A wave of volatility destabilizes global markets
On April 17, stock and government bond indices stabilized after a sharp decline. This turmoil was a direct result of the trade war launched by US President Donald Trump. Although markets attempted to stabilize, these policies could have lasting effects on the global financial system.
Since the tariffs began, major companies have struggled to forecast future production costs and profits. The volatility of political decisions has made accurate estimates more complex. Companies are no longer able to provide accurate financial guidance, creating a significant gap in investor assessments.
This chaos has affected the behavior of companies such as Walmart, United Airlines, and Delta, whose future forecasts have become more like guesswork than precise scientific calculations. Nevertheless, markets have responded relatively positively, with Walmart shares rising 10%, and airlines posting gains in early trading after releasing their quarterly results.
Volatile Earnings and Dual Scenarios
Not all companies have held back from issuing their forecasts, but many have opted for caution. According to FactSet data, nearly 70% of S&P 500 companies commented on their first-quarter earnings, while only three companies lowered their estimates.
It’s interesting that companies like United Airlines offered two different earnings scenarios. In a stable economic environment, United expects earnings per share to range between $11.50 and $13.50 for 2025. In a recession, it expects earnings to fall to a range of $7–9.
Delta Air Lines decided to retreat and withdraw its financial guidance. Walmart, meanwhile, chose to maintain its annual targets despite short-term pressures, affirming its confidence in its ability to adapt to business transformations.
Unexpected Fees Confound Financial Planning
Despite Trump’s promises to support domestic industries, the imposed tariffs have placed an additional burden on the manufacturing sector. At a time when companies like Walmart rely on imports from China, product costs have become more volatile.
Levi Strauss, the famous jeans supplier, warned in early April that its forecasts did not take into account the recent tariffs. Just two days later, Trump decided to reduce some of those tariffs. This erratic move has prompted analysts to consider developing new metrics such as “earnings before interest, taxes, depreciation, amortization, and tariffs” (EBITDAT) in an attempt to understand the changing impact on earnings.
The Dollar Remains King Despite Challenges
Amid this chaos, the debate over the fate of the US dollar as the global reserve currency has returned. The trade war has been accompanied by Chinese attempts to undermine the US currency’s status, a move supported by some members of the new Trump administration.
Despite these attempts, the dollar has withstood all historical challenges. It overcame the effects of the collapse of the Bretton Woods system, survived the rise of the Japanese yen and the euro, weathered the 2008 crisis, and was even used as a financial weapon against Russia in 2022.
Why does the dollar remain at the top?
Today, the dollar represents approximately 60% of global foreign exchange reserves. 85% of foreign exchange transactions are denominated in dollars, even though US trade accounts for only 10% of total global trade.
The dollar’s strength lies in a network of reinforcing factors: US military dominance, a stable legal system, and deep confidence in the independence of the Federal Reserve. Furthermore, the dollar provides superior liquidity that facilitates financial transactions around the world.
Even the New York-based CHIPS International Payments System processes $2 trillion in dollar transfers daily.
Hidden Costs to the US Economy
But hegemony does not come without a price. To meet global demand for the dollar, the United States is forced to continually borrow. Today, America’s foreign liabilities exceed $26 trillion, making it the world’s largest debtor nation.
This debt is not just a problem; it is a necessity that keeps the dollar on its throne. As economist Robert Triffin predicted in the 1960s, providing a global reserve currency requires inflating the U.S. deficit.
New Concerns from Homeland America
Members of the Trump administration have reopened the debate about the negative effects of this hegemony. Vice President J.D. Vance argues that the U.S.’s chronic trade deficit is caused by the influx of global capital to maintain the dollar’s strength. According to him, this deficit has led to the decline of the American manufacturing sector.
Stephen Merrin, chairman of the Council of Economic Advisers, asserts that excess demand for the dollar keeps the currency overvalued, weakening American competitiveness. He recently proposed imposing taxes on interest on bonds held by foreigners to reduce the dollar’s international appeal.
The End of the Dollar? Not Yet
Despite mounting criticism, the collapse of the dollar as a global currency does not appear imminent. Alternatives still lack the necessary infrastructure and reliability. The yuan, despite Beijing’s support, remains limited in its global reach.
So far, the dollar’s strength remains based on a network effect similar to that of major tech companies like Microsoft. Mistakes may be made, but a solid infrastructure makes abandoning the dollar a very costly option for any country or financial institution.
Ultimately, Trump’s trade war has directly affected markets, but its deeper implications relate to the dollar’s global standing. Despite attempts to challenge the “King Dollar,” no real competitor has emerged yet capable of dethroning it.
