Trump fueling a 'slow erosion of trust' in the US dollar

During his speech at the 2026 World Economic Forum (WEF) in Davos, Switzerland, U.S. President Donald Trump declared that the United States is "the hottest country anywhere in the world." But on Friday, January 23 — the last day of the event — reporting from Bloomberg News contradicted that claim. And Katie Koch, CEO of fund manager TCW Group, told Bloomberg that investors "are looking to diversify away from U.S. assets," adding, "I would kind of describe it as quiet quitting of U.S. bonds."

In an article published on January 27, The New Republic's Grace Segers warns that investors are slowly growing more concerned about the U.S. dollar.

"For more than 80 years," Segers explains, "the U.S. dollar has been central to the international financial system, in no small part because it is the primary global reserve currency. But as in politics, narratives are incredibly important in understanding stock market moves. The past week has seen the return of stories on the so-called 'sell America' trade — the idea that investors are hedging their bets by selling U.S. assets because they are worried about President Donald Trump's threats to the global economic order."

Segers, in her article, doesn't predict a dramatic collapse in the U.S. dollar, but rather, a possible loss in confidence over time.

"The role of the dollar is unlikely to be diminished in the immediate future, and its status as the global reserve currency is not currently under any serious threat," Segers notes. "But the instability of the Trump Administration could lead to a slow erosion in trust in the dollar, which in the long term — think years or decades hence — could reshape global monetary infrastructure."

Karen Petrou, co-founder and managing partner for Federal Financial Analytics, told The New Republic, "What it typically takes to be a reserve currency is a deep and liquid market — which the U.S. has unquestionably — clear rule of law, and policy predictability. And the latter two are a lot less clear these days…. If Trump not only says something, but then does it, you could see significant market turmoil — shock, panic. But so far, adverse market reaction seems to slow him down."

Stephen Kaplan, who teaches political science and international affairs at George Washington University in Washington, D.C., told The New Republic, "I think what we've been seeing is dollar hedging, or de-risking, but not de-dollarization."

Caleb Quakenbush, associate director of economic policy for the Bipartisan Policy Center, told The New Republic, "If there's less demand for dollars and fewer people abroad are holding dollars, those dollars don't flow back into the United States. And that can slow foreign investment in the United States."

Read Grace Segers' full article for The New Republic at this link.

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