Economists blast the Trump administration for rooting for a weak dollar

Does America want a strong dollar or a weak dollar? Depends on who you ask.
(Image credit: iStock)

The editorial board of The Wall Street Journal skewered the Trump administration after Treasury Secretary Steven Mnuchin championed "a weaker dollar" in Davos, Switzerland, on Wednesday. "Someone ought to tell these fellows the history of strong- and weak-dollar presidencies," the Journal wrote in response to Mnuchin's comment to reporters that a weak dollar is "not a concern of ours at all."

The Trump administration's argument is that "a weaker dollar is good for trade" because it could potentially boost exports, making American-made items more appealing for foreign buyers. On the other hand, foreign goods would become more expensive to U.S. buyers and "Americans don't live in an economic bubble," The Wall Street Journal scolded:

[Americans] buy from abroad because other countries make things Americans want or need. U.S. manufacturers import components to produce value-added goods like machinery and aircraft that are exported. Dollar devaluation makes those imports more expensive, which undermines competitiveness vis-a-vis foreign rivals. Commodities like oil and copper are traded in dollars so a weak dollar requires more of them. This is good for dictators in places like Venezuela. For Americans, not so much. [The Wall Street Journal]

A strong dollar has traditionally been considered an indicator of a healthy economy. "You run the risk of not just talking down the dollar but talking people out of buying U.S. equities and U.S. bonds as well," High Frequency Economics' Jim O'Sullivan told Politico of Mnuchin's comments. "You can end up with higher interest rates and lower equity prices. It's really playing with fire."

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The Week's Jeff Spross disagrees, though, writing that "the strong dollar policy was a bad call" to begin with. Read why he thinks President Trump should go ahead and smash the dollar here.

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