The U.S. dollar is experiencing a sharp decline this year amid rising concerns over the economic fallout from potential new U.S. tariffs. The U.S. Dollar Index recently plunged below the 100 mark and hit its lowest level in three years. As such, Invesco DB US Dollar Index Bullish Fund (UUP Quick QuoteUUP - Free Report) , tracking the dollar index, has shed 7.2% over the past three months. 

The U.S. Dollar Index has dropped more than 4.3% since early April and is on track for its worst month in years. Coupled with March’s 3.2% decline, the dollar is headed for its worst two-month performance since 2002—and potentially its ninth-worst month since 2000 if current trends hold. This suggests investors’ waning faith in U.S. financial stability.

A Crisis of Confidence Hurts the U.S. Dollar

Flip-flop tariffs have eroded investors' confidence in U.S. assets, weighing heavily on the greenback, which was once viewed as a safe investment. The tariffs would inflate inflation and slow down the global economy. 

Former Treasury Secretary Janet Yellen described the decline as “a very unusual pattern” in a CNBC interview Monday, noting that investors typically seek refuge in U.S. Treasuries during uncertain times — a move that usually strengthens the dollar. This time, however, both Treasuries and the dollar are falling. “That suggests investors are beginning to shun dollar-based assets and question the safety of what has long been the bedrock of the global financial system,” Yellen said (read: ETFs to Play Amid Long-Term Yields' Best Week Since 1982).

Amid the tariff-fueled crisis, the ballooning U.S. budget deficit is raising concerns that the dollar’s supremacy could slowly erode. The U.S. budget deficit has grown to more than $1.3 trillion in the first half of the 2025 fiscal year — the second-highest six-month deficit on record, according to the latest Treasury Department data.

The dollar slumped even as U.S. bond yields surged — a rare divergence that analysts at investment bank Evercore called “highly abnormal.” Under normal conditions, rising yields attract capital inflows and strengthen the dollar but rising policy uncertainty and escalating trade tensions are rattling global investors.

Can Confidence Be Restored?

Restoring faith in the stability of the dollar may be difficult. Analysts argue that meaningful recovery in the dollar would require a de-escalation of tariffs and serious action from Congress to rein in the federal deficit, neither of which appears imminent.

What Does a Weak Dollar Mean?

A weak dollar benefits blue-chip companies, which derive most of their revenues from international markets. This is because a weak dollar has made dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive, thereby leading to increased profits. As such, companies having a higher percentage of international sales will likely outperform. But with the tariff talks in play, these companies might take a hit.

Commodities, emerging markets as well as gold mining stocks will get a lift from a weak dollar. A weakening dollar generally pulls in more capital into emerging markets, propelling the stocks higher for most emerging nations (read: 5 Best Commodity ETFs of Q1).

Given this, we have highlighted a few ETFs that will benefit from the current trend and are likely to do so as long as the dollar remains weak.

ETFs to Bet On

Invesco DB Commodity Index Tracking Fund (DBC Quick QuoteDBC - Free Report)

Invesco DB Commodity Index Tracking Fund follows the DBIQ Optimum Yield Diversified Commodity Index Excess Return, composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world. With an AUM of $1.2 billion, Invesco DB Commodity Index Tracking Fund trades in an average daily volume of 2 million shares and charges 87 bps of annual fees. 

iShares MSCI Emerging Markets ETF (EEM Quick QuoteEEM - Free Report) ) 

iShares MSCI Emerging Markets ETF offers exposure to large and mid-sized companies in the emerging markets and follows the MSCI Emerging Markets Index. It holds 1,190 securities, with Chinese firms making up 30% of the portfolio. India and Taiwan round off the next three spots with a double-digit exposure each. iShares MSCI Emerging Markets ETF charges 72 bps of annual fees and trades in an average daily volume of 34 million shares. It has an AUM of $16 billion and a Zacks ETF Rank #4 (Sell) with a Medium risk outlook (read: 5 Country ETFs Up At Least 20% in Q1 2025).

VanEck Gold Miners ETF (GDX Quick QuoteGDX - Free Report)

VanEck Gold Miners ETF is the most popular and actively traded gold miner ETF with AUM of $16 billion and an average daily volume of around 24 million shares. It follows the NYSE Arca Gold Miners Index, which measures the overall performance of companies involved in the gold mining industry. GDX holds 63 stocks in its basket. Canadian firms account for about 44.6% of the portfolio, while the United States (16%), South Africa (11.8%) and Australia (10.5%) round off the next three spots. VanEck Gold Miners ETF charges 51 bps in annual fees (read: How to Play Gold's Unstoppable Rally With ETFs).