Kazinform reports that the Financial Times points out that Donald Trump's presidency is delivering a heavy blow to the US dollar. After winning the presidential election in November 2024, Trump immediately warned countries including BRICS nations not to abandon the dollar.

He threatened to impose a "100% tariff" on countries attempting to abandon the dollar and settle transactions in other currencies. On November 30, 2024, Trump issued this warning on his social media account.

However, time has proven that the global de-dollarization trend has accelerated instead. The Financial Times analysis shows that during Trump's administration, the dominant position of the dollar in global trade, alliances, and financial institutions seems to be nearing its end.

Economists typically argue for the dollar's status as an international reserve currency based on structural factors such as America's share of global GDP, the size and liquidity of its financial markets. However, this analysis overlooks the interests of the majority of global market participants. As the principle of "many hands make light work" applies in finance, the collective actions of most countries are sufficient to influence the dominant force.

The Financial Times pointed out that Trump's second term clearly revealed the limitations and errors of traditional "numerical analysis." The article recalled: "Before the end of World War II, the dollar competed fiercely with other major currencies, especially the pound sterling, often at a disadvantage. The dollar occasionally suppressed the pound, but events like the Great Depression severely hindered its expansion. After World War II, America became the only superpower, and since 1945, the dollar began its absolute dominance over the world."

To consolidate the dollar's monopoly position, institutions such as the Bretton Woods system, the International Monetary Fund, and the World Bank were established. Especially the Marshall Plan made a significant contribution to the dollar becoming the world's sole reserve currency. European countries devastated by the war agreed to remove restrictions on the amount of dollars printed and tied to U.S. gold reserves and accepted non-gold-backed dollars. Subsequently, billions of dollars flowed into Europe for reconstruction. According to the Marshall Plan, from April 1948 to December 1951, a total of approximately $13 billion was allocated, mainly flowing to Britain ($2.8 billion), France ($2.5 billion), Italy ($1.3 billion), West Germany ($1.3 billion), and the Netherlands ($1 billion).

The widespread acceptance of the dollar in Europe quickly restored international payments, integrating former hostile European economies into the global unified order through the dollar. However, the Bretton Woods system actually collapsed in 1971, and other currencies no longer pegged to the dollar, with countries gradually turning to settling transactions in their own currencies.

Nevertheless, thanks to economic strength and superpower status, the United States continued to maintain its global leadership role, with the dollar becoming the primary international reserve currency. The Financial Times wrote: "Since the 1970s, for half a century, the global dominance of the dollar has relied on a simple algorithm: America's huge share of global GDP, the vast proportion in financial transactions, and established geopolitical relationships. However, these three pillars, especially the latter two, are surprisingly fragile. Trump's destructive actions within just a few months exposed their weaknesses."

Many American analysts believe that the Trump administration is destroying long-term cooperative relationships with political and economic partners, thereby threatening the dollar's hegemony in the international financial sector. For example, starting April 3, Trump imposed high tariffs on exports to 184 allied countries and the EU, effectively declaring war on allies, causing financial and economic data in these countries to begin to decline.

The Financial Times points out that while the U.S. economy still leads developed countries, its global economic share has been continuously declining in recent decades. China's economy is close to surpassing the U.S., superficially being the "second largest economy," but it has already surpassed the U.S. in many stable growth parameters. The U.S. economy is the main pillar of the dollar's power; if it wavers, the dollar will lose vitality.

What about the other pillars? The U.S. share of global exports has fallen 1.5 times, dropping from 18% in the 1950s to 11% today. The Financial Times warns that if Trump continues his current trade policies and does not fully eliminate tariffs, the U.S. share of global exports will further shrink over the next four years. Because nearly 200 countries restricted from exporting by Trump, particularly the EU, the UK, Canada, and China, have significantly reduced purchases of U.S. goods, consumers are turning to alternatives.

Trump has not abandoned his tariff policy. On May 12 this year, in Geneva negotiations, the U.S. and China agreed to reduce U.S. tariffs to 10% and Chinese tariffs to 30% within 90 days. However, soon after, both sides accused each other of breaching the agreement. On June 10, a new round of negotiations in London reached an agreement to maintain the 30% tariff on Chinese exports to the U.S. and the 10% tariff on U.S. imports to China, valid until mid-August 2025. If the agreement is followed, both sides agree to extend the term, but the 30% tariff remains at a high level.

The Financial Times believes that if the U.S. does not adjust its current policies, hundreds of countries alienated from the U.S. will completely turn to de-dollarization, accelerating the process of monetary and financial diversification, and further promoting the de-dollarization wave that has gained momentum in recent years. Analysts point out that under Trump's administration, America's vague financial and fiscal prospects negatively impact the dollar's reserve status.

According to data from the U.S. Congressional Budget Office, the public debt-to-GDP ratio will rise from 99% in 2024 to 116% in 2034, 139% in 2044, and reach 166% by 2054. If Trump wins a third term in 2028, this negative trend will worsen. Currently, media attention focuses on Trump's deteriorating health, indicating that the Pentagon made him confidential information videos due to his "inability to read documents."

In addition, after last year's election, American society did not unite but instead saw increased division, as evidenced by protests in places like Los Angeles. Political polarization has caused foreign investors to hesitate in investing in U.S. projects and the economy.

The conflict between the White House, especially Trump, and the Federal Reserve and U.S. central bank (which play a key role in supporting the dollar) also reduces the attractiveness of the dollar. These institutions are independent of administrative orders, but Trump's team tried to make them compliant tools. Some countries have begun withdrawing gold stored in the U.S.

Analysts warn that if relations between the U.S. and its allies, especially the EU, continue to deteriorate, the entire Europe and developed countries may abandon the dollar as their primary reserve currency, which would become a sanction against Trump.

Original source: https://www.toutiao.com/article/7516419483087422015/

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