ESWAR PRASAD is Senior Professor of Trade Policy in the Dyson School of Applied Economics and Management at Cornell University, a Senior Fellow at the Brookings Institution, and the author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.

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Now they have a trade war problem to worry about again. Stocks and the dollar fell Friday after President Donald Trump brought the trade war back to the forefront with threats of massive tariffs against one of America’s most valuable companies and one of its most important trading partners.

Trade-related uncertainties, ballooning fiscal debt and weakened confidence about enduring U.S. exceptionalism have weighed on U.S. assets, with the dollar one casualty. Investors see the currency losing more of its luster as the greenback comes back to earth from lofty valuations.

The yen was steady at 143.84 per dollar, also on course for a 1.2% rise for the week, after Japan's core inflation accelerated at its fastest annual pace in more than two years in April, raising the odds of another interest rate hike by year-end.

"The combination of diminished appetite to buy U.S. assets and the rigidity of a U.S. fiscal process that locks in very high deficits is what is making the market very nervous," George Saravelos, global head of FX research at Deutsche Bank, said in a note. The Trump administration has said it backs a strong-dollar policy.