How the US could undermine its own currency—and why it matters globally

I’m a journalist. I’m trained to remain detached, especially when writing about politics. But the past few months have tested that commitment—because when Donald Trump returned to power, the US dollar began to slide. Fast.

Since January, the greenback has dropped more than 10% against a basket of major currencies—its worst performance since the oil shock of 1973. That’s not just market trivia. It’s wrecking household budgets, especially for those of us paid in currencies pegged to the US dollar. From groceries in Canada to rent in the UAE, the impact is direct, painful, and entirely out of our control.

1. The Invisible Tax of a Weaker Dollar

For most people, foreign exchange fluctuations are background noise. But for millions around the world—especially in financial hubs like Hong Kong, Singapore, and the Gulf—those fluctuations are deeply personal.

Hong Kong, for instance, maintains a strict peg between the Hong Kong dollar (HKD) and the US dollar. The peg has brought decades of monetary stability and global investor confidence. But it also means that anyone earning in HKD effectively lives at the mercy of the US Federal Reserve and the broader trajectory of the USD.

So when the dollar weakens, your salary weakens with it.

Let’s take a simple example. A Canadian dollar recently cost HK$5.84. That’s a sharp jump from the more typical HK$5.40 range. For someone transferring part of their HKD salary to a Canadian account—to cover rent, school fees, or family expenses—that 40-cent gap translates into a 7% hit on every dollar. On a HK$20,000 transfer, that’s HK$1,600 gone. Every month. That’s not just an FX nuisance. That’s one fewer grocery trip a week. That’s the electricity bill or a third of your housing maintenance fee.

2. Why the Dollar Is Really Falling

The recent slide of the US dollar isn’t due to a single cause—it’s a cocktail of market anxiety, fiscal mismanagement, and political volatility.

Since returning to the White House, Donald Trump has sent strong signals that he favors a weaker dollar. His advisors have revived talk of tariff expansion and hinted at pressuring the Federal Reserve for rate cuts to juice growth. Bond markets are rattled by ballooning deficits, a looming showdown over the debt ceiling, and investor concerns about the long-term credibility of US monetary policy.

In short: global capital is no longer as eager to hold US dollars.

The ICE US Dollar Index (DXY), which measures the dollar against six major peers (euro, yen, pound, Canadian dollar, Swiss franc, and Swedish krona), fell over 10% in five months. That’s the worst start to a presidential term in modern memory. Worse than 2008. Worse than COVID. Worse than Nixon-era inflation. And the weakness isn’t theoretical. Commodity prices—denominated globally in USD—are rising in real terms. For countries that import oil, pharmaceuticals, or wheat in USD, their bills just got bigger. For consumers, that shows up as imported inflation. It’s not just macroeconomics. It’s lunch, rent, and school fees.

3. The Global Class Hit Hardest by Dollar Declines

Here’s who really suffers when the US dollar dives:

• Middle-class expats and professionals earning in USD or USD-pegged currencies, but spending in appreciating ones like the CAD, AUD, or EUR. Their real incomes fall, but their obligations remain fixed.
• Foreign retirees living off USD-denominated pensions in Southeast Asia, Eastern Europe, or Latin America. When the dollar drops, their cost of living goes up—but their checks don’t.
• Overseas students and dependents relying on USD transfers from families. Their tuition, groceries, and transport costs suddenly require 10–15% more from home.
• Dual-income households where one partner earns in a softening USD and the other in a stronger local currency. Their financial planning gets thrown out of balance.

These are not hedge fund managers. They don’t have options contracts or forex hedges. They have remittance accounts, bank fees, and families. The dollar’s decline hits them hardest not because they’re irresponsible, but because they’re excluded from the protective tools available to institutions. They absorb currency shocks directly into their monthly budgets.

4. The Peg Trap: Why Some Currencies Get Dragged Down

It’s tempting to assume that people affected by the dollar’s fall should just “spend locally” or “diversify income.” But for those living in pegged economies, that advice doesn’t hold. Hong Kong’s currency has been pegged to the USD since 1983. The UAE dirham has followed a similar structure for decades. In these economies, monetary policy is effectively outsourced to Washington. Interest rates, inflation control, and even capital flows are indirectly governed by the US Fed.

When Trump pressures the Fed to cut rates—or Congress passes deficit-exploding stimulus with no offsetting revenue—the resulting policy loosens don’t just affect Florida or Ohio. They affect Shenzhen’s port workers, Dubai’s accountants, and Singapore’s logistics operators. The peg trap means these economies must import US monetary conditions—even if those conditions are a terrible fit for their domestic situation. Right now, that means importing inflation and asset bubbles.

5. Personal Stories, Policy Disconnects

The economic pain of a weakening dollar isn’t evenly distributed. It’s not felt by Wall Street or corporate America. It’s felt in the shopping carts of people trying to live responsibly. One Hong Kong-based couple shared their struggle: despite earning decent local salaries, they now need over HK$5.8 to buy one Canadian dollar—up from HK$5.4 just a few months ago. That 7–8% gap eats directly into their monthly family transfers. They’re not cutting luxuries—they’re cutting grocery runs.

It’s not a recession. It’s not unemployment. But it’s erosion. Silent, steady, unacknowledged. And it rarely shows up in US political discourse. American policymakers tout the benefits of a weak dollar for export competitiveness, but they ignore the collateral damage. They see it as a trade adjustment tool. But for millions abroad, it’s a destabilizing force that introduces volatility into daily life.

6. Exporters Cheer, But Inflation Creeps Everywhere

There are winners when the dollar weakens. US exporters benefit. Tourists find travel more affordable. Companies with large overseas sales book stronger foreign revenue when converted back into USD. But these gains don’t last long—and they come at a cost. A weakening dollar raises the price of imports. That’s bad news for businesses reliant on foreign inputs—like electronics, auto parts, or machinery. It also stokes inflation in developing economies, where energy and food imports are priced in USD.

For example:

• The Philippines, which imports 100% of its oil, faces higher fuel costs.
• Egypt, heavily reliant on US-dollar food imports, sees rising bread prices.
• Bangladesh’s textile factories, which import USD-priced cotton, are squeezed between rising input costs and weak foreign demand.

So while US exporters may temporarily benefit, much of the world is busy adjusting to higher bills and thinner margins.

7. The Trust Problem: When Currency Reflects Governance

Currencies are trust instruments. When people lose trust in a government’s ability to manage its fiscal and monetary affairs, the currency reflects that.

The US dollar has long enjoyed a special status because of its stability and predictability. But Trump’s return to power has introduced new uncertainty. Markets don’t just dislike unpredictability—they price it. A president who attacks the Federal Reserve, threatens trade partners, or weaponizes tariffs turns the dollar from a safe asset into a volatile one.

And that erosion of trust spreads quickly. Countries begin to question whether they should remain tied to the dollar. Investors rebalance toward other currencies. Households—like mine—begin to plan exits from USD dependency. That’s how global systems fray. Quietly, but decisively.

The dollar’s fall is a story of unintended consequences. While Trump’s team may view it as a tactical win for exporters or a short-term economic boost, it functions as an invisible tax on everyone living under the shadow of the USD—retirees, workers, families, and students. It’s also a warning shot. When global trust in US economic stewardship begins to erode, the damage doesn’t stop at Wall Street. It bleeds into shopping carts in Toronto, tuition payments in London, and fuel costs in Manila.

The White House may still believe that the world has no alternative to the dollar. But people living on the margins of this system—those who pay, but don’t get a vote—are already calculating alternatives. A world where the dollar is no longer king may still be distant. But if the costs of America’s monetary misadventures keep rising, that world will arrive not with a crash, but with a quiet shift—one grocery bill at a time.