US Dollar Could Rally 3% During A Second Trump Term: 'Far-Reaching Implications For FX Markets, Dollar'

The U.S. Dollar could rally 3% if former President Donald Trump wins re-election in November, Bloomberg reported, citing an analyst note from Barclays plc.

What Happened: The GOP front-runner is currently proposing a baseline 10% tariff on all U.S. imports and a levy of 60% or higher on Chinese goods if he wins a second term.

That plan — with less support for NATO (which Trump has also expressed) — could boost the value of the dollar's exchange rate by 2% to 3%, Barclays analysts say.

"A number of candidate Trump's flagship proposals across trade, fiscal and foreign policy amount to a structural break with the past, with potentially far-reaching implications for FX markets and the dollar," the analysts wrote.

Every additional 1% of GDP could add around 1% to 1.5% in upside for the US Dollar, they added.

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Why It's Important: The tariffs that Trump implemented in his first term, which the Biden administration has so far maintained, typically mean the cost of goods increases.

According to the Federal Reserve Bank of New York, the 2018 U.S. tariffs — taxes levied on imported goods — cost the typical U.S. household $419 per year.

A rise in the value of the US Dollar could be a key item for investors to watch.

Publicly traded companies that do a majority of their business in the currency could benefit while those who are impacted by other foreign exchanges could see some negative impacts.

The economy remains one of the biggest items on the minds of voters for the 2024 presidential election, according to polls.

Exchange-traded funds that track the U.S. Dollar could also benefit under a second Trump term, based on the comments from Barclays.

Two larger USD ETFs are the Invesco DB USD Index Bullish Fund ETF UUP and the WisdomTree Bloomberg U.S. Dollar Bullish Fund USDU.

During Trump's four years as president, the S&P 500 was up a total of around 67%, marking it one of the best four-year returns for the S&P 500 Index in recent history.

Under Biden’s first year, the S&P 500 gained 37.4% — the best one-year market return under a president since Harry Truman in 1945. Earlier this year, the index topped 5,000 for the first time.

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