De-dollarization, otherwise known as the phenomenon that denotes the dumping of the US dollar on a global scale, is now a burning concept running amok among global nations. The concept is now gaining maximum steam, primarily due to the rising narratives that continue to hammer the US dollar’s prestige and valuation. The American currency is now subject to wild allegations, including its growing weaponization and ability to sanction other nations, that are primarily compelling nations to consider shifting away from the dollar. Will the dollar be able to survive this transition?
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Why Is the Dollar Getting Ditched?
1. Geopolitical Risks And A Brewing Trade War
Donald Trump is now the 47th president of the United States. Trump has long proposed the idea of imposing tariffs on nations to bolster the US economy, which is now backfiring in the form of a bubbling trade war. This phenomenon is now compelling nations to discuss an alternate strategy, which includes putting counter-tariffs on the US to seek vengeance.
At the same time, this concept is also pushing the US dollar to encounter new lows, compelling nations to revisit their investments and tweak the areas where improvement is possible. If this continues, it may have a lasting impact on the dollar’s prestige, which may push nations to consider alternate payment systems.
2. Rise of Multipolar Currency Order
The countries have now increasingly become succinct in their efforts to robust their economies. In this wake, many countries have started to float the idea of using their currencies for global trade, rather than adhering to the US dollar’s usage on a global pedestal. This phenomenon is also giving birth to de-dollarization, urging nations to become vocal for local currencies rather than promoting the US dollar openly.
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3. Growing Weaponization Of The US Dollar
For the past few years, the US dollar has largely been weaponized and used in a way that, according to nations, “violates” prerequisites of peaceful international relations. The US’s ability to impose counter-sanctions has affected its prestige over the years, reducing its effectiveness and charm over the years.
“The strategy of sanctions has continued and extended to Iran, Cuba, Venezuela, Afghanistan, and Pakistan. Although the sanctions had been partially effective in the case of Cuba and North Korea, in most cases, such as Iran and Russia, they remain largely ineffective. The US even imposed sanctions on the members of the International Criminal Court (I.C.C.) for investigating the possible war crimes committed by the US in Afghanistan. The excessive use of sanctions by the US has reduced their effectiveness over time.” Modern Diplomacy stated.
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