U.S. Dollar Defends Role as Global Currency
The possible de-dollarization of the world economy has been thrust back into the spotlight with U.S. President Donald Trump's inauguration Monday. Trump reiterated an earlier statement saying that he would impose a "100 percent tariff" on BRICS country imports if the bloc took steps towards de-dollarization. The topic had already bubbled to the surface during the BRICS summit in South Africa in 2023. While lacking a spot on the agenda, decreasing the prevalence of the U.S. dollar in trade and financial transactions among the Global South was repeatedly referenced by the world leaders in attendance, for example Brazilian President Luiz Inacio Lula da Silva, who even called for a new common currency for the BRICS bloc.
Looking at trade and transaction data for the U.S. dollar in the past ten years, the currency has so far defended the major role it plays in international markets. The U.S. share of global GDP stands at around one quarter while the country's share in global trade in commodities and commercial services is lower, at around 11 percent. In this light, the U.S. dollar's outsized role in global trade, reserves and currency exchange that extends far past its country of its origin becomes apparent. Due to the United States' importance in global capital markets and international debt, the dollar continues to play a significant role internationally, Reuters reports.
In June, international SWIFT payments in U.S. dollars hit almost 48 percent of all payments, up more than 3 percentage points since June 2014. The Chinese yuan, an obvious competition to the dollar, stood at just 4.5 percent of all international payments.
An area where the yuan has been more successful - yet also on a small-ish scale - has been foreign reserves. Here, the U.S. dollar has lost almost 5 percentage points in 10 years, while the Yuan climbed from around 1 percent of international foreign reserves a decade ago to currently 2.1 percent. The biggest - and a very stable - footprint of the dollar is in foreign exchange transactions, almost 90 percent of which involved the currency in mid-2024.