What Would a Dollar Crisis Mean for Your Wallet?

For decades, the U.S. dollar has served as the financial world’s storm shelter. Financial turmoil traditionally sends Treasury yields down (a sign people are buying U.S. bonds) and the U.S. dollar up. Yet in the aftermath of Donald Trump’s 2025 tariff announcements, investors were abandoning both—at one point, the greenback plummeted 1.7% in a single day while 30-year Treasury rates spiked to almost 5.0%—meaning people were fleeing U.S. government bonds, not seeking them as shelter from the storm.

There have been previous bouts of stocks and the dollar declining together, such as during a 2011 U.S. credit rating downgrade and the early days of the COVID-19 pandemic. But monetary policy experts fear this isn’t just a passing rainfall, that Trump administration moves antagonizing both the markets and long-time trading partners have generated a tsunami bearing down on global confidence in the American greenback—which took generations of monetary and fiscal policy to build.

“We are in the midst of dramatic regime change in markets,” Deutsche Bank (DB) analysts warned. Karl Schamotta, chief market strategist at Corpay, said on Bluesky that “confidence in the dollar may be collapsing.” Should that happen, every American would feel it in their wallet.

A Dollar Short

A crisis of confidence in the dollar is when global investors and foreign central banks question the stability of U.S. dollar-denominated assets. This goes beyond the usual fluctuations in currency exchange values; it would be far more fundamental.

Since the Bretton Woods Agreement of 1944, the U.S. dollar has served as the world’s primary reserve currency. Central banks worldwide hold dollars to back their own currencies, and the dollar has long been the dominant medium of exchange in international trade. At the end of 2024, about 54% of global foreign-exchange reserves were held in dollars, demonstrating the currency’s continued power, even as it has been declining in recent decades.

In the turbulence triggered by Trump’s tariff actions, Deutsche Bank analysts pointed to a “simultaneous collapse in the price of all U.S. assets”—stocks, bonds, and dollars. This suggests investors may be questioning the dollar’s foundational role in the global economy.

The dollar weakened against nearly every major currency despite rising U.S. interest rates, while gold prices surged to record highs. Should the trend continue, a dramatic drop in the dollar’s value would have immediate consequences for all Americans.

A Cheap Dollar Is No Bargain for Americans

A de-dollarization would have major effects for American consumers:

• Higher prices for imports: Even setting aside the higher direct costs from the Trump tariffs, electronics, clothing, cars, and appliances—the vast majority of imported goods—would become more expensive as the dollar’s purchasing power declined.
• Increased fuel costs: The global oil market is priced mostly in dollars, which means oil would suddenly be cheaper for other countries. This would likely increase global demand and therefore oil prices, in turn raising prices at the gas pump in the U.S.
• Higher interest rates: Mortgages, auto loans, and credit cards would become more expensive if foreign investors demand higher yields on U.S. Treasury bonds.
• Retirement savings challenges: Retirees and other investors would face both inflation eroding their purchasing power along with a potential decline in the value of their stocks and bonds.
• More expensive international travel: American dollars would buy less abroad, making foreign vacations, education, and purchases significantly more costly.

Ways To Protect Yourself

While there’s no sugar-coating the effects on Americans if worldwide demand for American assets drops, there are strategies experts say can help protect you against dollar instability:

• Diversify internationally: Allocate part of your portfolio to foreign stocks and bonds in stable economies with strong currencies. The easiest way is through international exchange-traded funds.
• Consider alternative stores of value: Gold, which in 2025 hit record highs above $3,200 per ounce, and other precious metals can serve as hedges against dollar weakness.
• Pay down variable-rate debt: Reducing your debts, especially those with variable rates, would help protect you should interest rates spike.

The Bottom Line

The dollar’s position as the world’s reserve currency has given Americans significant advantages: lower interest rates, cheaper imported goods, and the ability to finance large government budget deficits at low interest. Even a gradual erosion of these advantages would affect everything from everyday purchases to retirement planning—and a massive dollar crisis could wipe these advantages away completely.