The value of the United States dollar has declined by nearly 10 percent since early 2025, a drop that might normally ripple through the economy in dramatic ways.
So far, however, economists and other financial experts say the real-world impact on most American businesses has remained relatively muted, even as consumers continue to grapple with stubborn inflation and broader economic uncertainty.
The war in Iran has factored into an approximate 2% overall recovery of the USD since early March, according to S&P Global and other financial websites as of March 17. This is consistent with a typical safe-haven move but does not constitute a massive surge.
Currency fluctuations influence everything from manufacturing costs to tourism demand. The recent depreciation of the dollar has produced mixed outcomes, with advantages and drawbacks that often offset one another.
A weaker dollar generally benefits American exporters because it makes U.S.-made goods cheaper for buyers overseas. That can help manufacturers and multinational companies compete more effectively in global markets.
In practice, though, the advantage is often limited.
“A weaker dollar generally helps U.S. exporters and manufacturers since they can be more price competitive globally,” said Jeff Korzenik, chief economist for Fifth Third Bank. “But the picture is a little more complex.”
The value of the U.S. dollar has declined noticeably since the start of 2025, but the drop is not unprecedented. The dollar fell about 11 percent in the first half of 2025, the largest drop since 1973, and around 10 percent for the full year, according to Morgan Stanley.
Economists attribute the decline to several factors, including expectations that the Federal Reserve will cut interest rates, slowing U.S. economic growth, and shifting global investment flows, according to an EBC Financial Group report published in late January.
The U.S. Dollar Index fell below 97.0 in January 2026, reaching a four-year low. Analysis published on TradingKey.com on January 30 attributed the decline to the Federal Reserve’s policy shift toward rate cuts, accelerating global de-dollarization, geopolitical disruptions, and weakening U.S. economic fundamentals.
The U.S. dollar rose in 2024 against most of its peers by as much as 7 percent, according to a January 2025 report in Bloomberg.
Despite the 2025 drop in value, analysts emphasize that the dollar remains within a historically typical range. On a trade-weighted basis, the currency’s value after the 2025 decline remains close to its 2024 level and roughly in line with its long-term average against major currencies, according to a TD report in January 2026.
The drop in value has also coincided with increases in many other global currencies, from the euro to the Swiss franc. The price of gold has risen to nearly 60 all-time highs since January 2025. Its price is $5,020–$5,035 per troy ounce on global markets as of March 14.
“A weaker dollar is a two-sided coin,” Steve Sosnick, a market strategist at Interactive Brokers, told The Guardian earlier in 2026.
Impact of the U.S. Dollar’s actions
A falling U.S. dollar often benefits multinational companies, Sosnick added.
“If you have operations around the world and foreign currency revenue that will have a conversion advantage when you turn it into U.S. dollars, that will be good,” Sosnick told The Guardian. “On the other hand, it makes imported goods more expensive, and there might be some inflationary impact from that.”
Meanwhile, the Federal Reserve’s decision to moderately cut interest rates since September 2025 has eroded the dollar’s yield advantage over other currencies.
The Fed has also signaled the likelihood of additional easing, with many economists predicting another one to two rate cuts in 2026 (indications recently indicate only one rate cut is likely this year), although other factors, ranging from rising unemployment to the conflict in the Middle East that began in early March, will have an impact.
Lower U.S. rates make dollar-denominated assets less attractive to investors, pushing some to sell dollars in favor of higher-yielding currencies.
For many American manufacturers, the impact of a weaker dollar is complicated. Numerous companies rely heavily on components and raw materials imported from other countries. Imports become more expensive when the USD weakens, which can erode the cost advantage created by stronger export demand.
A softer dollar can also boost international tourism to the U.S. because foreign travelers find their money stretches further when visiting. That benefit tends to concentrate in specific regions and industries, particularly hospitality, travel, and entertainment.
Some businesses exposed to currency swings use strategies such as hedging or long-term supply contracts to reduce risk. Those tools can provide temporary protection against exchange rate changes, but they often carry costs and rarely offer permanent solutions, Korzenik said.
“Industries adversely impacted by a weaker dollar can get temporary protection from further declines through currency hedging and longer-term input cost contracts, but such protections often come at a price and are not permanent,” he said.
For consumers, the effects are often less direct. A weaker dollar generally raises the price of imported goods, which can contribute to inflation. Economists note, however, that the United States imports a smaller share of goods relative to its total economy than many other countries, which limits the overall inflationary impact.
There can also be indirect benefits for workers if a weaker currency strengthens domestic industries such as manufacturing. Those sectors often generate higher wages and create what economists call a multiplier effect, meaning each job supports additional employment in related industries.
While a mildly weaker dollar can help more U.S. businesses than it hurts, a dramatic decline changes the calculation. Korzenik noted that the dollar fell in the mid-1980s because of growing U.S. trade deficits and falling interest rates. That can also create broader financial risks.
Such a drop could deter foreign investors from buying U.S. treasuries and other financial assets, raising bond yields and affecting other forms of investment.
“That potentially forces the U.S. Federal Reserve to raise interest rates to defend the dollar, disrupting financial markets,” Korzenik said.
The Dollar Remains Historically Strong
Even so, the actual impact of the U.S. dollar’s recent decline has remained relatively modest, including in areas such as inflation, said Kevin K. Yousif, CFA, president and sole owner of Yousif Capital Management, LLC, a Michigan based investment advisory firm.
“If the dollar is weaker, that should make imports more expensive,” Yousif said. “I searched for (examples) of that but couldn’t find much proof.”
Yousif’s research included reviewing Consumer Price Index (CPI) reports in 2025 and early 2026. He didn’t see any obvious correlation between inflation and imports. In fact, the price of many electronics, which are generally manufactured overseas, has fallen, Yousif said.
“It’s not what you learned in Economics 101,” Yousif said with a laugh.
That pattern is not universal. Some lower-cost products, such as branded promotional items often manufactured in Southeast Asia, have increased in price. Research on tariffs and import pricing has consistently shown that the cheapest product varieties often experience the biggest price increases, he added.
Economic theory suggests that a dramatic drop in the dollar’s value could discourage foreign investors from purchasing U.S. government debt and other financial assets, potentially pushing bond yields higher and forcing policymakers to intervene, Yousif said.
Despite the recent decline, economists say the dollar remains historically strong in many respects. The exchange rate shift is only one of several forces shaping prices and business decisions across the U.S. economy, according to Antonio Doblas-Madrid, an associate professor of economics at Michigan State University.
The value of the dollar has fallen since early 2025, but it is not in a historically weak position,” Doblas-Madrid said.
Instead, he argues that shifting trade policies and the uncertainty surrounding tariffs may be having a larger influence on inflation and business planning.
“I think that is a bigger factor,” Doblas- Madrid said.
Tariffs and trade disputes can ripple through supply chains, altering where companies source products and how they price goods. That uncertainty has made it more difficult for businesses to determine whether recent exchange rate changes are temporary or part of a longer-term shift.
Even when exchange rates move significantly, companies often do not immediately adjust their prices.
“There have been many studies showing that changes in exchange rates do not instantly translate into changes in import prices,” Doblas-Madrid said. Businesses often wait to see whether a currency move is permanent before altering supply chains or pricing strategies.
The U.S. dollar also continues to benefit from its unique position in the global financial system. It remains the most widely used currency for international trade and is widely viewed as a financial haven during periods of geopolitical tension.
That dynamic has been visible in recent weeks as global markets reacted to military developments in the Middle East. In many conflicts, the currency of countries directly involved in military action weakens. Historically, the dollar has behaved differently, often strengthening during global instability as investors seek safer assets.
“If the dollar were truly weak, we would expect to see the U.S. trade deficit shrinking,” Doblas-Madrid said. “But we are not seeing that yet.”
That sentiment was echoed by Yousif, who indicated the USD rose in the first two weeks following the start of hostilities in Iran. That suggests global investors consider the U.S. Dollar as a safe-haven holding, similar to how the price of gold often rises during times of financial uncertainty or turmoil.
It was only a year ago that many investors were concerned about the impact of the U.S. government’s rising debt and sticky inflation, which became two widely referenced reasons for the dollar’s 9 percent drop in 2025.
“We learned (after the U.S. and Israel attacked Iran) that the U.S. Dollar still has that safe-haven status,” Yousif said. “In a moment of stress, it is still a strong (symbol).”
The United States has run persistent trade deficits for decades, Doblas-Madrid said. The last time the country recorded a trade surplus was in 1991, during the period surrounding the Gulf War.
Currency movements can take time to work their way through global supply chains, meaning the full effects of the dollar’s recent decline may not yet be visible.
At the same time, economists continue to evaluate how currency shifts interact with broader economic trends, including inflation, energy prices, and trade policy.
Some economists believe tariffs implemented in recent years may already be adding roughly one percentage point to inflation. Rising oil and gas prices have also contributed to household inflation.
“Tariffs and exchange rates both have an impact,” Doblas-Madrid said. “The question is not if inflation will rise, but how much.”
Even if exchange rates change, American importers do not automatically adjust their prices, Doblas-Madrid said. Numerous studies over the years have examined the elasticity and long-term trends of international trade.
Economists initially underestimated the level of trade that would increase between the United States and Mexico following the launch of NAFTA in the 1990s.
“Companies back then interpreted the exchange rate change as more permanent, so they were more willing to shift their supply chains and other plans,” Doblas-Madrid said.
Addressing the why and projecting near-term movement
Today, some supply chains have been reconfigured to route North American products through Mexico in the wake of tariffs, which has increased the value of the Mexican peso.
“I do think tariff policy and geopolitical agreements are a bigger force over the U.S. dollar,” Doblas-Madrid said.
Recent financial analysis suggests the dollar’s weakness may also be cyclical rather than structural.
A report by the Dutch financial institution ING Group found that the U.S. dollar index fell nearly 10 percent during 2025, its worst annual performance since 2017. Analysts attributed much of that decline to shifting trade policy, tariff threats toward allied countries, and criticism of the Federal Reserve.
However, the report concluded that global demand for dollar-denominated assets remains strong. Private investors, who hold the majority of foreign investments in U.S. markets, have largely maintained their positions.
The analysis by ING Group found no widespread evidence of dollarization. The dollar still dominates global trade, financial transactions, and international investment flows.
As geopolitical tensions have recently even pushed the dollar modestly higher again, economists like Korzenik and Doblas- Madrid and financial planners like Yousif believe the USD’s safe-haven status remains intact for now. However, they recognize that inflation, interest rates, global supply chains, and government trade policy may ultimately play a far larger role in shaping prices and economic conditions in the months ahead.
“We will see what happens over the next few months,” Doblas-Madrid said.
