The U.S. dollar fell 1.3% on Tuesday, the most since last April, after President Donald Trump declined to say that the currency had fallen too much.

Speaking to reporters during a visit to Iowa to promote his economic record, Trump was asked if he was comfortable with the current value of the greenback and if he thought it had fallen too much after sliding 10% over the past year.

“I think it’s great,” Trump said of the weaker dollar. “I mean the value of the dollar, look at the business we’re doing. No, [the] dollar is doing great. You know it’s very interesting, if you look at China or Japan, I used to fight like hell with them because they always wanted to devalue their yen … you know that, the yen and yuan, and they’d always want to devalue it. They devalue, devalue, devalue. And I said, ‘not fair.’ They devalue, because it’s hard to compete when they devalue.”

The Dollar Index, which tracks the U.S. currency against six leading trading partners (but not China), fell the most in a single day since last April 10, when it tumbled almost 2% amid mounting trade disputes and U.S. threats to impose a 145% tariff on China. That same day, the S&P 500 slid 3.5% and the Nasdaq Composite sank 4.3%.

On Tuesday, the dollar also dropped to its lowest level since February 2022.

https://www.cnbc.com/2026/01/27/dollar-worst-one-day-rout-since-april-trump-says-hasnt-fallen-too-low.html

Gustavo Petro’s government criticized the enormous increase amid the trade war launched by Ecuadorian President Daniel Noboa, linked to border security reasons.

BOGOTA – The Colombian government on Tuesday rejected Ecuador’s decision to increase the tariff for transporting Colombian crude oil through the Trans-Ecuadorian Pipeline System by 900% , amid growing trade tensions.

The increase in the tax was announced on Monday by Ecuador’s Minister of Environment and Energy, Inés Manzano , who told local media that the rate would rise from three to 30 dollars per barrel. The measure has been in effect since January 23, according to a resolution signed that day.

“This decision by the Ecuadorian government is a new act of aggression against the people. Now they are unilaterally and arbitrarily raising the price of transporting crude oil through one of their pipelines, violating, once again, previously made commitments,” Colombian Minister of Mines and Energy Edwin Palma said in a statement.

Palma asserted that Ecuador’s “retaliation” is an " opportunity" to seek solutions that will prevent such actions in the future.

“I call on the affected oil unions to be creative and, before thinking about retaliation against our people, let’s think about how we can turn this situation into an opportunity to continue transporting and exporting that crude oil under different logistical conditions for the benefit of our country,” the minister said on X.

Palma asserted that while Colombia proposed a “dialogue” with its neighbor amidst the tensions, the response has been aggression, while expressing confidence that “diplomacy and frank dialogue will serve to return to normality for the benefit of our people.”

Ecuador justified the increase as a reciprocal measure to Colombia’s decision to indefinitely suspend the export of electricity to Ecuador since last Friday.

Both countries have imposed mutual measures since last week, when Ecuadorian President Daniel Noboa criticized Colombia for its lack of reciprocity in protecting the binational borders – where criminal groups linked to drug trafficking operate – in addition to a trade deficit of more than $850 million with Colombia.

Donald Trump style

Amid this border dispute, the president unleashed a tariff war with Colombia similar to the one used by his US ally Donald Trump in the fight against drugs and trade objectives.

Ecuador increased tariffs on Colombian products by 30% , and Colombia responded with an equivalent tariff on dozens of Ecuadorian products, which has generated concern among business owners in both countries.

The governments have said they remain open to dialogue and the search for a diplomatic solution , although no meeting date has been set.

Colombian President Gustavo Petro, the first left-leaning president in his country, said on Saturday he was willing to talk, but on the condition that they first discuss a joint policy for controlling seaports from which drugs are trafficked.

Meanwhile, Noboa announced on Monday investments of $230 million for the purchase of military equipment and technology to combat crime on the border, given that “other countries do not show reciprocity and do not act firmly,” he said in an apparent allusion to Colombia.

In an interview with a local media outlet on Tuesday, Noboa asserted that “the neglect of the (Colombian) border allowed for the expansion of drug trafficking” and specified that this situation “forced the State to invest more resources in the area.” He added that “this is not an attack on a sister country” and that “there are concrete facts: many drug traffickers have Colombian passports. We must confront organized crime together with resolve.”

In a message on X, he pointed out that dangerous criminals captured by Ecuador had “links” to Colombia. “They were all trying to replicate a business that had already worked for them in that country, but they made a mistake with Ecuador,” he wrote.

The extensive and porous border of more than 600 kilometers between Ecuador and Colombia has been used for years by illegal armed groups linked to drug trafficking, illegal mining, smuggling and human trafficking.

Ecuador has the highest homicide rate in Latin America, with a record of 52 murders per 100,000 inhabitants, according to the Organized Crime Observatory.

Noboa’s message about shared responsibility in the fight against drug trafficking “is anchored in the new national security doctrine of the United States,” said political analyst Wilson Benavides of the Central University.

Furthermore, it serves as “a distraction” to “blame the other side (…) because in light of the circumstances, unfortunately, the rates of insecurity and intentional homicides are not going down,” he added.

Gen. Michael Guetlein, head of the Golden Dome missile defense program, said the success of this effort depends on the ability to field defenses that are both scalable and affordable, including new directed-energy and other non-kinetic technologies aimed at lowering the cost of intercepting missiles. Speaking Jan. 23 at the AFCEA Space Industry Days conference in Los Angeles, Guetlein said the program’s central challenge is the economics of missile defense, specifically how the cost of each intercept limits how many interceptor shots the United States can afford to keep on hand. He described this as an issue of “magazine depth,” a term that refers to the number of interceptors available to respond to an attack. Missile defense systems with limited magazines can be exhausted quickly if an adversary launches multiple weapons or employs decoys. The thinking is that a system that can only handle a small number of intercepts does not provide credible deterrence. The “cost per kill” has to come down, said Guetlein. Current U.S. missile defense interceptors, which were designed for regional or limited homeland defense missions, cost millions of dollars apiece and are used to defeat much lower-cost weapons. Analysts have pointed out that this imbalance invites adversaries to overwhelm defenses through volume.

“We have the most exquisite capabilities on the planet, with a high probability of kill. They do not miss but they take forever to build. They’re exceptionally expensive, and as a result, I have very small magazine depths, because the cost per kill is so high,” said Guetlein. “I have to flip that equation.” Golden Dome is the Defense Department’s effort to design a next-generation homeland missile defense architecture capable of countering advanced threats such as hypersonic glide vehicles, modern ballistic missiles and fractional orbital bombardment systems. Unlike existing missile defense programs that rely largely on ground- and sea-based interceptors, Golden Dome envisions a multi-layered system that integrates space-based sensors, communications and interceptors into a unified framework.

Pressure to scale production

Guetlein told the AFCEA conference that what the Pentagon needs immediately from industry is the ability to scale production and deliver lower-cost ways to defeat missiles, including non-kinetic options. Analysts say space-based interceptors capable of maneuvering on orbit could be effective but would also be among the most expensive elements of any future architecture. Directed energy systems, including lasers and neutral particle beams, are among the concepts Guetlein has highlighted as potential ways to drive down the cost per shot while increasing magazine depth. Neutral particle beams, which remain largely experimental, would theoretically operate at near-light speed and damage targets by disrupting electronics or generating heat. Guetlein also pointed to “left of launch” defenses, a phrase used to describe efforts to stop missile threats before a launch occurs. That can include intelligence and surveillance activities that detect preparations, as well as non-kinetic actions that complicate or delay an adversary’s ability to fire. The goal here is to reduce the number of missiles that ever need to be intercepted. “Because when you’re trying to defend something the size of the United States, I can’t do it the way we’ve done it overseas. I have to have a new way of doing it,” he said.

The urgency to scale production and lower costs has already shaped Pentagon investment decisions. The Defense Department recently announced plans to directly invest in the production of interceptor missiles built by Lockheed Martin and solid rocket motors produced by L3Harris Technologies. While not labeled as Golden Dome funding, those investments align directly with the program’s emphasis on deeper magazines and lower per-unit costs. They also speak to Guetlein’s broader argument that Golden Dome is less a technology challenge than an industrial one. “We’re accelerating private capital investment, and we’re taking private equities’ view of the defense industrial base,” Guetlein said, adding that he regularly meets with investment bankers to help stabilize demand signals as companies seek capital to expand capacity. That emphasis on economics was echoed in the National Defense Strategy released Jan. 23, which identifies defense of the homeland as the Pentagon’s top priority. “The Department will prioritize efforts to develop President Trump’s Golden Dome for America, with a specific focus on options to cost-effectively defeat large missile barrages and other advanced aerial attacks,” the document states.

Architecture to remain secret

Guetlein said details of the Golden Dome architecture will remain classified. He said conversations with industry are occurring almost exclusively through one-on-one engagements, rather than open forums. After his confirmation as Golden Dome program manager in July, Guetlein said foreign actors began cyber targeting the defense industrial base, prompting senior officials to clamp down on public discussion. “We have been quiet,” he said. “I have not been talking to industry consortiums. I’ve not been talking to the press. I’ve not been talking to the think tanks, and it wasn’t until September I was allowed to even start talking to the Hill.” That secrecy has begun to draw scrutiny. In a defense spending bill for fiscal year 2026 approved by the House last week, appropriators said they support Golden Dome but faulted the administration for failing to provide sufficient detail on how $23 billion in mandatory funding has been allocated. The bill directs the Pentagon to submit more detailed plans and justifications. Guetlein said the program is on track to meet the administration’s timeline.

“By the summer of ‘28 we will be able to defend the entire nation against ballistic missiles as well as other generation aerial threats,” he said, calling Golden Dome an “unprecedented challenge.”

uh, yeah, sure…

As program director, Guetlein reports to the deputy secretary of defense and has been granted unusually broad authorities. “I have budget authority, contract authority, hiring authority, technical authority, security authority to get after protecting the homeland.” The Golden Dome office, Guetlein said, currently has 52 staff and expects to grow to about 100, even though he is authorized to reach 300. Requirements are set centrally, but procurement is decentralized across the services and agencies. “I’ve got the Space Force buying SBIs. I’ve got the Army buying munitions and sensors. I’ve got the Navy buying munitions. I’ve got the Missile Defense Agency buying next generation interceptors, glide phase interceptors, and a whole host of other capability,” Guetlein said. He also works closely with the Space Development Agency’s low Earth orbit sensor and transport network. Guetlein noted that the Missile Defense Agency’s SHIELD procurement vehicle is not part of Golden Dome, despite recent headlines about the large number of vendors selected to compete under the contract. SHIELD, he said, is simply “a tool that I can reach in and use if I need to.”

Command-and-control layer

One of the most demanding pieces of the program, he said, is the command-and-control layer that connects sensors, decision-makers and interceptors across services and classification levels. That software “glue layer” must be demonstrated this summer, integrated with interceptors in 2027, and shown operating against credible threats in 2028. To speed that effort, the Golden Dome office formed a command-and-control consortium of six companies working side by side, an arrangement Guetlein described as a departure from traditional contracting approaches. Beyond technology, Guetlein said entrenched culture and organizational behavior pose daily obstacles. He criticized what he described as a compliance-driven mindset that prioritizes risk elimination over speed and integration. “We cannot keep doing business as usual,” he said. “That’s really what our challenge is going to be.” While President Trump has floated the idea of international involvement in Golden Dome, Guetlein said he has not yet been authorized to engage allies. “Everything we are doing is allied by design,” he said, adding that planning already assumes future integration of partner capabilities and access to overseas territory for sensors. Golden Dome has figured into a broader geopolitical dispute over Greenland, where Trump has said expanded U.S. access would be “vital” to the program, including for radar and interceptor deployment.

Calls for Europe to decouple from the U.S. and rely solely on domestically produced weaponry have grown louder. However, experts estimate that achieving such independence would take at least 10 years and require around one trillion dollars. This assessment was reported by Defense Romania, citing The Wall Street Journal. Significant progress has already been made in increasing production volumes. For example, in the field of 155-mm artillery shells, European manufacturers have surpassed the U.S., with Rheinmetall alone producing 1.5 million rounds per year. When it comes to air defense missiles, industry giant MBDA has quadrupled production, but this still amounts to only 40 units per month, which Ukraine could expend in two nights. Europe is capable of supplying itself with armored vehicles, ships, artillery, and submarines. Yet in several areas, Europe still lags behind, including stealth aircraft, long-range missiles, and satellite reconnaissance. Work is underway to create alternatives, but these solutions will not be ready for years.

Europe’s collective defense budgets now reach $560 billion, double the funding levels of ten years ago, but this is still less than the U.S. Department of Defense, whose budget is expected to reach $850 billion. By 2035, European countries aim to reach about 80% of U.S. spending levels. A major issue, however, is not budgets, but fragmentation. France maintains a high degree of defense autonomy, while Germany and many Eastern European nations continue to purchase American or at least South Korean equipment, perpetuating dependence. Overall, the article emphasizes that building a European pillar within NATO, or even a fully integrated European army, is no longer a dream of Euro-bureaucrats, but a necessity. Yet achieving true military independence from the U.S. will take at least a decade. Defense Express notes that this timeline is realistic, given the lack of domestic equivalents for many types of weapons. For instance, precision MLRS systems like HIMARS remain largely unavailable in Europe. Despite progress in France and initial projects in Spain, serial production is still years away. Regarding defense budgets, the article refers to aggregate figures, which can be misleading. Countries such as Poland and the Baltic States have significantly increased their spending, Germany is ramping up production, and France is attempting reforms domestically—often encountering political resistance. Italy, by contrast, has calculated its defense budget in a complex manner, including infrastructure costs, while Spain has refused to commit to major defense spending increases.

Fragmentation also stems from national priorities: many European countries favor domestic defense industries, even if the offered systems are inferior, more expensive, produced in limited numbers, or exist only on paper. Joint procurement is increasingly becoming the norm, as seen with the CAVS armored vehicle program. However, projects like the sixth-generation FCAS fighter demonstrate the challenges: disagreements over role distribution among countries led to the project’s collapse. Europe thus faces a long road of work and compromise before it can achieve true independence from the U.S.

Liberalising capital flows

As the IMF urged national authorities to abandon capital controls, East Asians borrowed dollars, expecting to repay later on better terms.

Meanwhile, the dollar only stopped weakening after the US allowed Japan to reverse yen appreciation in mid-1995.

Under Managing Director Michel Camdessus, the IMF began pushing capital account liberalisation. This contradicted the intent of the Fund’s sixth Article of Agreement, affirming national authorities’ right to manage their capital accounts.

Despite considerable evidence to the contrary, Camdessus’ IMF preached the ostensible virtues of capital account liberalisation.

East Asian emerging financial markets were initially delighted by the significant capital inflows before mid-1997. After the strong yen decade, the US dollar appreciated from mid-1995.

When financial inflows reversed after mid-1997, some East Asian monetary authorities were unable to cope and turned to the IMF for emergency funding .

Many paths to crises

The Asian financial crisis is typically dated from 2 July 1997, when the Thai baht was ‘floated’ and its value quickly fell without central bank support. The ensuing panic quickly spread like contagion across national boundaries via financial markets.

Financial investors – in Bangkok, Singapore, Hong Kong, Tokyo, London and New York – hastily withdrew their funds, often mindlessly following perceived ‘market leaders’ without knowing why, like animal herds in panic.

Funds fled economies in the region, like frightened audiences in a dark theatre hearing a fire alarm. Capital even fled the Philippines, which had received little finance, because it was in Southeast Asia, the ‘wrong neighbourhood’.

After earlier celebrating Malaysia, Indonesia, and Thailand as ‘East Asian miracle’ economies, confidence in Southeast Asian investments fell suddenly.

Central banks in the region were sceptical of IMF prescriptions but believed they had little choice but to comply.

Press photographs showed Camdessus standing sternly, with arms folded like a displeased schoolmaster, over the Indonesian President bowing deeply to sign the IMF agreement.

This humiliating image probably expedited Soeharto’s shock resignation soon after, in mid-1998, over three decades after he seized power in a brutal military putsch in September 1965.

Following an earlier financial crisis, a 1989 Malaysian law had prohibited some risky banking and financial practices, but the authorities sought to attract foreign investments into its stock market.

Thailand had become vulnerable by allowing borrowers direct access to foreign banks through the Bangkok International Banking Facility and its provincial counterpart.

Debtors could thus bypass central bank regulation and supervision. The Thai currency float prompted massive funds outflows from the country.

As market confidence waned, funds fled Malaysia’s bourse, triggering a massive collapse in the currency’s value against the dollar, which had steadily weakened against the yen between 1985 and 1995.

Following massive capital outflows, Malaysia finally introduced capital controls on outflows from September 1998, fourteen months after the crisis began!

The controls enabled Malaysia to stabilise its currency and the economy temporarily, but also ended the earlier decade of accelerated industrialisation and growth.

Learning from experience

Rather than acknowledge and address the worsening problem due to earlier capital account liberalisation, the Fund made things worse with its prescriptions.

It insisted on keeping capital accounts open and raising interest rates to reverse outflows. This slowed economic growth as borrowing – and hence, both spending and investing – became more costly.

As investment and spending are necessary for economic growth, IMF prescriptions exacerbated the problems instead of providing a solution.

The East Asian financial crisis was undoubtedly avoidable. Experience has shown that financial markets and capital flows do not function as mainstream theories claim.

Thus, financial dogma and its influence on economic theory and policy obscured more realistic understanding of how markets actually operate and the ability to develop more pragmatic and appropriate policy alternatives.

History never fully repeats itself. But better policymaking for financial crisis avoidance and recovery will only emerge from more informed, historically grounded analysis.