The dollar’s future is in the balance as the US prepares for the 2024 presidential election, with much riding on the result. There is much conjecture on the potential impact of President Joe Biden’s reelection or the reappearance of Donald Trump on the currency’s course.
Impact of a Biden Victory
It is anticipated that the dollar will change if Joe Biden wins a second term. The dollar has strengthened because to Biden’s current policies, which combine fiscal stimulus with a watchful Federal Reserve. However, a re-elected Biden might have to contend with more stringent budgetary restrictions given the widening budget deficits and rising levels of public debt. Meanwhile, if inflation declines, the Fed may decide to reduce interest rates, which would weaken the currency’s strength that was predicted during Biden’s first term.
Furthermore, Biden’s foreign policy stance has prevented the dollar from depreciating as a result of other countries’ reserve diversification initiatives, especially when it comes to coordinating sanctions with allies like Russia.
Potential Scenarios under Trump’s Re-election
Unlike Biden, however, projecting the path of the dollar during a second Trump presidency turns out to be more difficult. In the past, the dollar fell after Trump’s 2020 loss and rose after his 2016 win. Citing historical patterns, analysts predict that a resurrected Trump administration might strengthen the currency by lowering taxes for corporations and the wealthy. In addition, even though they would be costly, higher import duties might strengthen the dollar by reducing imports and increasing domestic spending.
But there are still unknowns. The Fed’s efforts to control inflation may clash with Trump’s preference for low interest rates, which might devalue the dollar. Furthermore, in an effort to combat currency strength, Trump’s advisors support measures like levies on foreign purchases of US assets and extra sanctions on currencies that resist efforts to devalue the dollar—a tactic reminiscent of the 1985 Plaza Accord.
Results
The outcome of the presidential election will continue to impact the dollar’s future. The strength of the currency will depend on who is in the White House when it comes to tariff-driven dollar strength amid policy uncertainties, as demonstrated by Biden’s moderate fiscal posture and coordinated penalties, or Trump.
