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A rising dollar is among the 'biggest threats' to the global economy, strategist says

  • A trade showdown between the U.S. and China is widely expected to be detrimental to global economic growth, while elevated tensions over the standoff between the world's biggest economies has also dulled the dollar's appeal.
  • There was a trade war … It took place last year and America won it because it effectively imposed 10 percent tariffs on China and 12 percent on the rest of the world and 15 percent on Europe by depreciating the dollar," Paul Gambles, managing partner at Thailand-based advisory firm MBMG Group, told CNBC's "Squawk Box Europe" on Thursday.
  • The dollar Index, the greenback versus a basket of currencies, is up over 1 percent since the end of January with most of its slide happening before that date.

Global economic growth could soon be derailed by a bounce in the U.S. dollar, a strategist told CNBC Thursday.

A trade showdown between the U.S. and China is widely expected to be detrimental to global economic growth, while elevated tensions over the standoff between the world's biggest economies has also dulled the dollar's appeal. The U.S. currency has recorded five consecutive quarters of losses, which includes the last quarter ending March 31.

President Donald Trump's top economic advisor Larry Kudlow has since sought to ease concerns by saying the U.S. administration is in "negotiation" with China — and not engaged in a trade war. This helped stir a dramatic comeback in U.S. equities and prompted the dollar to rebound.

"There was a trade war … It took place last year and America won it because it effectively imposed 10 percent tariffs on China and 12 percent on the rest of the world and 15 percent on Europe by depreciating the dollar," Paul Gambles, managing partner at Thailand-based advisory firm MBMG Group, told CNBC's "Squawk Box Europe" on Thursday.

However, he argued the dollar has since showed signs of "forming a bottom." The dollar Index, the greenback versus a basket of currencies, is up over 1 percent since the end of January with most of its slide happening before that date.

"I think the key point is the American economy and actually the global economy was predicated on the dollar continuing to fall ... So actually even a 1 or 2 percent appreciation is quite dangerous," he said, before adding that continued dollar strength is "probably one of the biggest threats" to worldwide economic growth.

'Sound and stable'

Last month, Kudlow said he believed a good economy policy included a "sound (and) stable dollar." His comments were largely in keeping with previous U.S. administrations, who have traditionally been proponents of a strong greenback.

Nonetheless, at the start of the year, Treasury Secretary Steven Mnuchin had suggested dollar weakness was "not a concern of mine" only to backtrack a day later and reiterate that a strong "long-term dollar" is in the country's best interest. Trump hinted before his inauguration that he preferred a weaker dollar.

Trade showdown

Meanwhile, an ongoing trade dispute between Washington and Beijing has fueled market fears of a full-blown trade war. This, in turn, could threaten to derail global economic growth.

Traders work on the floor of the New York Stock Exchange (NYSE) on February 5, 2018 in New York City.
Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) on February 5, 2018 in New York City.

Trump had unveiled a list of Chinese imports he aimed to target on Tuesday, as part of a crackdown on the Asian giant's trade practice. Beijing responded with additional charges on 106 U.S. products less than 24 hours later, stoking concerns of a tit-for-tat trade war.

The White House has since sought to push back on the notion a trade war could soon breakout, aiding dramatic recovery for U.S. stocks in the previous session.

— CNBC's Thomas Franck contributed to this report.