After decades meting out sanctions and financial coercion, the US may soon feel its grip on world trade beginning to loosen.
“Change is good, but dollars are better,” once wrote a U.S. author of romance novels. This light-hearted sentiment often reflects the prevalent view about the future role of the U.S. dollar as the dominant global currency. The consensus view among most financial experts is that the dollar is untouchable, but I believe that view is incorrect.
The dollar is the foundation of American economic power. It is central to the global financial system, and the strength of the U.S. economy has long been intertwined with the dollar’s dominance. However, this dominance is increasingly being challenged as the world becomes more fragmented geopolitically. As other regions seek alternatives to the dollar, the U.S. could begin to lose its control over world trade.
Recently, Brazil’s president Luiz Inácio Lula da Silva raised an important question during his visit to China: “Why should every country have to be tied to the dollar for trade? Who decided the dollar would be the [world’s] currency?” His remarks capture the growing resistance to dollar hegemony, especially in countries that feel the economic consequences of U.S. policies and sanctions.
China, in particular, has been actively pushing for alternatives to the dollar. The country’s efforts to internationalize its own currency, the renminbi, and expand its influence through initiatives like the Belt and Road Initiative could lead to greater reliance on the renminbi in global trade. Countries involved in these initiatives are increasingly looking for ways to bypass the dollar, reducing their dependence on it.
The U.S. has used the dollar’s dominant status to impose economic sanctions on countries like Iran, Russia, and Venezuela, which has led to growing resentment. The use of financial coercion has made many countries wary of being overly reliant on the dollar and the U.S. financial system. As a result, there is a growing demand for alternatives that can provide greater financial autonomy.
In addition to China, other nations, particularly in the global South, are exploring alternatives. Russia has already been moving away from the dollar in its trade deals, and several countries in Africa and Asia are discussing ways to trade in their local currencies or through new regional financial systems. These developments suggest that the dollar’s dominance may not be as secure as it once seemed.
The shift away from the dollar is not likely to happen overnight, but the trend is already visible. As more countries pursue economic alliances outside the U.S.-dominated financial system, the world may see a gradual but significant shift away from dollar-based trade. The U.S. may soon find that its grip on global economic leadership is weakening as China and its allies position themselves as alternatives to the old order.
