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The Decline of the U.S. Dollar During 2017

Trammell and Hornak

Since the inauguration of Donald Trump in 2017, the value of the U.S. dollar has steadily declined. In the last year, the value of the trade-weighted U.S. dollar index has dropped from 127.25 to 117.50. This index measures the average of the foreign exchange value of the U.S. currency with those of our major trading partners. 

This graph represents the Broad Trade Weighted U.S. Dollar Index. Click on it to open in FRED

So what does this mean for the U.S. economy? While the decline in value of the U.S. dollar sounds like a bad thing, some economists believe that it is actually beneficial. One of the goals of the Trump administration has been to decrease the value of the U.S. dollar. By dropping its value, the U.S. is able to increase its exports, therefore fostering domestic economic growth. When the dollar value decreases, foreign countries can exchange their currency for more U.S. dollars. This makes the dollar more competitive in foreign markets and explains the expected economic growth.

Net Exports of Goods and Services of the United States. 

Obviously, however, there is a huge negative consequence for decreasing the value of the U.S. dollar. Goods and services now cost more for American consumers. What is good for the economy could be good for the consumer, because companies are getting more profit from exports which could then benefit their workers. However, the results of Trump's policy have largely benefited the companies more than the individual consumers. Some people have naturally profited from the success of their company. Which should be more important to policymakers: the companies or the individuals?

19 thoughts on “The Decline of the U.S. Dollar During 2017

  1. spencerc20

    It seems that when it comes to the value of the dollar, companies should be taken into account more than individuals because they are more involved with trade. Yes, American travelers will be upset when they go abroad and cannot get as much foreign currency, but the dollar having a decreased value will also lead to an increase in American tourism and spending within the United States from people living elsewhere. Maybe it shouldn't be the goal of an administration to decrease the value of our currency, but we shouldn't be but so fearful of it happening.

  2. calihanj20

    I think a natural side effect of the weakening of the US dollar will be a decrease of the US trade deficit, assuming other factors remaining constant. As stated in the article, there should be an increase in exports due to weakening the dollar, but I also think there could be a decrease in imports due to higher prices. If there are more exports and less imports the trade deficit should go down. Whether lowering the trade deficit is beneficial to the economy is up for debate, but it is something on which Trump ran, so that might be a goal of his.

    1. Cade Hornak

      Good insight. Yes, lowering the trade deficit is the goal of the Trump administration. The deficit has been gradually cut since he took office. However, we have still yet to see tangible side-effects of such policy.

  3. longa20

    To answer your question, I believe that individuals should be more important to policymakers as they are elected by the citizens to benefit them. It is also interesting how the trade benefits have an negative effect for consumers, as with many policies that we learned from the postwar boom also had negative effects.

  4. Jack Ware

    This is a very interesting question as there are advantages and disadvantages on each side. Taking a look at possible advantages, I believe that it is important to note similar cases in other countries like China whose currency has been devalued and has even been considered undervalued. This devaluation gives countries like China a strong advantage over the U.S in exports. Devaluing the U.S dollar would allow us to compete with China and strengthen our global presence in the export market.

  5. moraifa19

    This is interesting that the Trump administration is purposefully manipulating the price of the dollar to increase exports and therefore increase domestic growth. I wonder what Levinson would have to say about this considering he adamantly rejects the long term effects of government intervention to bring long-lasting benefits.

  6. the prof

    FRED has similar graphs for various other currencies. In particular, the Chinese yuan has risen steading in value, doubling over the past 20 years. Your shoes are likely no longer made in China. That's an inconvenient truth in Washington – talk of a weak yuan goes back to the Bill Clinton's era, it's not new.
     
    Who wins and who loses from a stronger dollar? You need to look at the data, the most recent are at the BEA web site. Our biggest exports are aircraft and parts, automobiles and parts, and agricultural commodities. Lots of chemicals, too. Imports?
     
    Now the US economy is running full-out. So if auto production is to rise, those workers have to come from some other part of the economy. If imports fall, what makes up the difference? This is one of the hard parts of macro, micro responses don't necessarily add up in the expected manner, because for everything that rises as a share of the economy, something else has to fall.

  7. myerse20

    This is extremely fascinating to me. First of all, I hadn't considered that a President's election would affect the value of the US dollar, but it makes a lot of since. When I read that at first, I thought it was going to be because of a failure of Trump's policies. Turns out, it is the exact opposite. The concept of wanting a lower value on the US dollar confused me at first, but y'all did an excellent job explaining the reasoning behind it. I still believe that individuals should be more important to policymakers, but I can clearly see the benefits in supporting corporations, too. Very interesting blog post!

  8. Jimmie Johnson III

    This data is very interesting, especially if you remember how Trump's presidential campaign was focused on putting the american person first, this data proves he is actually hurting the people rather than helping them. Also, it is interesting he is affecting the dollar to have it support companies through exports because of Trump's business background. Could this data prove that Trump is using the Presidency to help his businesses and if so, is this ethical of the president?

    1. Cade Hornak

      One should note that some consumers who work in companies do benefit from this new policy, but yes on the aggregate, this policy hurts the individual. Unfortunately, this data cannot determine whether the companies that benefit most are large corporations with whom Trump works directly or the small businesses whom Trump vowed to help during his campaign. If the former is true, it does pose an interesting ethical question.

  9. hallk20

    This data is really eye opening, as I never would have imagined that decreasing the value of the dollar could be called a good thing. This does seem to go along with the campaign promises of Donald Trump, as he claims he wants to strengthen American businesses, rather than directing wealth towards individuals in society. This idea reminds me of the concept of trickle down economics, where people claim that cutting taxes and putting money into the hands of the wealthy and the big corporations, that some of that wealth then will trickle down to the middle and lower class. It makes me question the state of the middle and lower class as we wait for the effects of this to reach them. It will be interesting to see the long term effects of the new tax plan recently passed in congress and how that will effect the value of the dollar and the economy as a whole in years to come.

  10. Katie Paton

    Prior to this blog post, I would have thought that the decline of the US dollar meant that our economy was suffering. I find it odd that even though the value of the US dollar has declined since the election of President Trump, it is still way above the value of the US dollar during the recession. Though Trumps administration may be pleased that they have lowered the value, it seems that the individuals are being left behind which is alarming as we are just a few years away from entering the work force. In my sustainability class we discussed corporations giving back to local communities and it will be interesting to see if that increases more as their profits increase with the decline of the US dollar.

  11. bearupk20

    To me, it is interesting to see how a president's campaign and ideals can change something as significant as the value of the U.S. dollar. Trump is very pro-business and this blog post did a good job of explaining how the declining value of the U.S. dollar benefits business. Allowing exports to be more competitive in foreign trade really does help U.S. companies grow and increase their productivity, and it will be fascinating to see how the results from this will seep into the rest of the economy.

  12. Lauren Fredericks

    It's interesting to see the value of the U.S. dollar drop so quickly after Trump announced his plans to put this goal in motion. From my perspective, it seems as though politicians only have so much over the economy because of its hundreds and thousands of variables. What has President Trump done specifically to make this goal a reality?

  13. clintong20

    This concept is very interesting. The U.S dollar seems to determine the play of political and social approval. I do know that 45 has the intentions of keeping American business at home, so why has his administration now become so invested in foreign markets and in full neglecting of citizen dollars?

  14. moraifa19

    This was very interesting to see the workings behind goals of particular political parties, that we hear in debates and and in press briefings, come to light. Reducing the value of the dollar will make imports more expensive and increase US exports to foreign buyers, hypothetically giving back the lost jobs that Trump had promised in his campaign. But what is to be said for the global loss of the US not remaining at the equilibrium level, and stealing labor intensive work from other countries who are abundant in it.

  15. Chris Surran

    This post is very interesting. In general, I think it will be interesting to track the long term impact these policies will have on our rGDP, as we have learned that imports (and not exports) are most important in helping a country achieve long term growth.

  16. clintong20

    I want to, once again, touch very briefly on whether the effect of the U.S dollar is based solely off of foreign affairs. As Trump famously embodies that concept of a "stay at home economy", can we craft the value of our dollar here, strictly at home?

  17. alisonw20

    By benefiting the company, the workers will at the least benefit indirectly, initially. At first wages will not rise because no company would increase wages due to a slight rise in demand. However, if this trend were to last over time, then companies would eventually raise wages. This means that workers will eventually benefit from the decline in the strength of the US dollar.

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