Trump Tariff Shock Deepens Dollar Slide, Global Capital Shifts to Euros and Yuan as Borrowing Costs Mount

Cross-border bank credit has surged worldwide, while cracks are widening in the dollar-centric system of international financing. As elevated U.S. interest rates drive up dollar borrowing costs, governments and companies have broadened their funding channels into euros and yuan, while central banks have increasingly diversified their reserve assets across currencies. The simultaneous decline in U.S. equities, Treasuries and the dollar following the tariff shock unleashed by the Donald Trump administration has also eroded the safe-haven premium attached to dollar assets. A prolonged decline in overseas demand would leave the United States contending with higher Treasury funding costs, diminished seigniorage revenue and mounting fiscal pressure.