Goldman Sachs Predicts Sharp Decline in U.S. Dollar as Tariffs Rise and Growth Slows

Key Takeaways

• Goldman Sachs warns that the U.S. dollar is at risk of a major decline.
• Tariffs and slowing GDP are weakening the dollar’s global position.
• Expect 10%+ depreciation against major currencies like the euro and yen.
• Foreign investor sentiment is turning cautious toward U.S. assets.
   

Goldman Sachs has issued a stark warning: the U.S. dollar may face a sharp decline in the coming months due to economic slowdown and a more aggressive tariff policy. The findings, published in the bank’s latest research report, signal growing global concern over the dollar’s long-term dominance.

“U.S. tariffs are expected to weaken the dollar as GDP growth slows,” the report states.

The shift in trade policy and falling GDP growth are creating a less stable economic environment, shaking investor confidence in U.S. assets.

Tariffs Could Drive Dollar Depreciation

The report explains that new tariffs — especially on critical imports that are difficult to replace — give foreign suppliers pricing power, forcing the U.S. to absorb higher costs. This weakens the terms of trade and places downward pressure on the dollar.

“The dollar should depreciate, rather than foreign currencies,” the report notes.

With the U.S. economy bearing more of the burden, the dollar may weaken significantly in 2025.

Trade Policy May Hurt Corporate Profits and Consumer Spending

Michael Cahill, senior FX strategist at Goldman Sachs, emphasized that the strong dollar was largely supported by the U.S.’s superior investment returns. However, this could change.

“If tariffs squeeze profit margins and reduce consumer real incomes, they erode the U.S.’s economic edge,” he said.

This shift could trigger a broader decline in investor interest and lower demand for U.S. dollars.

Forecast: Dollar to Fall Against Major Currencies

Goldman Sachs projects a potential 10% decline in the dollar’s value against the euro, along with a 9% drop against the Japanese yen and British pound over the next 12 months.

Foreign investors are beginning to pull back from U.S. assets, citing policy uncertainty and weaker growth prospects as key deterrents.

Why This Matters for Global Markets

The depreciation of the U.S. dollar could have far-reaching implications:

Higher import prices for U.S. consumers and businesses

Increased volatility in global forex markets

A potential reshuffle in global capital flows

As the global economy adjusts, investors, policymakers, and businesses will need to closely monitor U.S. fiscal and trade developments.