From Goldman Sachs research, this is Allison Nathan. Welcome to Top of Mind, a podcast that explores macroeconomic issues on the minds of our clients.

In this episode, we're talking about the dollar.

It's the world's most important currency, underpinning much of global trade and finance.

And it's also been getting stronger and stronger for some time now.

On the one hand, that's a good thing because a country's currency typically reflects the relative strength of its economy and the appeal of its assets. For that reason,

since the mid-1990s, presidential administrations have actually embraced a strong dollar policy.

But on the other hand, a stronger dollar makes U.S. exports more expensive for the rest of the world.

This harms the competitiveness of U.S. companies trying to sell their

products abroad and ultimately worsens the U.S. trade deficit, a measure that President Trump views

as encapsulating all that's wrong with global trade policies, which he thinks leave the U.S.

at a serious disadvantage. So it's not much of a surprise that President Trump is concerned about the

strong dollar today. Today, you see this tweet, the president calling for a lower dollar in effect.

That's just not something typically you've seen presidents do in the past. It's also no surprise

that currency has now become a new front in the U.S. China trade war. Just weeks ago, the U.S. Treasury declared China a currency manipulator, a designation last used

in 1994, which implies that a country is deliberately weakening its currency to boost its competitiveness.

And this on the heels of China allowing the yuan to move to its weakest point against the dollar in a decade.

They devalue their currency. They have for years. It's put them at a tremendous competitive advantage.

Given all this, the question of whether the U.S. government should, could, and would begin to actively manage the dollar,

and whether these actions could precipitate a global currency war is top of mind.

To help answer some of these questions, we first turn to Joseph Gagnan.

He's a senior fellow at the Peterson Institute for International Economics and a former Fed official

who has written extensively about currency conflict.

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