If Trump’s dollar strategy succeeds, or even if it simply generates volatility, the effects will not remain confined within US borders. Inflation created by American fiscal and trade policy radiates outward, shaping global prices and domestic realities far beyond Washington.

As the issuer of the global reserve currency, US inflation spills over through interconnected trade and financial systems, impacting import-dependent and dollar-exposed nations. The term ‘exporting inflation’, in this context, refers to the transmission of US-sourced inflationary pressures to other economies, especially those that are import-dependent or have high exposure to the dollar. This process unfolds through several interlinked channels, often blurring the line between domestic monetary decisions and global macroeconomic consequences.

The most direct mechanism is the dollar’s dominance in global trade. Commodities such as oil, gas, wheat and metals are priced in US dollars on international markets. Thus, when inflation in the US leads to a rise in commodity prices, countries that rely on these imports face higher costs, regardless of their own inflationary dynamics. This is especially acute in countries like Nigeria, where domestic production of essentials is low and imports account for a substantial portion of consumption. According to the Observatory of Economic Complexity (OEC), Nigeria’s highest imports in 2023 were refined petroleum ($18.2 billion), military vehicles ($9.17 billion), wheat ($2.97 billion), cars ($1.56billion) and raw sugar ($747 million)—all of which are susceptible to dollar-denominated price increases. Indeed, in an April 2025 interview with Arise News, economist, Paul Alaje, warned of Nigeria’s susceptibility to heightened US inflation.

A second mechanism for exporting inflation is currency depreciation caused by inflationary policy. When the US engages in expansive fiscal or monetary policies, such as large-scale tax cuts or quantitative easing, without an equivalent increase in productivity, the dollar may weaken. While a weaker dollar can help boost US exports by making them cheaper, it can wreak havoc elsewhere. For economies that hold reserves or transact heavily in dollars, the depreciation effectively raises the price of imports and increases the local currency cost of servicing dollar-denominated debt.

For instance, in 1985, the US dollar had appreciated significantly, leading to trade imbalances and economic strain on other countries. To address this, the United States and other major economies entered into the Plaza Accord, an agreement aimed at depreciating the US dollar through coordinated intervention in currency markets. This deliberate weakening of the dollar was intended to correct trade imbalances but also had significant impacts on countries holding dollar-denominated assets or debts. For example, Mexico, already burdened with large volumes of dollar-denominated debt, was hit hard when the dollar’s devaluation caused the real value of its debt to rise sharply in local currency terms. The peso depreciated by over 40 per cent during this period, triggering a debt repayment crisis and contributing to broader regional instability. The Plaza Accord thus stands as an early case study of how US-engineered currency shifts can transmit financial shocks to dollar-dependent economies, a dynamic still playing out today in Nigeria.

Lastly, interest rate and capital flow dynamics play a crucial role. Inflationary pressures often push interest rate hikes, which attract global capital into the US, causing a reversal of capital flows from emerging markets like Nigeria. The resulting outflows weaken other currencies, further elevating import prices and domestic inflation. This cycle can force developing countries to raise their own rates to stem currency depreciation, tightening domestic financial conditions and slowing growth. In early 2024, for example, following US interest rate hikes, Nigeria raised its benchmark interest rate by 400 basis points to 22.75 per cent, the largest increase in 17 years, to counter capital outflows and stabilize the naira.

Today, Nigeria remains deeply exposed to this phenomenon. Despite recent efforts to increase local refining capacity and diversify its economy, Nigeria still imports a significant bulk of its refined petroleum (about 25 million litres daily) and is highly dollar-dependent. Any uptick in US inflation, particularly if driven by proposed tax cuts and increased fiscal spending, could trigger global inflationary trends. As oil and other key goods are priced in dollars, US inflation feeds into higher benchmark prices on global exchanges, regardless of Nigeria’s domestic production or currency dynamics.

Moreover, Nigeria’s capacity to shield itself is limited. With inflation already elevated and interest rates near record highs, the Central Bank of Nigeria (CBN) has little room for further monetary tightening. The CBN, in its February 2025 communiqué, noted the ‘persistent volatility in the foreign exchange market’ and the challenge of ‘high inflationary pressures,’ underscoring the domestic vulnerability to global shocks. Similarly, Agora Policy, an Abuja-based economic think tank, warned in its February 2025 report, ‘How the Impending Trade Wars May Impact Nigeria’, that ‘Nigeria is at risk of low foreign exchange inflows and higher inflation due to recent economic policies of the United States.’ A resurgence in US inflation, especially if it triggers another interest rate hike, could further weaken the naira, intensify capital flight, and raise the cost of living for ordinary Nigerians.