In the U.S., a Strong Dollar Risks Renewing Calls for Protectionist Trade Policies

A very strong U.S. dollar will increase the risk of renewed trade tensions between Washington and its main trade partners, and will likely also intensify protectionist rhetoric in the United States ahead of the 2024 presidential election. A confluence of factors -- including Europe's dire economic outlook, the U.S. Federal Reserve's relatively aggressive interest rate hikes, and continued monetary accommodation in Japan -- have increased the dollar's value relative to other major currencies like the euro, the British pound and the Japanese yen. In trade-weighted terms, the U.S. currency remains just below its March 2020 peak, when the COVID-19 pandemic and safe haven flows sent the dollar soaring....