How will the foreign exchange value of currency be affected, will the terms of trade for US increase due to their rising tariffs?
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That’s a super interesting question. Tariffs definitely shake things up.
At first, rising U.S. tariffs can actually strengthen the dollar a bit. Since we’re importing less, there’s less demand for foreign currency and more demand for USD. Plus, some investors see tariffs as the U.S. “protecting” its economy, which can bring money in and boost the dollar.
But over time, things get messy. Other countries usually hit back with their own tariffs, which can hurt U.S. exports and slow down growth. And if the economy starts to feel that drag, investor confidence can drop taking the dollar down with it.
As for the terms of trade, yeah, they could improve for a bit since import prices rise and domestic stuff gets more competitive. But if other countries retaliate or switch suppliers, that benefit might not last long.
So overall: short-term gains maybe, but long-term? Depends on how the rest of the world reacts. Trade wars are tricky like that.