There is no denying the growing anti-US dollar sentiment globally. The de-dollarization movement has taken strong hold over the last decade. China, Russia, and Iran, among others, have spearheaded the move away from the greenback. Many believe moving away from the USD will reduce risks associated with the currency. However, this notion may not be aligned with the global economic state.
Will Emerging Economies Suffer From De-Dollarization?
Moving away from the US dollar is another way of moving away from the United States. The world’s largest economy plays a vital role in global economics. American technology is a key component in not just the global balance, but also in people’s social lives. Most outlets, such as Google, YouTube, and Meta’s Instagram, Facebook, and WhatsApp, are US-based companies. Replicating these platforms is no easy task.
Most emerging nations are heavily dependent on the US dollar. The greenback is used for trading commodities and plays a vital role in foreign exchange. Pivoting away from the dollar will cause serious harm to a nation’s economy in the short term. The cost of moving away from the dollar may prove to be too expensive for many developing nations. De-dollarization could be a blunderous move if attempted.
The Chinese yuan and the euro have emerged as new alternatives to the US dollar. However, currency volatility could cause havoc for nations switching to these alternatives. The US dollar is a go-to asset in times of distress. The currency is often called a safe haven. The yuan and the euro are yet to prove their resilience in turbulent times.
Also Read: Market Bets on Yuan as De-Dollarization Picks Up Pace
One of the most significant harms from moving away from the dollar could be potential sanctions from the West. Being sanctioned would mean a country would be cut off from most of the latest developments, whether it is technological or economic.
President Trump has also threatened massive tariffs on countries that support de-dollarization. Developing nations can in no way afford heavy taxation from the US.