Does President Donald Trump really want a weaker dollar?

“A strong dollar is in our national interest.”

The simple message from Robert Rubin, who became treasury secretary in 1994, marked a turning point.

For decades, American policymakers had complained about how the weak currencies of their country’s trading partners had made life difficult for domestic manufacturers.

Since then, they have either repeated Mr Rubin’s maxim, or avoided discussing the appropriate level for the greenback altogether.

Now things are up in the air. With trade policy increasingly protectionist and the dollar suddenly weakening, three decades of Treasury orthodoxy is in question.

The Trump administration is not speaking with one voice.

Scott Bessent, the new treasury secretary, has stressed that the strong-dollar policy is still in place.

But both President Donald Trump and J.D. Vance, his vice-president, have argued for a weaker currency, saying that the greenback’s strength is a problem for American industry.

Messrs Trump and Vance may, therefore, welcome the fact that their new, ultra-aggressive trade policies are ripping through currency markets.

The dollar has fallen to a five-month low against the Japanese yen.

Last week, the euro increased by 4.5 per cent against the greenback, its most rapid rise since 2009.

A continuation of such trends would represent a sharp change after more than a decade of dollar strength, with consequences for monetary policy at home and abroad, international markets and global trade.

Moreover, some in the administration want to go further.

In November Stephen Miran, now chair of Mr Trump’s Council of Economic Advisors, outlined a series of unconventional methods by which America might depress its currency, ranging from a multilateral agreement (under the threat of punitive tariffs) to imposing a fee on foreign owners of Treasury bonds.

For the moment, there is little sign of such policies being enacted, but Mr Trump is mercurial and open to persuasion.

On their own, tariffs can boost a currency: driving consumers away from foreign goods means that there is less demand for other currencies.

Yet if trade restrictions, and the uncertainty around them, seriously knock the American economy, the result may be lower interest rates, and therefore a weaker greenback.

In the short term, stockpiling may also put pressure on the dollar.

Businesses have scrambled to buy foreign goods ahead of the introduction of border levies.

America’s trade deficit in goods surged to $153 billion in January, up from $92b a year earlier. This buying frenzy is likely to continue for as long as the threat of still-higher tariffs looms.

The administration’s foreign policy has added fuel to the fire.

German ten-year government bond yields surged last week from 2.4 per cent to 2.8 per cent, driven by expectations that the incoming government will fund its rearmament with debt.

These higher yields are luring investors, boosting the euro in the process.

Meanwhile, European stocks are up by 14 per cent in dollar terms this year, while the S&P 500 is down by 2 per cent.

Even a modest reassessment of America’s stock market dominance could ding the dollar, with investors requiring it less.

What would a weaker greenback mean for the world?

The past decade has been especially difficult for emerging markets, where firms and governments borrow in dollars.

A slump would provide them with some relief.

In America the immediate impact would be felt most keenly by the Federal Reserve.

The country is less import-dependent than many others, but a declining dollar would, by driving up the cost of imported goods, complicate the already difficult task of managing persistent inflation.

Gita Gopinath of the IMF has estimated that a 10 per cent drop in the dollar adds 0.4-0.7 percentage points to American consumer prices.

The dollar has, for decades, shrugged off predictions of its imminent demise.

Treasuries are still the reserve asset of choice for the world, which supports America’s currency.

Yet a concerted push to weaken the dollar, especially using Mr Miran’s methods, would represent a stern test.

On March 6th Patrick Harker, president of the Federal Reserve Bank of Philadelphia, admitted that he was increasingly worried about the greenback’s role as the global reserve currency.

Little wonder. The government’s policies are already having a negative impact on it.

And no administration in modern history has been as sympathetic to the benefits of a weaker dollar.