The U.S. dollar recently touched a six-week low, signaling growing concerns about the health of the world’s largest economy. While global stock markets have shown some resilience amidst ongoing trade sagas, the greenback appears firmly on the defensive. What’s weighing down the mighty dollar? Here are five crucial factors, as observed by market strategists, driving its recent slide.

1. Escalating Trade War Impacts on the U.S. Economy

The primary culprit behind the dollar’s recent weakness is the escalating trade war waged by President Donald Trump’s administration. Signs of fragility are emerging across the U.S. economy as a direct consequence. This includes a looming doubling of U.S. duties on imported steel and aluminum to 50% starting Wednesday, which is set to further strain trade relations and economic stability.

2. Weakening U.S. Manufacturing and Jobs Data

Hard economic data is beginning to reflect the toll of trade uncertainty. U.S. manufacturing activity has contracted for a third consecutive month in May, a clear red flag. Furthermore, tariff-related snarls mean suppliers are taking longer to deliver goods, adding to economic friction. Market observers are now keenly awaiting upcoming factory order numbers and crucial jobs figures for further signs of economic strain.

3. Persistent Global Trade Tensions and Unresolved Disputes

Despite occasional glimmers of hope, the overall dynamic suggests that trade tensions are not truly improving. Financial strategists note that the dollar is “getting hammered widely” as trade disputes persist. Recent angry rejections from China’s Commerce Ministry regarding U.S. accusations of trade agreement violations underscore the ongoing and unresolved nature of these global conflicts.

4. Mounting Fiscal Worries and the “Sell America” Theme

Beyond trade, domestic fiscal concerns are also contributing to the dollar’s woes. A broad “sell America” theme has emerged, leading to a recent drop in dollar-denominated assets, including U.S. stocks and Treasury bonds. These worries are amplified by the Senate’s consideration of a new tax cut and spending bill, projected to add an estimated $3.8 trillion to the federal government’s already substantial $36.2 trillion debt over the next decade.

5. Ongoing Uncertainty in Trade Negotiations

The on-again, off-again nature of President Trump’s tariff threats and the protracted trade negotiations create a climate of high uncertainty. While trade talks with the European Union recently got back on track, and a U.S. trade court initially blocked some tariffs, an appeals court quickly reinstated them. This seesawing legal and diplomatic battle leaves markets guessing and contributes to the dollar’s instability, reflecting a lack of clear resolution in vital trade relationships.

The dollar’s performance is clearly entangled in a complex web of trade disputes, economic data, and fiscal policy. As these factors continue to play out, market participants will be closely watching for any shifts that could dictate the greenback’s next move.