Jonathan Levin, Columnist

King Dollar Won’t Follow Trump’s Tariff Playbook

Tariff backers suggest that currency offsets will make the inflationary impacts more muted. Maybe, but at what cost?

February 6, 2025 at 10:00 AM UTC

Jonathan Levin is a columnist focused on US markets and economics. Previously, he worked as a Bloomberg journalist in the US, Brazil and Mexico. He is a CFA charterholder.

Finding the balance.
Photographer: Chip Somodevilla/Getty Images

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President Donald Trump’s trade war is hard to justify when inflation remains a worry for so many households. One prominent theory among apologists is that currency markets tend to adjust to offset new duties, counteracting the potential impact on consumer prices at home. Treasury Secretary Scott Bessent advanced this point in a confirmation hearing before the Senate Finance Committee last month, part of a rebuttal to one senator’s concerns about inflation. It’s important to consider just how bizarre his logic ultimately is.

Let’s revisit Bessent’s exchange with Senator Ron Wyden, a Democrat from Oregon: