[UNITED STATES] In recent years, the global financial landscape has been influenced by both external and internal forces that challenge the U.S. dollar's dominance. While much attention has been placed on China’s growing economic influence, some experts argue that former President Donald Trump poses a greater threat to the stability of the U.S. dollar. According to former senior economic officials, the actions and policies associated with Trump’s political ideology and economic decisions could significantly impact the dollar’s global standing.
This article explores the warnings from former U.S. economic officials, comparing the potential risks Trump presents to the stability of the U.S. dollar versus China’s influence on the global currency system.
The US Dollar: A Pillar of Global Economy
The U.S. dollar has long been the backbone of global trade, serving as the world’s reserve currency. Its dominance in international trade and finance has been unrivaled, largely due to the strength of the U.S. economy, the size of its financial markets, and its political stability. This unparalleled global status gives the U.S. substantial economic leverage, as the dollar is used for nearly 90% of global foreign exchange transactions.
However, this supremacy is constantly under pressure from various economic, political, and geopolitical forces, including the rise of alternative currencies and economic policies that challenge dollar hegemony. Some of these forces include the rise of China, whose increasing influence on global trade has led to calls for diversification from the U.S. dollar. Yet, experts argue that the real challenge could come from within the U.S. itself, particularly from the actions of Donald Trump.
Trump's Economic Policies and Their Impact on the Dollar
Trump’s tenure as president was marked by unconventional economic policies that broke with traditional approaches. While many of these policies aimed at boosting domestic industries, their longer-term effects on the dollar may prove damaging. Several economic experts have pointed out that Trump’s trade wars, particularly with China, and his "America First" policies may have contributed to undermining global confidence in the U.S. economy and, by extension, the U.S. dollar.
Trade Wars and Protectionism: Trump’s trade wars, particularly his tariffs on China and other trading partners, disrupted global trade and introduced uncertainty into international markets. While these policies were initially aimed at protecting American jobs and reducing trade deficits, they also created a ripple effect that undermined confidence in the stability of U.S. trade relations. The unpredictability of U.S. trade policies under Trump’s administration left many international partners wary of relying too heavily on the dollar, opening the door for alternative currencies to gain traction.
Government Debt and Fiscal Policies: Under Trump’s administration, the U.S. saw significant increases in government debt due to tax cuts and increased military spending. This growing fiscal deficit raised concerns about the sustainability of the U.S. economy and its ability to manage inflation. As the U.S. accumulated more debt, foreign governments and investors became more cautious about holding large reserves of U.S. dollars. This shift in sentiment, according to economic experts, could lead to a decline in the dollar’s value over time.
Unpredictability and Policy Shifts: Perhaps one of the most significant threats Trump posed to the U.S. dollar was the level of unpredictability in his administration's policies. Economic stability often relies on consistent, predictable policies that can be relied upon by investors. However, Trump’s abrupt policy shifts, whether in trade, foreign relations, or monetary policy, created a climate of uncertainty. Such unpredictability raised doubts about the future trajectory of the U.S. economy and the dollar’s long-term dominance.
China’s Rising Influence on the Global Financial System
While Trump’s policies undoubtedly impacted the U.S. economy and the dollar, many experts agree that China’s growing influence is a significant concern for the dollar’s dominance in the global financial system. China has made significant strides in diversifying its foreign exchange reserves, including accumulating gold and increasing its use of the yuan in international trade.
The Internationalization of the Yuan: In recent years, China has made concerted efforts to internationalize the yuan, positioning it as a viable alternative to the U.S. dollar. Initiatives like the Belt and Road Initiative (BRI) and the creation of the Asian Infrastructure Investment Bank (AIIB) have promoted the use of the yuan in international transactions, particularly in developing countries. While the yuan still lags behind the dollar in global trade, China’s push to make it more widely used could gradually reduce the global reliance on the U.S. dollar.
China’s Diversification of Foreign Reserves: China has also sought to diversify its foreign reserves away from U.S. Treasuries and dollars. By investing in gold, other currencies, and assets, China is reducing its exposure to U.S. economic policies. This diversification is seen as a hedge against potential risks posed by U.S. fiscal mismanagement or a depreciation of the dollar.
Digital Yuan and Central Bank Digital Currencies (CBDCs): One of the most significant developments in China’s bid to challenge the U.S. dollar’s dominance is the rise of the digital yuan. The People’s Bank of China (PBoC) has been actively testing a digital currency that could be used in international trade, reducing the reliance on the dollar. If successful, the digital yuan could provide an alternative to the dollar for countries seeking to avoid U.S. economic influence.
Experts Warn: Trump a Bigger Threat Than China
While China’s efforts to reduce reliance on the U.S. dollar are real and ongoing, several former senior economic officials argue that Trump’s actions during and after his presidency pose a more significant threat to the dollar’s dominance. As noted by former U.S. Treasury officials, the unpredictability and inconsistency of Trump’s economic policies have shaken global confidence in the U.S. economy.
As one former senior official put it: “It’s not China’s actions that are eroding confidence in the dollar; it’s the instability and erratic decisions coming from within the United States itself.” These officials point to Trump’s protectionist trade policies, his challenges to long-standing international agreements, and his confrontational approach to global alliances as factors that created a more volatile global economic environment.
Another former official noted that Trump's “America First” rhetoric, which often placed the U.S. at odds with traditional allies, further undermined the dollar’s standing in the global marketplace. When key U.S. allies begin to question the reliability of American leadership, the dollar’s dominance could be at risk.
The Future of the US Dollar: Will Trump’s Impact be Long-Lasting?
Despite the growing influence of China and the challenges posed by Trump’s economic policies, many experts still believe the U.S. dollar will maintain its dominant role in the global economy for the foreseeable future. However, the path forward may depend on how the U.S. manages its internal challenges and external relations.
Some analysts argue that if Trump—or similar populist leaders—return to power and continue to undermine international economic cooperation, the U.S. dollar could face greater risks. On the other hand, if the U.S. can stabilize its fiscal policies and restore confidence in its global leadership, the dollar’s supremacy could remain unchallenged.
The global dominance of the U.S. dollar has long been a cornerstone of the international financial system. While China’s rise poses an undeniable challenge to this dominance, the policies and rhetoric associated with Donald Trump may be a more immediate threat to the dollar’s stability. His unpredictable economic decisions, coupled with growing protectionism, have eroded global trust in the U.S. economy.
As the world moves toward a more multipolar economic landscape, the question remains whether the dollar will retain its primacy or if China’s efforts—and internal U.S. policy changes—will lead to a fundamental shift in the global financial system.
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