Key information
- The US dollar remains deeply anchored around the world, accounting for 58 percent of global foreign exchange reserves.
- An official BRICS currency or monetary union is unlikely, despite the group’s growth and increase in non-dollar-denominated transactions.
- Trump’s warnings against countries attempting to replace the U.S. dollar seem far out of step with current economic reality.
Despite Donald Trump’s recent warnings against countries trying to replace the US dollar, the greenback’s dominance seems assured for now. The former president, in Truth Social, threatened to impose “100 percent tariffs” on countries seeking to undermine the U.S. currency, particularly those participating in a potential BRICS currency initiative.
BRICS brings together Brazil, Russia, India, China and South Africa, to which Iran, Egypt, Ethiopia and the United Arab Emirates were recently added. Although this group has grown and discussed increasing non-dollar transactions, experts say an official BRICS currency or monetary union is unlikely.
The position of the US dollar on the world stage
The U.S. dollar remains deeply anchored around the world, accounting for 58 percent of global foreign exchange reserves, according to the International Monetary Fund (IMF), although this figure has fallen from 67 percent in 2000. The influence of the greenback is particularly strong in international trade within the Asia-Pacific region, where it accounts for 74 percent of export bills.
Historical and structural factors
The global position of the U.S. dollar stems in part from the Bretton Woods Agreement established in 1944, which pegged currencies to the U.S. dollar. Although this system has evolved and some countries have detached their currencies from the dollar, its status as the dominant reserve currency remains undisputed. This dominance is further reinforced by the United States’ position as the world’s largest consumer and a significant source of public debt held by foreign investors.
Current economic reality
Even the United States’ massive debt and financial system vulnerabilities during the 2008 crisis did not have a significant impact on the dollar’s dominance. Experts emphasize its crucial role in global finance, pointing out that without it, the multilateral trading system would likely collapse, making the global economy considerably less efficient.
Recent developments and Trump’s statements
While recent years have seen an increase in transactions using local currencies, particularly between China and Russia due to sanctions following the invasion of Ukraine, these developments have not resulted in an official currency of the BRICS or a monetary union. Trump’s statements on this subject appear largely out of step with current economic reality and lack concrete evidence of an imminent threat to the hegemony of the US dollar.
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