- Trump insists on maintaining the US dollar as the world’s primary reserve currency.
- Economists predict such measures could ultimately weaken the dollar more than strengthen it.
Amidst accelerating global de-dollarization efforts, former U.S. President Donald Trump has vowed to make it prohibitively expensive for countries to abandon the US dollar. Trump’s commitment to preserving the dollar’s status as the dominant global reserve currency comes at a time when geopolitical shifts and the concerted efforts of countries like China and Russia threaten its supremacy.
Trump’s Bold Tariff Strategy
During a recent rally, Trump made a stark declaration:
“If you drop the dollar, you won’t be doing business with the United States because we’ll slap a 100% tariff on your products.”
His proposal includes implementing export controls, currency manipulation charges, and tariffs against any nation opting out of the dollar for bilateral trade. This aggressive stance underscores Trump’s strategy to counteract any move away from the dollar amidst increasing economic partnerships among nations like Russia, China, India, and Iran, which now conduct 92% of their transactions outside of the dollar realm.
This shift is primarily driven by the growing dissatisfaction with the dollar’s dominance, especially following the sanctions imposed by the U.S. against Russia in 2022. These sanctions have spurred a significant number of countries to reconsider their economic reliance on the dollar, enhancing their interest in de-dollarization.
Economic Implications of Trump’s Tariffs
The economic implications of Trump’s tariff threats could be counterproductive. Hao Hong, an economist from the GROW Investment Group, suggests such policies would not only lead to higher inflation in the U.S. but also negatively impact Chinese exports. The broader economic fallout could exacerbate global financial instability. Commerzbank AG analyst Ulrich Leuchtmann further indicates that such disruptions could prompt more nations to move away from the dollar, jeopardizing its status as a safe haven and potentially triggering a significant decline in its value.
Despite historical concerns about the dollar’s vulnerability, Trump has consistently criticized the use of sanctions, arguing that they weaken the dollar and disadvantage the U.S. in global competition, particularly against China.
“We’re losing Iran, we’re losing Russia. China is out there trying to make its currency the dominant one. There are so many conflicts with all these countries that we are going to lose the dominance of the dollar,”
Trump stated during an event in New York.
