| The US dollar has been on the back foot since Trump's inauguration, with traders increasingly concerned about a policy mix that threatens the US economic outlook. What was once viewed as a pro-growth administration is now raising red flags across financial markets. Six things are weighing: Tariff Troubles - Market participants worry about fragile supply chains breaking under new trade barriers, potentially causing inflation shocks beyond simple projections Growth Agenda Sidelined - Promised tax cuts and deregulation have been overshadowed by protectionist policies and uncertainty, limiting economic upside Deficit Crisis Looming - With deficits already at 7% of GDP during full employment, bond markets are showing stress as Congress moves toward potentially 10% deficit spending Institutional Erosion - Dollar dominance relies on global institutions and rule of law that are being rapidly undermined, threatening USD's reserve currency status Immigration Uncertainty - Potential labor shortages in key inflation-controlling sectors like agriculture and hospitality as immigration policy remains incoherent Fed Independence at Risk - Recent legal precedents could potentially allow firing Federal Reserve officials, raising major concerns about monetary policy credibility Market Expectations Reversed - Sharp contrast between post-election optimism and current reality as policy appears driven by presidential instincts rather than cabinet restraint Consumer and Business Sentiment Falling - Sentiment indicators already showing steep declines while markets hold their breath for impacts on the real economy |
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