How a weakening greenback reshaped prices, tourism, and Caribbean economic life

The US dollar did not collapse in 2025. But it lost something just as important: its bite.

After years of global dominance, the greenback entered a broad decline that reshaped everything from supermarket shelves in St John’s to impacting visitor spending.  By the end of the year, the US Dollar Index had fallen sharply, reflecting a global recalibration driven by slowing US growth, shifting Federal Reserve policy, ballooning US fiscal deficits, and investor unease over America’s political and economic direction.

For Antigua and Barbuda and the wider Caribbean, this was not an abstract Wall Street story. It showed up in the cost of food, shipping, fuel, hotel margins, and how much visitors chose to spend once they stepped off the plane.

In 2025, we were reminded that even a softer US dollar can still shape small economies in powerful ways.

Why the Dollar Slipped in 2025

The US dollar’s decline in 2025 began with a loss of confidence in policy direction.

The slide began in January as markets reacted to a mix of trade shocks, fiscal unease, and shifting expectations about the future of US monetary policy. By mid-year, it had recorded one of its steepest first-half declines in decades.

Several forces converged. Early in the year, renewed tariff measures and trade threats unsettled global markets. These moves were widely viewed as inflationary and growth-damaging, weakening confidence in US economic management and triggering early selling of dollar-denominated assets. 

At the same time, expanding US deficits and rising debt levels added to investor unease about the long-term stability of US macro policy.

By mid-2025, the narrative had changed from “the dollar is unbeatable” to “the dollar is vulnerable.” That shift in sentiment helped turn what began as a policy-driven pullback into a sustained depreciation.

Table: US Dollar Movement, January–December 2025

Month	Dollar Index (Approx.)	What Was Happening
Jan	125	Dollar starts the year elevated but begins to weaken as trade and fiscal uncertainty grows
Feb	123	Early decline continues as markets reassess US policy risks
Mar	120	Trade and tariff shocks accelerate selling of US dollar assets
Apr	117	Confidence erodes further as fiscal and policy fears deepen
May	115	Dollar slides to multi-year lows against major currencies
Jun	113	First-half decline reaches its steepest point
Jul	120.53	Partial stabilisation as markets digest losses
Aug	120.98	Dollar remains weak, with only modest recovery
Sep	120.45	Pressure persists as rate cuts approach
Oct	121.17	Small rebound on short-term volatility
Nov	121.80	Late-year firmness, but still below early-year strength
Dec	~121	Year ends with the dollar weaker than where it began

Monetary policy movements by the Federal Reserve also played a role.  Interest rate reductions in the last quarter of 2025 confirmed that the era of higher yields relative to other currencies was ending, further eroding investor confidence.  

With growth improving in parts of Europe and elsewhere, and US policy risk rising, global investors diversified. Capital flowed toward non-US assets, while many large funds began hedging their dollar exposure, a process that itself added downward pressure on the currency.

Yet, as major analysts have emphasized, this was not a structural collapse of the US dollar. It remained the world’s dominant reserve and settlement currency, and it continued to attract capital during periods of global stress.

What 2025 represented was a prolonged cyclical weakening driven by policy uncertainty, fiscal strain, and changing global capital flows, not the end of dollar supremacy.

Imports, Inflation and the Cost of Living in Antigua and Barbuda

For Antigua and Barbuda, a weaker US dollar cut in an uncomfortable direction.

The EC dollar is pegged to the US dollar, which means the country inherits both its stability and its vulnerabilities. When the dollar weakens globally, Antigua does not gain export competitiveness the way flexible-currency countries do. Instead, it absorbs higher import costs.

That mattered in 2025 because almost everything consumed was imported. As the dollar weakened against the euro, the pound, and other currencies, goods sourced outside the US became more expensive. Combined with shipping costs, already elevated after years of global disruption and rising again, and the escalation of US tariff wars, pushed prices higher. Supermarkets, hardware stores, and pharmacies all felt the squeeze.

This was one of the main, though unspoken, drivers of the inflation Antigua experienced in 2025. Even when local demand was steady, movement in global currencies and freight costs pushed prices upward. It became more expensive to live, not because Antiguans were consuming more, but because the currency foundation for those imports was shifting.

How the Decline in US Currency Value Decline Impacted Tourism

The dollar’s decline also impacted tourism behaviour.

In theory, linked to a fixed exchange rate, Antigua’s prices stayed stable. Hotel rooms, tours, restaurants, and most visitor services are priced in US dollars or pegged to the EC dollar. So, US visitors did not suddenly see higher headline prices.

But their purchasing power changed. In real terms, their dollars did less. The effect showed up not in whether they travelled, but in how they spent. This is where discretionary spending patterns shifted.

The American still came, but once on the island, spending shifted: fewer private boat charters, fewer spa days, fewer art and jewellery purchases, for example. The result was a reduction in the flow of money into the small local businesses that depend on visitor expenditure.

At the same time, UK and European visitors enjoyed stronger currencies against the dollar. For them, Antigua felt more affordable. Their discretionary spending was often more robust, subtly reshaping the mix of tourism demand through the year.

The US Dollar: Still the World’s Financial Spine

Despite all this, the dollar remains the core of the global financial system as 2026 begins.

It is still the primary global trading currency, the dominant commodity pricing currency, the world’s main reserve currency, and the anchor of global debt, banking, and settlement systems. No other currency offers the depth, liquidity, legal certainty, and institutional trust that the dollar does. The United States still hosts the world’s largest consumer market and deepest capital markets. That makes the dollar more than a currency. It is infrastructure.

Even in 2025, when investors questioned US policy, they did not abandon the dollar. They hedged. They diversified. But they stayed inside the system.

Where BRICS and Latin America Fit In

The expanding BRICS bloc and growing Latin American engagement with alternative financial systems reflect a global push to reduce over-dependence on any one currency. Countries are experimenting with local-currency trade, alternative payment systems, and new development banks.

For the Caribbean, this matters. It opens the door to new sources of infrastructure and tourism investment, broader trade financing options, and long-term reserve diversification

But it does not replace the dollar. Even many BRICS-linked trade agreements still convert through it. BRICS is widening the map. The dollar still holds the compass.

Looking Ahead to 2026

As 2026 unfolds, the Caribbean sits inside a shifting global system.

A softer dollar means continued pressure on import prices. It means careful management of inflation. It means tourism strategies that speak not just to US visitors, but to UK and European markets whose currencies carry more weight.

For investors and currency traders, the era of easy dollar dominance has ended. Volatility is back. Capital moves more freely. But when global stress rises, money still runs to the greenback.

For small, open economies like Antigua and Barbuda, learning to navigate the space between dominance and economic diversification while managing our cost of living will define the next decade of survival and strategy.