Trump threatens to sanction countries that do not use the US dollar, strategist: the outcome may backfire

Last Saturday, Trump threatened to impose a 100% tariff on countries that do not use the US dollar during a rally in the key swing state of Wisconsin. However, according to a report by Deutsche Bank on Monday, if Trump's plan to forcefully promote the dominance of the US dollar in global trade were to come true, it would likely cause economic chaos and ultimately weaken the dollar. Ulrich Leuchtmann, head of foreign exchange research at Deutsche Bank, analyzed Trump's series of statements. In his view, investors should pay attention to Trump's campaign promises, but punitive tariffs may have the opposite effect of what is expected. The strategist wrote, "Harsh policies may motivate countries to move away from the dollar, threatening the safe-haven status of US Treasury bonds and 'leading to a significant weakening of the dollar.'" Leuchtmann explained, "Trump wants to change the status quo and forcefully promote the dominance of the dollar. This will change everything. If the US imposes daunting tariffs, it will cause massive disruption to the global economic system." In fact, even Trump himself has acknowledged that US-led sanctions have weakened the position of the dollar in the world. On September 5th, he said, "I impose sanctions, and I lift sanctions as soon as possible, because sanctions will ultimately strangle the dollar and everything it represents." It is certain that presidential candidates often fail to fulfill the promises made during the campaign. Over the years, many have predicted that the status of the dollar as the world's reserve currency would be shaken, but so far, these predictions have been incorrect. Senior foreign exchange strategist Leuchtmann, with over 20 years of professional experience, also admitted in his report that there are reasons to believe the dollar will strengthen during Trump's presidency. He has been bullish on the dollar for most of this year. Other strategists, such as those from Morgan Stanley and Deutsche Bank, had previously believed that Trump's tariff policies and focus on driving US economic growth would lead to a stronger dollar. To some extent, the scenarios outlined by market observers highlight the difficulty of predicting based on the ever-changing political landscape. According to data from the International Monetary Fund (IMF), although the dominance of the dollar has weakened in recent decades, the dollar still accounted for 59% of global official foreign exchange reserves in the first quarter of 2024, with the euro in second place at close to 20%. A poll released by The New York Times and Siena College last Sunday showed former President Trump leading Vice President Harris with 48% to 47% support. Although this margin falls within the 3-point margin of error of the survey, the results indicate that Harris's long-standing surge in popularity in polls may have stalled, and Trump's support remains resilient