President Donald Trump wants a weaker dollar, but his economic policies have helped make the dollar relatively strong. The greenback is up nearly 4.5% so far in 2018 against other major global currencies, including the euro, yen and pound. Few investing experts expect much to change for the dollar after Tuesday’s midterm elections. That’s in part because trade policy probably won’t change even if Democrats win the House. And interest rates will probably keep rising – boosting the dollar along with them. A strong dollar is a sign of a strong economy. But it also comes with potential consequences. Stronger dollar hurts profits for US multinationals Continued dollar strength could wind up leading to more volatility in the stock market. The stronger dollar is a problem for many large American companies, because it reduces the value of their international sales and profits. Hasbro (HAS), Harley-Davidson (HOG), Huggies maker Kimberly-Clark (KMB) and Gillette owner Procter & Gamble (PG) have all warned that the dollar is hurting their results. So have industrial companies 3M (MMM) and Caterpillar (CAT) and Big Pharma giant Pfizer (PFE). The stronger dollar can also cause trouble for large American firms at home, because it helps make products from overseas cheaper. On the flip side, US goods are now more expensive in international markets because of the stronger dollar. That’s a particular worry for giant tech hardware companies like Apple (AAPL). “These big tech companies are global businesses that rely on international markets. If interest rates are rising and the dollar is following suit, that reduces the purchasing power of their foreign customers,” said Jonathan Curtis, portfolio manager with the Franklin Technology fund. JJ Kinahan, chief market strategist for TD Ameritrade, conceded that a stronger dollar is a problem. But he thinks the benefits of less expensive imports for American consumers and retailers may offset the profit hit that multinational companies have to take. A healthier US consumer could keep the economy afloat. Dollar strength could backfire Some warn that the dollar’s strength combined with trade war policies could undo America’s economic strength. “Regardless of the makeup of the House, the President can still influence policy such as trade agreements by issuing executive orders. The prospect of tariffs and a strong dollar is a risk to global growth,” wrote OppenheimerFunds senior investment strategist Brian Levitt in a recent report. If the dollar keeps rising, that could further squeeze not just China but fragile emerging markets like Turkey, Argentina and Indonesia, all of which have debt denominated in dollars. “As US economic growth reaches a simmer and global growth slows, the market may view continued hikes as a bearish outcome that would drive the dollar higher, leading to further tightening financial conditions outside the US and exacerbating vulnerabilities in the emerging markets,” wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management, in a report. The dollar’s strength could turn out to be the undoing of many other economies around the world – and that could eventually slow down the US as well. Where does Trump stand? Trump’s stances on the dollar have shifted multiple times during his presidency. For example, Trump said in January that he wanted a strong dollar, contradicting comments made by Treasury Secretary Steven Mnuchin about how a weaker dollar would be good for the United States. But more recently, Trump has lamented the dollar’s strength – particularly as the Federal Reserve has raised interest rates, a move that boosts the dollar’s value even further. He tweeted in July that Europe and China were “manipulating” their currencies. Barring a major economic slowdown, the Fed is likely to raise rates again in December and several more times throughout 2019. That should lift the dollar’s value further.