President Donald Trump’s bid to reshape the global economic landscape in America’s favor is now challenging one of the core pillars of US post-World War II power — the dollar’s uncontested status as the world’s reserve currency. For decades, the greenback has dominated global markets, accounting for about nine out of every ten foreign exchange trades, nearly half of global merchandise trade, and close to 60% of foreign reserves held by governments. This dominance has allowed Washington to run large budget deficits and enabled US consumers to spend beyond their means, backed by the confidence of foreign investors eager to hold dollar-denominated assets.

But that confidence is showing signs of erosion. The Biden administration’s 2022 decision to restrict Russia’s access to the dollar after its invasion of Ukraine marked the first significant trigger for diversification away from the currency. If Washington could block the 11th-largest economy—deeply integrated into global oil trade—others began to question whether any country was truly safe. Rising inflation, a worsening fiscal outlook, and, more recently, the erratic rollout and reversal of Trump’s April tariff measures have amplified these doubts. The US dollar index has dropped more than 10% in the first half of the year, its sharpest such decline since 1973, alongside weakness in US Treasuries.

This uncertainty is fueling a shift in behavior. Banks and brokers report growing demand for currency arrangements that bypass the dollar, while wealthy families in Asia are reducing their exposure to US assets, citing heightened unpredictability under Trump’s trade policies. Within BRICS—a group led by Brazil, Russia, India, China, and South Africa—efforts to develop an alternative cross-border payments system are gaining momentum. Even long-time allies in Europe see a window to chip away at the dollar’s supremacy.

Still, some remain optimistic. JPMorgan Chase CEO Jamie Dimon recently described the US as the world’s most “prosperous, innovative nation” and dismissed concerns over short-term currency swings. Treasury Secretary Scott Bessent has reassured markets that Washington remains committed to a strong-dollar policy, with Trump threatening steep tariffs on any nation that challenges it. Analysts note, however, that the dollar’s greatest advantage is the absence of a single, viable rival.

The euro has been floated as an alternative, but Europe’s fragmented political and fiscal systems have limited its ability to compete. China continues to promote the yuan, but strict capital controls hinder its global adoption. Gold, while favored by central banks and investors seeking safety, is impractical for trade due to its lack of yield and limited liquidity in transactions. Digital assets, including Bitcoin and stablecoins, have also entered the conversation—though most remain too volatile or, in the case of stablecoins, too closely tied to the dollar itself to truly displace it.

For now, the dollar’s grip on the global financial system may be loosening, but without a clear successor, it remains firmly entrenched at the top of the monetary hierarchy.

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