We expect the US dollar to appreciate a bit further in 2025 as the US economy and stock market continue to outperform peers and president-elect Donald Trump brings in extensive tariffs next year. As widely anticipated, the Republican sweep in the November US election brought a broad-based dollar rally. Our judgement is that Trump will enact a 10% universal tariff and 60% on imports from China soon after his inauguration, which does not appear to be fully discounted by market participants (even if a lot of general optimism around the US economy and the dollar arguably is at this point). Combined with continued US outperformance (plus more disappointment on European growth and Chinese stimulus), we think the adjustment to higher US tariffs will lead to another leg higher in the dollar next year, taking the DXY index to ~110, near its 2022 peak. That might prompt more talk of a Plaza 2.0/Mar-a-Lago Accord, but we think that idea remains far-fetched.
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