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Data shows the Dollar falls when shipping activity slumps.
The Dollar is tipped to fall further as President Donald Trump's tariffs lead to a collapse in imports in the coming weeks and months.
One of the most reliable ways of anticipating U.S. trade developments is to monitor shipping, and it is clear the U.S. is about to see a drastic reduction in imports.
"In the 3 weeks since the tariffs took effect, ocean container bookings from China to the United States are down over 60% industry-wide," says Ryan Petersen, Founder and CEO of Flexport.
"If the tariffs on China continue at this level, will we see a $2T hit to economic activity in our country, the failure of tens of thousands of American businesses, and the laying off of millions of employees?" he adds.
The Port of Los Angeles, which handles 31% of US imports, has reported a surge in shipping cancellations, as bookings from China to the U.S. plummet following the tariff hike.
Data from the Port of Los Angeles shows that from the week beginning April 20 to the week beginning May 10, TEU is set to fall 35%. TEU is a standard measure of cargo capacity.
The haemorrhaging of good imports follows the decision by the U.S. to raise import duties on Chinese imports to 145% in early April.
Above: GBP/USD hit a new 2025 high on April 28.
"Markets are waking up to the idea that the end, and reversal, of this phase of globalisation reshapes everything: savings and investments, capital flows and, of course, FX markets. US equities and the USD lie at the centre of this ecosystem — and will suffer collateral damage as it unwinds," says Mark McCormick, Head of FX Strategy at TD Securities.
A huge inventory cycle is about to commence in the U.S. whereby companies book imports for the all-important year-end period, and on current dynamics it looks as though U.S. retailers face significant challenges.
Apollo Management’s chief economist, Torsten Slok, says "Covid-like" shortages and significant layoffs in industries spanning trucking, logistics and retail lie ahead.
Given these developments, the prospect of a downturn in U.S. data is elevated, which is fuelling a 'Sell America' trade that includes the U.S. Dollar.
Analysis by analysts at Handelsbanken that compares periods of low shipping growth (≤-0.6% y-o-y) with high shipping growth (≥1.8% y-o-y) reveals a pattern of how Dollar weakness during periods of low growth.
"When shipping volumes decline significantly, the data shows that the DXY typically weakens, falling by approximately 0.3% y-o-y during these periods. In contrast, during strong shipping growth, the DXY tends to appreciate by roughly 1.1%," says Michel Gubel, an analyst at Handelsbanken.
Image courtesy of Handelsbanken.
The DXY refers to the Dollar index, a measure of U.S. Dollar performance and value based on a basket of the key USD exchange rates.
"This inverse relationship appears consistent and statistically significant across our entire sample period (2001 to present). This suggests that US growth is dependent on economic activity, even if imports rise," says Gubel.
The Dollar has fallen 8.0% already in 2025 as the shocks of Trump's trade policies reverberate, leading analysts to warn that the multi-year trend of Dollar appreciation has finally come to an end.
"The dollar bear market is finally here," say Tim Baker and George Saravelos, foreign exchange market strategists at Deutsche Bank.
The authors say the largest shift in U.S. trade policy in a century; the biggest pivot in German fiscal policy since re-unification, the most significant reassessment of U.S. geopolitical leadership since World War II, are amongst the drivers for the Dollar's trend-turn.
"Our view on all these factors is that the pre-conditions are now in place for the beginning of a major dollar downtrend," they add.