A weaker dollar is now emerging as part of President Trump’s unconventional economic approach, marking a sharp break from decades of U.S. policy as BRICS countries continue to accelerate efforts to reduce their dependence on the dollar. At the time of writing, the currency is at a four-year low, down nearly 10% in 2025 and another 2% so far in 2026, the largest annual decline since 2017.
The weaker dollar that President Trump has hailed represents a departure from traditional Republican orthodoxy on currency issues, which has typically supported a strong dollar.
President Trump told reporters on Tuesday:
“I think it’s great. Look at the business we’re doing. The dollar is doing great.”
President Trump’s weak dollar policy and de-dollarization of BRICS
President Trump’s approach to the weak dollar, while controversial, is consistent with the BRICS’ de-dollarization efforts, which are gaining momentum on several fronts. Russia currently conducts around 90% of its intra-BRICS trade in its own currency, and the BRICS central bank purchased over 1,100 tonnes of gold in 2025, the largest increase in 70 years, indicating a major shift in reserve asset preferences.
The decline in the US dollar has been driven by several factors, including President Trump’s unpredictable approach to economic policy, particularly his concerns about the use of tariffs, and his frequent criticism of the Federal Reserve. The Fed continues to cut interest rates, pausing this week after cutting them three times in late 2025, and higher interest rates generally tend to lead to stronger currencies.
How does a weaker dollar benefit American exports?
The weak dollar has made U.S. exports more competitive overseas, providing tangible support to domestic manufacturers. When the currency is weaker, foreign buyers find American products cheaper, which can increase sales and employment in manufacturing across the United States. U.S. companies with significant sales overseas can also benefit by converting foreign currency profits into U.S. dollars.
The domestic tourism industry will also receive a tailwind from the weaker dollar. The country becomes more attractive to foreign tourists because they can buy more dollars in their home currency and use it for vacation spending, which helps hotels, restaurants, and other tourism-related businesses.
Treasury Secretary Scott Bessent sought to clarify the administration’s position on Wednesday, reportedly saying:
“The US has always had a strong dollar policy. But a strong dollar policy means setting the fundamentals right. If you have a sound policy, money will flow in.”
Mr. Bessent made the remarks a day after President Trump’s remarks, which markets interpreted as an attempt to reassure investors about the administration’s commitment to a strong dollar policy, which the United States has maintained as a cornerstone of its economic approach for decades.
BRICS countries promote alternative payment systems
BRICS plans to launch BRICS Pay by the end of 2026, a system that will connect member countries’ central bank digital currencies and bypass Western payment systems like SWIFT. The euro area has reduced its official dollar reserves to 56.92% from previous levels by January 2026, showing a clear trend of BRICS de-dollarization taking shape.
The timing of these BRICS de-dollarization initiatives coincides with a weaker dollar environment, raising questions about whether currency depreciation is accelerating the transition away from a dollar-based trading system.
The New Development Bank has also set a goal of making 30% of its loans in local currencies by the end of 2026 to reduce dependence on the US dollar. The China-Brazil currency swap agreement currently covers nearly 30% of bilateral trade, demonstrating how alternative financial mechanisms are being implemented in practice.
Russian President Vladimir Putin commented on the situation as follows:
“We are not rejecting the dollar, we are not fighting the dollar, but what can we do if they do not allow us to cooperate with the dollar? In that case, we will have to look for other alternatives, and that is what is happening.”
However, India’s External Affairs Minister S. Jaishankar offered a different perspective by saying:
“I don’t think we have a policy that will replace the dollar. Global economic stability is tied to the dollar as a reserve currency, and the last thing we want in the world right now is economic stability to be undermined.”
Risk of dollar depreciation
The disadvantages of a weaker US dollar are felt by American consumers and businesses alike, and they are significant. The price of imported goods has soared, contributing to inflationary pressures that affect both shoppers and manufacturers who require overseas parts and raw materials. The euro has appreciated about 13% against the dollar over the past year, making it significantly more expensive for Americans to travel to Europe.
Economists and market observers have traditionally viewed a country’s currency as a reflection of its global economic standing, and analysts often interpret sharp currency depreciation as a sign of eroding confidence in a country’s economic fundamentals. Those concerns about the dollar losing its global dominance have led to what traders call the “Sell America” trade that emerged in 2025, although foreign investors have not abandoned U.S. assets as widely as analysts had originally feared.
The administration’s acceptance of a weaker dollar also reflects the fundamental tension between supporting domestic industry through competitive currency valuations and maintaining the dollar’s status as the world’s reserve currency. President Trump’s stance on the weaker dollar raises questions about its long-term effects. In late 2025, the administration threatened to impose 100% tariffs on BRICS countries if they actively pursue replacing the dollar with a unified bloc currency, indicating geopolitical interests are at play.
Long-term impact on global currency markets
Bessent defended his administration’s economic policies, saying a reduction in the U.S. trade deficit should automatically lead to a stronger dollar over time. His comments suggest that Treasury is defining its dollar strength policy not only in terms of currency exchange rates, but also in terms of economic fundamentals that attract capital inflows to U.S. markets.
As BRICS countries continue to build alternatives to dollar-based systems, including the mBridge blockchain platform for wholesale central bank digital currency exchange, the ongoing BRICS de-dollarization movement represents a significant challenge to the economic influence of the United States that has existed since the end of World War II. BRICS’ de-dollarization efforts have accelerated in recent months, with member states testing multiple payment systems and currency agreements. Time will tell whether a weaker dollar truly benefits the United States, or whether the dollar’s loss of global dominance justifies these concerns, as these parallel trends continue to develop throughout 2026.
