Donald Trump’s second-term trade and other policies could be less stable than his first. One of Trump’s most durably and strongly held views has been that trade deficits drain American wealth. With that has come calls for a weak dollar, to fight deficits. But this month Trump seemed to flip to a strong dollar, even threatening tariffs against countries not using the dollar. He also tentatively endorsed a form of cryptocurrency that is attractive when the dollar is stable and widely used. This looks like a sudden reversal of a core position. What’s next?

Trump has long vilified the US trade deficit, from a 1987 Larry King interview, to a 2000 co-authored book, to comparing the deficit with China to rape in 2016. The most comprehensive way to reduce a trade deficit is a weaker currency. Indeed, several times earlier this year Trump complained the dollar was too strong. His trade and currency views have long fit together.

Now, maybe not. Early September saw Trump state opposition to Russia and Iran sanctions. He noted currency, “You’re losing Iran, you’re losing Russia . . . China is out there trying to get their currency to be the dominant currency.” Trump could just be looking for an excuse to lift Russia sanctions—he seems to like dictators. But Trump then vowed 100 percent tariffs for countries moving off the dollar, which would include Russia. This would be an extreme shift.

There are several explanations. The first is substantive: A drawback of Trump’s trade threats is potentially less dollar use. Less use would, in turn, drive up financing costs for the enormous budget deficits Trump both helped create and will inherit if he wins. And there are more downsides to a weak dollar, costs which may have caused him to rethink at least a bit.

But these costs have always been clear and Trump has for a long time still demanded the dollar get cheaper. Why change now? Two more explanations stem from another surprise—Trump’s flip from skepticism of cryptocurrency while President to increasing acceptance starting last spring. And this more recently went beyond a policy switch on crypto in general.

Trump in August and September progressively associated himself with a financial entity driven by his sons called World Liberty Financial. The central product seems to be stablecoins, cryptocurrency whose value is pegged to another asset. In this case the other asset is the dollar, which means a relatively strong and widely used dollar is required for World Liberty to prosper.

Trump’s endorsement could just be about campaign contributions. He’s received much support from the crypto sector during 2024. With World Liberty offering stablecoins, it’s far less risky than some crypto ventures can be. While important to his sons, World Liberty may be mostly virtue signaling to ensure more donations for Trump senior. The lack of information provided in the firm’s rollout last week is consistent with this angle.

But the third explanation is nerve-wracking. Trump has engaged in similar promotional efforts, such as for non-fungible tokens. They were hard to take seriously and this one may prove unserious. But if Trump is in fact committed to World Liberty, it would go all too well with his reversal on the dollar: the dollar must remain the incontrovertible global reserve currency for World Liberty’s pegged stablecoin to thrive.

This would be disconcerting on two grounds. The obvious one is Trump being tempted to rig monetary policy, through his Secretary of the Treasury and pressure on the Federal Reserve, to ensure a strong dollar, benefit World Liberty, and benefit his family. There are advantages to a strong dollar. But the best policy for the US is not determined by a President considering family financial gain. And this is no small policy to be warped—the dollar is arguably the most important international tool America has.

The broader problem would be worse. Reducing the trade deficit has been a cornerstone Trump goal. A strong dollar makes that harder, and many of his past comments show Trump understood this point. Yet long-standing calls for a weak dollar have become, out of the blue, effectively calls for a strong dollar. If the trade deficit is being deemphasized, for whatever reason, almost any Trump position can shift. A second Trump term could be even more chaotic than most expect.

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