• U.S. tariffs pose greater risks to the dollar and domestic economy than to global counterparts, warns Bank of America.
  • Retaliatory measures and policy uncertainty could dampen hiring, investment, and economic data, further pressuring the greenback.
  • Fiscal loosening may drive borrowing costs higher, complicating the outlook for currency stability.

A Vulnerable Greenback

Bank of America analysts have sounded the alarm on the U.S. dollar’s exposure to escalating tariffs, arguing that the domestic economy stands to lose more than its trading partners. The asymmetry stems from America’s outsized trade footprint—retaliation could disproportionately disrupt export demand and supply chains. While robust economic data might temporarily overshadow "policy noise," BofA anticipates bearish indicators as businesses delay hiring and capex amid mounting uncertainty.

"The U.S. trades more with the world than the world trades with the U.S.," noted one analyst, highlighting the currency’s sensitivity to tit-for-tat measures. Early signs of strain are emerging: Merrill’s April capital markets report flagged subdued corporate investment as tariff threats compound fiscal policy risks. Meanwhile, fiscal stimulus could backfire by pushing borrowing costs higher—a headwind for both growth and the dollar.

Data vs. Policy Tug-of-War

Market reactions now hinge on whether hard data can offset deteriorating sentiment. The Biden administration’s retention of Trump-era tariffs—and new ones targeting strategic sectors—has revived fears of 2018-style volatility. Private sector sources describe boardrooms "recalculating supply chains by the week" as rules-of-origin requirements shift. One manufacturing CFO, speaking anonymously, said tariff-related contingencies now consume "15% of working capital discussions."

BofA’s caution contrasts with its otherwise strong Q1 performance, where wealth management balances topped $4.1 trillion. The divergence underscores how policy shocks could undermine organic financial sector gains. With other majors like the EU weighing counter-tariffs, the dollar’s safe-haven status faces its stiffest test since the inflation surge of 2022.