Losing Faith in the Dollar?
The Quiet Retreat of Foreign Investors
❝ Faith in dollar-denominated assets has not returned to Trump’s second-term peak.
U.S. Treasury Data May Confirm a Confidence Crisis
Data that shows where U.S. Treasuries stand in terms of foreign buyers and sellers—a critical benchmark for confidence in dollar-denominated assets and Trump White House policymaking—is due next week. I’m expecting to see a flatlining that leans toward downward trends in net inflows going forward.
The latest Treasury International Capital (TIC) data for April showed net outflows of $14.2 billion, marking the first reversal after three consecutive months of gains.
An Update on the April Swoon: Dollar, Tariffs, and Investor Reaction
This data coincides with the U.S. dollar's sharp 10+% drop during what has been dubbed the April swoon, driven by President Trump’s announcement of reciprocal tariffs on nearly all trading partners. Yes, equities markets have recovered—a partial reflection of Trump’s twice-over TACO1 decisions to delay tariff implementation.
But in my view, the market rebound does not reflect a return of institutional confidence in U.S. dollar-denominated assets to levels seen at the beginning of Trump’s second term.
A Cautious Foreign Investment Community
Far from reloading their Treasury portfolios, central banks and collective investment managers—including mutual funds, ETFs, pensions, endowments, sovereign wealth funds, and insurers—are holding back.
They recognize, painfully, that the U.S. is still facing trillion-dollar deficits, rising debt service burdens, and a “big beautiful (fiscal) bill” that promises to drive deficits even higher. All the while, this chaotic administration continues to politicize trade policy and scramble to rebuild domestic manufacturing and investment. Trump may succeed, to some extent, in reshoring. But in the process, he has left the broader architecture of global trade in disarray.
Goldman Sachs Revises Rate Outlook—Three Cuts Ahead?
In a July 11th note to subscribers, Goldman Sachs updated its interest rate forecast:
Now expecting three consecutive cuts—in September, October, and December
Up from a prior expectation of just one cut in December
According to Goldman’s analysts, this revision reflects:
The Fed’s dovish tone in recent commentary
A more moderate-than-expected tariff pass-through
Signs of labor market softening
What Goldman left unsaid: Trump’s ongoing pressure on the Fed. Chair Powell has signaled a data-dependent path forward—but political pressure adds a new kind of uncertainty to the outlook. And when interest rates drop, inflation risk rises.
Be Careful What You Wish For
Trump may be determined to get his way—but this may be a case of be careful what you wish for. If confidence in the dollar erodes further, rate cuts may not be enough to stabilize the landscape.
The next inflection point won’t come from a single TIC data release or a Fed press conference. It will come when foreign institutions begin actively divesting from U.S. Treasuries—not just reducing purchases. That would mark more than a warning. It would be a withdrawal of trust.
Conclusion
Foreign investors are pulling back from U.S. Treasuries amid rising deficits, political pressure on the Fed, and tariff uncertainty under Trump’s second term. This retreat signals declining confidence in dollar-denominated assets and could mark a turning point in global trust in U.S. financial leadership.
Editor’s Note:
This essay contributes to econVue contributor Marsha Vande Berg’s ongoing series examining the macro risks—and opportunities—arising from President Trump’s determined efforts to reshape U.S. governance and the global economy under the MAGA banner.
To follow Marsha Vande Berg’s writings on econVue, please consider becoming a subscriber:
Marsha Vande Berg
Marsha Vande Berg is a thought leader with expertise in international business, public administration and global affairs. Her emphasis is Asia Pacific markets, governance, sustainability and technology.
TACO—short for “Trump Always Chickens Out”—was coined by a Financial Times journalist to describe Trump’s repeated tariff reversals. It has since become shorthand for his frequent policy U-turns.