{"id":335383,"date":"2025-05-02T19:28:19","date_gmt":"2025-05-02T13:58:19","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=335383"},"modified":"2025-05-05T19:01:59","modified_gmt":"2025-05-05T13:31:59","slug":"trumps-return-threatens-us-dollar-global-dominance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/trumps-return-threatens-us-dollar-global-dominance\/","title":{"rendered":"Trump\u2019s Return Threatens US Dollar Global Dominance"},"content":{"rendered":"

Source<\/strong>: The post Trump\u2019s Return Threatens US Dollar Global Dominance has been created, based on the article \u201cKing Dollar<\/strong>\u2019<\/strong>s shaky crown<\/strong>\u201d published in \u201cBusinessline<\/strong>\u201d on 1 May and 2 May 2025 respectively. Trump\u2019s Return Threatens US Dollar Global Dominance.<\/strong><\/p>\n

\"Trump\u2019s<\/p>\n

UPSC Syllabus Topic:<\/strong> GS Paper2- International Relations<\/p>\n

Context<\/strong>: Donald Trump\u2019s return to power in January 2025<\/strong> has disrupted global financial stability and raised doubts about the future of the US dollar<\/strong>. Two recent books \u2014 King Dollar<\/em> by Paul Blustein and Our Dollar, Your Problem<\/em> by Kenneth Rogoff \u2014 provide important insights into the dollar\u2019s role and its emerging challenges.<\/p>\n

The Dollar<\/strong>\u2019<\/strong>s Global Primacy<\/strong><\/h2>\n
    \n
  1. Key Global Currency Functions: <\/strong>The US dollar<\/strong> remains the top reserve currency<\/strong>, investment vehicle<\/strong>, and trade invoicing medium<\/strong>. It supports global trade due to its liquidity and reliability<\/strong>.<\/li>\n
  2. Market Presence and Network Effects: <\/strong>According to the Bank for International Settlements (BIS)<\/strong>, daily foreign exchange turnover<\/strong> reached $7.5 trillion<\/strong> in April 2022<\/strong>, with the dollar involved in 88%<\/strong> of trades. In 1989<\/strong>, the figure was just $500 billion<\/strong>. This vast usage reinforces the dollar\u2019s dominance through powerful network effects<\/strong>.<\/li>\n
  3. Limited Global Competition: <\/strong>Despite efforts like China\u2019s e-CNY<\/strong>, the renminbi<\/strong> lacks the exchange-rate flexibility<\/strong> and financial reforms<\/strong> needed to challenge the dollar. Rogoff<\/strong> stresses that without these changes, the renminbi will not become a viable alternative.<\/li>\n<\/ol>\n

    Trump<\/strong>\u2019<\/strong>s Disruptive Economic Approach<\/strong><\/h2>\n
      \n
    1. Departure from Postwar Strategy: <\/strong>Unlike past US leaders who used multilateralism<\/strong> to maintain order, Trump<\/strong>\u2019<\/strong>s grievance-led unilateralism<\/strong> represents a major shift. His policies go beyond what even Blustein and Rogoff<\/strong> had anticipated in December 2024<\/strong>.<\/li>\n
    2. Erosion of Domestic and Global Trust: <\/strong>Trump has withdrawn from international agreements<\/strong>, cut foreign aid<\/strong>, and followed a transactional foreign policy<\/strong>. Domestically, he has pressured the Fed<\/strong>, weakened the federal workforce<\/strong>, and attacked legal and academic institutions<\/strong>.<\/li>\n
    3. Escalating Trade Conflicts: <\/strong>Trump\u2019s \u201c<\/strong>Liberation Day<\/strong>\u201d <\/strong>tariffs<\/strong> caused a drop in the dollar<\/strong> and a spike in Treasury yields<\/strong>, indicating investor flight from US bonds<\/strong>. A brief tariff delay<\/strong> calmed markets, but further attacks on Fed Chair Powell<\/strong> triggered renewed declines.<\/li>\n<\/ol>\n

      A Shifting Global Financial Order<\/strong><\/h2>\n
        \n
      1. Capital Market Fragmentation<\/strong>: Falling global trust<\/strong> in US leadership could lead to currency fragmentation<\/strong>. Economic models suggest that multiple currencies<\/strong> could share global dominance.<\/li>\n
      2. Strategic Misjudgment of Dollar<\/strong>\u2019<\/strong>s Role: <\/strong>Trump\u2019s adviser Stephen Miran<\/strong> claims the dollar has harmed US manufacturing<\/strong> and worker competitiveness<\/strong>. However, Blustein<\/strong> counters that the \u201c<\/strong>exorbitant cost<\/strong>\u201d argument<\/strong> ignores the dollar<\/strong>\u2019<\/strong>s geopolitical benefits<\/strong>.<\/li>\n
      3. Possible Turning Point:<\/strong>April\u2019s events may signal the start of dollar decline<\/strong>. While no clear successor exists, continued instability may weaken the global trade and financial order<\/strong>.<\/li>\n<\/ol>\n

        Risks to Dollar Dominance<\/strong><\/h2>\n
          \n
        1. Institutional and Fiscal Instability: <\/strong>Congressional Republicans<\/strong>, supported by Trump, are expanding deficits by bypassing reconciliation<\/strong> and depending on volatile tariff revenues<\/strong>. This signals deepening institutional decay<\/strong>.<\/li>\n
        2. Breakdown of Regulatory Cooperation: <\/strong>US reluctance to cooperate with the Basel Committee<\/strong> and Financial Stability Board<\/strong> risks undermining cross-border regulatory coordination and critical tools like dollar swap lines<\/strong>.<\/li>\n
        3. Technology and Currency Innovation Gaps: <\/strong>Trump\u2019s CBDC ban<\/strong> and crypto deregulation stance<\/strong> isolate the US from global payment innovation<\/strong>, threatening future efficiency and interoperability<\/strong>.<\/li>\n<\/ol>\n

          Question for practice:<\/strong><\/p>\n

          Evaluate how Donald Trump’s return to power in 2025 has affected the global dominance of the US dollar.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Source: The post Trump\u2019s Return Threatens US Dollar Global Dominance has been created, based on the article \u201cKing Dollar\u2019s shaky crown\u201d published in \u201cBusinessline\u201d on 1 May and 2 May 2025 respectively. Trump\u2019s Return Threatens US Dollar Global Dominance. UPSC Syllabus Topic: GS Paper2- International Relations Context: Donald Trump\u2019s return to power in January 2025… Continue reading Trump\u2019s Return Threatens US Dollar Global Dominance<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":335706,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230],"tags":[12121,212,239],"class_list":["post-335383","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","tag-businessline","tag-gs-paper-2","tag-international-relations","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2025\/05\/Trumps-Return-Threatens-US-Dollar-Global-Dominance.png?fit=1280%2C850&ssl=1","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/335383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=335383"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/335383\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/335706"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=335383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=335383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=335383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}