President Donald Trump's implementation of tariffs has caused the US dollar to decline unexpectedly and drastically. This resulted in increased costs for imports due to the combination of the tariffs and the weakened value of the dollar.

Throughout the year, the US dollar index has dropped by 4.7%, reflecting investors' concerns about the economic repercussions of the expanding tariff program. Trump's imposition of tariffs on various countries and industries earlier this year was followed by a surprising announcement of additional steep tariffs on several trading partners.

These newly introduced tariffs, which were higher than anticipated, led Fitch Ratings to predict a tariff rate of approximately 25%, the highest in over a century. Consequently, JPMorgan economists have raised the likelihood of a recession to 60%. The dollar plummeted by over 2% following the "Liberation Day" tariff announcement, highlighting the severe impact of these measures on the economy and markets.

Originally, it was expected that the tariffs would benefit the US economy and strengthen the dollar. However, the extreme nature of the tariffs unveiled by Trump has undermined this belief and is undermining the perceived "American exceptionalism" in the economy and financial sectors.

As companies are likely to pass on some of the tariff costs to consumers, prices may increase significantly. For instance, the auto tariffs alone could result in price hikes ranging from $5,000 to $10,000 per vehicle. Former Treasury Secretary Larry Summers estimated that these tariffs could cost a family of four around $300,000.

Moreover, the depreciating dollar will contribute to higher import prices from certain countries. For example, a 50,000 euro car from Germany would have a price tag of approximately $55,000 at the current exchange rate of $1.095 per euro, before considering any tariffs.