More on the Trump Administration's Dollar Policy

Last May, I asked, "Does the Trump Administration Want a Strong or a Weak Dollar?" That post was about a House hearing with Treasury Secretary Scott Bessent, and I didn't get an answer to the question posed in the title of my post.

Then in late January, in light of some comments from Trump, Bessent was asked about this issue again in a CNBC interview:

Question: One question people have right now is the appeal of US assets, especially when they look at the US dollar, which is trading at multi-year lows. I know the President sort of endorsed this as a good thing yesterday, but is it really a good thing if people are wondering if the dollar is the right place to be?

Bessent: Well, again, the US always has a strong dollar policy, but a strong dollar policy means setting the right fundamentals. And I think that with President Trump, with the one big beautiful bill, with our regulatory policies, we are making this the best place to come build your business, have tax certainty, regulatory certainty, energy certainty, and over time the prices on the screen can fluctuate over six months, a year ...

Question: You're not worried about dramatic weakness in the dollar?

Bessent: Again, if we have sound policies, the money will flow in. And we are bringing down our trade deficits, so automatically that should lead to more dollar strength over time.

Question: Are we intervening in the currency market right now? Strengthening the yen? Is that happening?

Bessent: Absolutely not.

Question: Is that something you're planning to do? There was word that the New York Fed was looking for prices.

Bessent: Again, we don't comment, other than to say we have a strong dollar policy. ...

Along the same lines, at a recent House hearing, Bessent was asked by Rep. Bill Foster (D-IL) – the same member of Congress who raised the issue last May – about the issue again (starts at 1:47:53 of the video):

Foster: Last time we spoke, I asked you a simple question that I didn't get an answer to, which is, does this administration support a strong dollar policy or a weak dollar policy? And frankly, as far as I've been able to tell, you're just all over the map on this. So could you answer the question, just simply, do you support a strong dollar policy or a weak dollar policy? And how would you score, whichever way you're trying to go, how you are doing?

Bessent: We always support a strong dollar policy.

Foster: Okay, that's interesting, because, you know,
last time we spoke, I presented a couple of graphs which presented the historic fact, the interesting fact, that every time you put a Republican in charge in the presidency, two things have happened, that the dollar has gotten weaker, and that manufacturing employment has dropped. And this has happened just during every Republican president in our lifetime. And the reverse has happened, every Democratic president, the dollar has strengthened, actually achieved your objective, instead of just talking about it. And since the time of that, actually, I think this plot here was the one we had then, when the dollar was only 8%, I think it's down about 10 and a half percent now. ...

What should we make of all this? Does the Trump administration want a strong dollar? Bessent keeps saying they do, and yet the dollar keeps going down. Are they, in fact, looking for a managed decline in the dollar like in the 1980s? I'm still not sure what's going on here.