Former U.S. President Donald Trump has expressed grave concerns about China’s efforts to undermine the U.S. dollar’s global dominance, warning that the loss of the currency’s supremacy would be akin to losing a world war.
Trump’s comments come as multiple countries shift away from the dollar and embrace other currencies for international trade.
A Growing Trend of De-dollarization
In a recent video, Trump highlighted China’s intentions to change the global currency standard, emphasizing the potential consequences for the United States.
He warned that if the U.S. loses its currency dominance, it would become a second-tier country, losing influence over nations such as Brazil, Colombia, Iran, and Russia.
Recent events have indeed threatened the U.S. dollar’s position as the primary medium of exchange in international trade and the backbone of most countries’ foreign exchange reserves.
On March 29, Brazil and China struck a deal to replace the dollar with their own currencies—the yuan and the real—for bilateral commerce. This agreement marks a significant milestone in China’s campaign to internationalize the yuan and challenge the dollar’s supremacy.
The trend toward de-dollarization was initially sparked by U.S.-led sanctions against Russia following its annexation of Crimea in 2014 and escalated with Russia’s invasion of Ukraine in 2022.
As a result, several countries have started reducing the dollar’s share in their trade and foreign exchange reserves.
Dollar Supremacy Under Threat
Russia and China, both directly affected by U.S. sanctions and economic rivalry, have been at the forefront of the de-dollarization movement.
However, the trend has gained momentum with the involvement of Saudi Arabia, a key guarantor of dollar payments in petroleum deals, which has historically underpinned the currency’s dominance.
Since 2018, Russia has divested from all of its U.S. treasury bonds, which were worth around $150 billion in 2012. China has also reduced its U.S. treasury holdings from approximately $1.3 trillion in 2013 to $1.1 trillion in January 2022.
Meanwhile, Saudi Arabia has cut its holdings from $185 billion in February 2020 to $119 billion in January 2022.
In March 2022, the Wall Street Journal reported that Saudi Arabia and China were discussing the possibility of using yuan for oil purchases.
This development was followed by the China National Offshore Oil Corporation’s purchase of 65,000 tons of liquefied natural gas (LNG) from the United Arab Emirates, paid for in yuan—the first instance of the currency being used for an LNG trade.
Risks and Ramifications
The Export-Import Bank of China has also announced that it has completed preparations to provide yuan loans to Saudi Arabia’s state-run banks, paving the way for bilateral trade using the Chinese currency.
If the U.S. dollar loses its status as the world’s dominant currency, the nation’s global influence and economic stability could be at risk. The growing trend of de-dollarization is a cause for concern, as it signifies a shift in the balance of power on the global stage.
You can watch Donald Trump’s video below:
