How Trump’s War on Fed, Trade Could Dethrone U.S. Dollar

The US dollar remains, despite everything that it reduces its imminent disappearance as a global reserve currency, clearly located on its throne. But this may begin to change after Wednesday, with his observation meeting a lot of the American Federal Reserve.

The latest monitoring of the dominance of the dollar, which was collected by the Atlantic Council, explains that the US dollar still does not have a competitor to any of the central features of the reserve currency: the dollar is still the most used currency in the reserves of the central banks, and the most important money used in export bills is still dominated by foreign foreign transactions. Most international debts are still resistant to the dollar, as well as most vital commodity sales such as oil.

The US dollar, despite everything that corresponds to its imminent demise As the global reserve currency, it is still clearly involved in its throne. But this may begin to change after Wednesday, with his observation meeting a lot of the American Federal Reserve.

Delay Monitor the domination of the dollarAnd, collected by the Atlantic Council, shows that the US dollar still does not have a competitor to any of the central features of the reserve currency: the dollar is still the most used currency in central bank reserves, and the most important money used in export bills is still dominating foreign transactions. Most international debts are still resistant to the dollar, as well as most vital commodity sales such as oil.

The euro, which he tested for testing the dollar since its establishment remains a quarter of a century ago, remains the second important global currency in all these standards. Other potential competitors, whether it is the Chinese or Japanese yen, is far from playing the role of global backup today. Even away from the dollar challenge, any kind of “Brexes”, which is a group currency from the group of different nations You seek to challenge We dominate a wider scale.

The remaining dollar of the backup currency is very important for the United States, not just for prestige. It is a lot.Excessive privilege“

“No one remembers a time when the dollar was not the global reserve currency,” said Josh Lipsky, chief manager of the Geological Economy Center in the Atlantic Council. “We can do things that other countries do not enjoy to the luxury of doing.” Without this role, it is noted that “our entire system and our cheap credit will be in danger. Things will look completely different.”

This is one of the reasons why president Donald Trump, despite his preference for Dollar cheap To enhance exports and relieve trade deficit, he also sought to overcome all competitors. Earlier this year, Trump again threatening A highly declining tariff on any countries within the Brexes group that sought to create a global alternative that could challenge the dollar, and the ambition that the China -led group talks about, but it has gone, in this shadow, anywhere so far.

However, Trump’s special economic policies threaten to accelerate the US dollar’s centralization and attractive erosion. One of the issues is his explosion in the budget deficit in the United States, which requires larger batches of debts that buyers from abroad, even if the initial plans to force international creditors to accept long-term debts (“Mar-A-Lago” deal“It is unprecedented. It has begun its expansion in the definitions of both friends and enemies in reformulating global trade flows and underestimating the American market.

“When you have a backup coin in the world, you have to do a lot to put it under the threat – nothing can do,” said Lipsky. “But the challenge of the central bank’s independence, the debt crisis, the geopolitical crises … these are the types of things that can expel the feces of stool together.”

One leg will be below Special audit Wednesday is the normal meeting of the Federal Reserve, the first since Trump sought to no avail To shoot one ruler He did not like it while installing a person working at the White House successfully. These moves have caused anxiety among investors (and Other central bankersAbout the real independence of the most important central bank in the world.

Although the reduction of interest rates by 0.25 percent, it could be announced after a meeting on Wednesday-Federal Reserve Chairman Jerome Powell was at the end of last month-and he gets good price. Many fears Which – which policyAnd not economic conditions, calling the bullets. For example, a half -point reduction in this month is likely to cause the market to be wandering.

There are arguments, such as those by Powell, that the labor market that slows down leads to a necessary rate reduction, though a lot From economists Argue This stubborn inflation actually indicates that the right step is to stand on Pat or even raise interest rates, not lowering them at a time of high prices. But the fact that Trump has benefited from Powell and reducing the Federal Reserve rate to reduce prices sharply to the turbocharged economic growth creates it impression The nominal central bank may start taking the direction from the White House, as the additional interest rate decisions come in the next few months.

This was strengthened this week by confirming the head of the White House Economic Council, Stephen Miran, author of the Mar-AGo Dollar plan, as a court in the Federal Reserve with interest rate decisions. Initially, he will continue to work in the administration while serving at the Federal Reserve. Trump this week Compressed again The federal reserve to reduce interest rates is deeper and faster than the Federal Reserve has indicated so far, and therefore the key on Wednesday will be the directive provided by the Federal Reserve on discounts in the rate of future benefits.

But the other challenge for the dollar, even if it is arising at this stage, comes from emerging and developing markets, including countries in the Brexes and those that were at the recipient of American sanctions and definitions. Not all Russia, China and others seek to increase the use of its currencies in the border trade, but also to develop the original financial settlement systems that can avoid the central role of the dollar as the finance portal of the financial flow gate in the world. Those initiatives – from Mbridge To China Cips To Russia Spsf– The dollar has not been removed yet. But they put the foundation.

“Alternative financial plumbing is spreading quickly and does not use the dollar,” said Lipsky. “So the question becomes: Can something eventually be driven by a way to evade penalties a long -term challenge to the dollar?”

Meanwhile, the minor transfer dynamics of greater economic relations between emerging market economies lead to a shift from dependence on the dollar. Brazil, which has already taken a lot of Chinese soybean market away from the United States thanks to the Trump tariff, is also Do this increasingly In non -dollar currencies, thanks to the deepest and formal financial relations between Brazilia and Beijing. Last week, China and Indonesia fell deeper Customer cooperation deal. The list is long.

“There is definitely the use of most local currencies within the trading between the dimensions,” said Lauren Johnston of the Ostcina Institute in Melbourne, Australia. Johnston has worked for years on international monetary reform and recently Dug Critical scene and advanced transactions, especially among the BRICS members.

What all new alternative channels, whether it is a currency or technology, shows that one of the central columns of the dollar-that is, the absolute need to use it to care for most of the business across the border in most places-is slowly disposed of.

Johnston said: “This is not explicitly equivalent to replacing the value of the dollar’s backup today, or its role as a reliable way to store wealth, but it may easily reduce the share of trade that occurs in the dollar, and reduces the need for it.”

These technical developments are combined with geopolitical and ethnic shocks, from the widespread use of US sanctions to the Willy application for definitions, State interventionAnd External requirements Lipsky, with regard to organization and taxes, said to pay more and more countries away from the dollar, even if they could not replace it yet.

“For a long time, the two countries wanted to be part of the dollar system. Now, many need this, but it doesn’t necessarily want, and this is for me a big difference.”