Edward Fishman, Gautam Jain, and Richard Nephew
The U.S. dollar has been the dominant currency in global trade and finance for more than seven decades. Over that time, little has ever truly threatened its position. Global economic systems operate with significant inertia. Major players, from governments to banks to multinational corporations, prefer tried and tested mechanisms for conducting trade and finance. Breathless headlines frequently declare that countries are seeking alternatives to the dollar, that a new consortium is attempting to create a rival currency, or that the latest political crisis in Washington will finally end the dollar’s reserve status. But through decades of changing economic growth around the world, periods of turmoil in global markets, and questions about the future of U.S. economic policy, the dollar’s dominance has remained secure.
Until now. On April 2, U.S. President Donald Trump announced steep new tariffs on almost every U.S. trading partner. His plans, which have sent U.S. and global stock markets plunging, are the latest example of a consistent theme in his approach to governance: the weaponization of U.S. economic power. Trump has slapped tariffs on goods from Canada and Mexico in response to a variety of purported ills and reinvigorated the maximum pressure campaign against Iran begun in his first term. Combined with Trump’s attacks on the rule of law, his clumsy, erratic attempts to weaponize Washington’s economic advantages pose the greatest threat so far to the dollar’s status as a reserve currency.
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