washington appeared to ease hostilities with temporary concessions on auto parts and electronics imports.
In addition to critical minerals, the administration has left in place threats of new levies on a broader swath of sectors, including copper, pharmaceuticals, and semiconductors. The lingering uncertainty surrounding U.S. trade policy has rattled both domestic and global markets, with economists warning that a prolonged tariff war could significantly impair cross-border investment and further weigh on U.S. productivity.
The dollar’s weakness was further exacerbated by a growing perception that the Federal Reserve may face increasing pressure to pivot toward a more accommodative stance in the face of geopolitical instability and signs of economic slowdown. Business leaders and market strategists alike are growing wary that the unpredictable nature of U.S. trade policy may tip the economy toward recession, sparking capital flight into foreign markets.
Soft inflation landscape abroad
Adding to the greenback’s woes was a soft inflation landscape abroad, with Canada, the Eurozone, and the UK all reporting cooler-than-expected consumer price data. While those figures might normally support dollar strength by lowering the case for foreign rate hikes, the overriding influence this week has been concern over U.S. fiscal and trade policies.
With trade tensions heating up and investor sentiment growing increasingly risk-averse, the dollar, along with U.S. equities and long-term Treasury securities, faced simultaneous selling pressure—underscoring the fragile state of confidence in the U.S. economic trajectory.
