The U.S. and its wealthy peers are spending like they’ve got someone else’s credit card, and the greenback is paying the price.
Driving the news: The U.S. dollar had its worst first half of the year since 1973, a skid that experts say has been driven by President Trump’s tariff crusade and Washington’s lavish borrowing.
- Spooked by the soaring deficit, investors are backing away from U.S. Treasury bonds, dragging the greenback down with them.
- The president’s new tax and spending bill is expected to add almost US$3.3 trillion to the U.S. deficit over the next decade through a combination of tax cuts and higher spending.
Why it matters: The dollar is unlikely to lose its crown as the world’s reserve currency any time soon, but its recent slide is a warning sign that markets may not tolerate the endlessly growing debt that many wealthy countries have made a habit of piling up.
In Canada, the deficit has also been growing substantially; spending for core services like healthcare and pensions is expected to increase as the population ages, not to mention new priorities like hitting NATO’s 5% defence spending target. Some combination of tax hikes and budget cuts will be needed to help preserve investors’ confidence in our ability to repay our debts.—LA