Could the dollar lose its dominance? | The Economist

TL;DR

The dollar is weakening due to Trump's erratic policies and rising US debt, but no single currency is ready to replace it.

Key Points

• 1.Dollar's share of global foreign-currency reserves has already dropped from ~90% to under 60%, and Trump's April 2025 tariff announcement triggered a dollar selloff that has yet to recover.
• 2.The euro is the strongest alternative — backed by 21 nations and an independent central bank — but it lacks enough safe debt (German bond markets are too small) and risks periodic debt crises.
• 3.The Chinese yuan is hindered by China's authoritarian government and strict capital controls, making investors doubt they can freely withdraw money — stalling its internationalization.
• 4.The most likely outcome isn't a single dollar replacement but a fragmented multipolar system of competing currency blocs, which would be a destabilizing shift for global finance.