What will happen if the United States intervenes to weaken the dollar?

The US administration is increasingly considering interven tion to weaken the dollar. If this threat materialises: The effect on US industry will be positive, but the overall effect on US GDP will be negative, the dominant effect being the deterioration in the terms of trade (a rise in the relative price of imports). The United States’ shift from a strong dollar strategy to a weak dollar one therefore reflects a clear shift from a consumerist strategy to a mercantilist one; Other countries may react: the euro zone may adopt an even more expansionary monetary policy ; China may resume currency intervention, in which case there really would be a currency war.