Goldman Sachs Forecasts Further Dollar Decline Amid Escalating Tariff Risks

Goldman Sachs has upgraded its bearish view on the U.S. dollar, projecting further declines in the near term due to escalating risks from proposed trade tariffs. The bank notes that a potential 25% tariff on imports from key trading partners, including China and the European Union, could trigger retaliatory measures and disrupt supply chains, weakening the dollar’s appeal as a safe-haven asset. The DXY index, which tracks the dollar against a basket of six major currencies, has already fallen 3.4% since late December 2025, reaching 101.20 in early January 2026. EUR/USD has surged to 1.1380, while GBP/USD climbed to 1.2745, reflecting investor flight from the dollar amid uncertainty. The SPX has responded with a 2.1% rally in the same period, as lower dollar strength boosts multinational earnings and reduces the cost of dollar-denominated assets for foreign investors. The forecast comes amid heightened market sensitivity to U.S. trade policy shifts. Goldman’s analysis suggests that if new tariffs are implemented, the dollar could depreciate an additional 5–7% over the next 12 months, with the DXY potentially testing 96.00. This would significantly impact sectors reliant on global trade, including consumer goods and industrial manufacturing, where input costs and export margins are directly affected by currency volatility. Financial markets are adjusting accordingly. Treasury yields have seen slight downward pressure, with the 10-year note yield falling to 4.02%, while equities in export-dependent industries are outperforming. The shifts highlight the interplay between macroeconomic policy, currency value, and asset pricing, reinforcing the need for investors to reassess risk exposure in a trade-sensitive environment.