They already have, with a little help from a U.S. economic rival.
China has been striking yuan-only trading deals with Brazil for agricultural products, Russia for oil and South Korea for other goods for years. It has also been making loans in yuan to central banks desperate for cash in Argentina, Pakistan and other countries, replacing the dollar as the emergency funder of last resort.
Another possible US alternative in future years if their market grows: cryptocurrencies.
Said BlackRock Chairman Larry Fink in his annual shareholder letter about dollar dominance, “If deficits keep ballooning, America risks losing that position to digital assets like Bitcoin.”
Not everyone is convinced that a big reason the dollar is falling is because of lost faith in the US.
Steve Ricchiuto, an economist at Mizuho Financial, says dollar weakness reflects anticipation of higher inflation due to tariffs. But even if investors aren’t as comfortable holding dollars, he says, they really don’t have much of a choice. No other currency or other asset, like yuan or bitcoin or gold, is vast enough to handle all the demand.
“The U.S. will lose the reserve currency when there is someone out there to take it away,” Ricchiuto says. “Right now there isn’t an alternative.”
Maybe so, but Trump is testing the limits.
It’s not just the tariffs, but the erratic way he’s rolled them out. The unpredictability makes the US seem less stable, less reliable, and a less safe place for their money.
