Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
Donald Trump’s “breathtaking fiscal policy excess” and attacks on the Federal Reserve’s independence risk diminishing the US’s status as the ultimate safe haven for foreign investors, economists polled by the Financial Times have warned.
The poll, conducted by the Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business, found that more than 90 per cent of economists surveyed were either somewhat concerned or very concerned about the safe-haven role of US dollar denominated assets over the next five to 10 years.
The White House insisted this week that Trump’s economic policies will help cut US debt as it made a final pitch to win over fiscal hawks in the Senate and get the president’s flagship tax bill over the line.
But independent estimates, including by fiscal watchdog the Congressional Budget Office, indicate the measures contained in the budget bill — which Trump has dubbed “the big beautiful bill” — will push the US federal debt past its previous post-second world war high later this decade.
While the dollar usually appreciates during bouts of global market panic, the sharp sell-off in global equity markets following Trump’s unveiling of aggressive reciprocal tariffs on April 2 was coupled with a depreciation of the US currency.
The benchmark S&P 500 has since recovered and is at an all-time high amid hopes that Trump’s economic policies will not derail growth or fuel inflation in the world’s largest economy.
“The safe-haven assets appear to be [the] Swiss Franc and gold. In fact, [the] US looks like an emerging market, whereby policy uncertainty leads to rising risk premia that drive long-term yields up and the currency value down,” said Saroj Bhattarai at the University of Texas at Austin.
The dollar is trading at a three-year low amid concerns over fiscal sustainability and question marks over the Federal Reserve’s independence, as Trump continues to attack chair Jay Powell over his reluctance to cut interest rates amid concerns that the global trade war could push up inflation.
“Breathtaking fiscal policy excess is all but guaranteed, and that invites, though hardly guarantees, a change of heart about dollar assets,” said Robert Barbera at Johns Hopkins University.
“Marry that emerging reality to a de facto White House takeover of the Fed — through a Powell firing or the championing of a hack as a Powell replacement? That would move me from somewhat concerned to very, very concerned.”
Powell’s term ends in May 2026 and speculation is rife that Trump could name his pick to replace him early in a bid to undermine the Fed chair.
“Fiscal deficits, deliberate government actions to shrink the US financial account and devalue the dollar, uncertainty about succession at the Fed and questions about Fed independence all negatively affect [the safe haven status of the dollar],” said Anna Cieslak at Duke University.
US Treasury yields, which usually fall in times of market volatility, rose in early April. While the benchmark 10-year yield has since fallen to about 4.3 per cent, many economists polled believe it could soon hit 5 per cent — a level that would spark concern within the Trump administration.
Almost three-quarters of the survey’s 47 respondents tipped the yield on 10-year debt to rise above 5 per cent by the middle of next year.
“US Treasury [bonds] might not be a safe asset any more,” said Evi Pappa at Universidad Carlos III de Madrid. “Look at what happened at ‘liberation day’ to the US 10 year versus European yields.”
Economists have become more gloomy on the US economic outlook since they were last polled in March.
The median expectation is now for the world’s largest economy to expand by 1.5 per cent over the course of this year, slightly down from an estimate of 1.6 per cent in the spring.
Separate surveys of economists and US households and businesses show that forecasts for growth and confidence sank rapidly after the April 2 tariffs were announced, but have since partially recovered on the back of the trade truce between the US and China and rises in equity prices.
Economists have also become more hawkish on price pressures, with the median expectations for core PCE inflation this year moving up from 2.8 per cent in March to 3 per cent in June, amid expectations that Trump’s tariffs would be passed on to US consumers.
But only a few respondents believed there was a more than 50 per cent chance of core PCE inflation exceeding 4 per cent and the unemployment rate simultaneously exceeding 5 per cent at any point between now and the end of 2026.
A better than expected reading for consumer price index inflation in May boosted hopes that less of the cost of tariffs than feared would be passed on to American shoppers.
But the annual figure for core personal consumption expenditures inflation in May, published on Friday, rose slightly to 2.7 per cent, from 2.6 per cent the previous month.
