Is Trump Accelerating the Dollar's Decline?

While President Donald Trump points the finger at foreign investors and the BRICS nations for the trend of de-dollarization, a closer look suggests his own policies and rhetoric are the primary catalysts speeding up the shift away from the US dollar.

Although the dollar's role as the world's reserve currency has been gradually waning for decades, long before Trump's presidency, his administration's actions have given the trend a significant push.

How Tariffs Push Nations Away from the Dollar

Trump's strategy of using "reciprocal tariffs" is intended to shrink the U.S. trade deficit. However, this policy has a direct consequence: if countries cannot sell their goods to the United States, they cannot earn the dollars they need for international trade and investment.

This approach, combined with an insistence on bilateral negotiations, has unsettled global partners, including long-standing U.S. allies. As nations re-evaluate their economic dependence on the U.S., they are actively seeking alternatives to the dollar, inadvertently fueling the de-dollarization movement. These defensive countermeasures are a direct reaction to the perceived leverage tactics from Washington.

Trump vs. The Fed: The Fight Over Interest Rates

The U.S. Federal Reserve has maintained higher interest rates since 2022 in response to the inflation that followed the Covid-19 pandemic and Russia's invasion of Ukraine. As the Fed raised rates, the yields on U.S. government debt also climbed.

President Trump, however, is now pressuring the Fed to slash interest rates. His goal is to lower the massive debt servicing costs burdening both the federal government and private corporations. In 2024, interest payments alone cost the U.S. federal government about 3% of its GDP. With national debt exceeding 120% of GDP, these costs are only manageable if interest rates stay low.

This public campaign against his own Fed chair appointee, Jerome Powell, has rattled investors. The pressure undermines confidence in the central bank's independence and raises serious questions about future monetary policy.

Rising Inflation Fears Spook Dollar Investors

Investors are growing concerned that Trump's influence on the Fed will force interest rates down prematurely, a move they believe would trigger a new wave of inflation and devalue the dollar against other major currencies. If the Fed is pressured into buying U.S. Treasuries in a new round of "quantitative easing," returns on dollar-based investments could turn negative in real terms.

While the worst inflation fears have yet to be realized, the impact of tariffs on prices is undeniable. Ahead of the April 2 tariff implementation, many U.S. companies stockpiled imports. As those inventories dwindled, prices inevitably rose.

This environment has prompted many investors and monetary authorities worldwide to sell their dollar-denominated assets in search of alternatives. Such sell-offs put direct downward pressure on the dollar's value, creating a feedback loop that further accelerates de-dollarization.

Foreign Demand for US Treasuries Is Fading

Washington is increasingly worried that foreign investors will continue to dump U.S. Treasury securities. In 2015, foreigners held one-third of this debt; that figure has now fallen to less than a quarter.

Proposals like the "Mar-A-Lago Accord," which would compel foreign governments to hold U.S. Treasury "century bonds" for 100 years at a guaranteed loss, only add to the resentment.

Efforts to force down Treasury bond yields are both difficult and risky for the highly financialized U.S. economy. Previous turmoil in the bond market has led to stock market sell-offs, which in turn lower share prices and tax revenues. Furthermore, with trillions of dollars in corporate bonds set to mature in the next two years, higher interest rates would significantly raise borrowing costs for American businesses, many of which hope to refinance at lower rates.

But any attempt to artificially lower interest rates while inflation persists would signal to investors that negative real yields are here to stay, making dollar assets even less attractive.

Has De-Dollarization Hit a Tipping Point?

President Trump's policies, particularly his use of tariffs and sanctions as threats, have provoked a global reaction that is steadily chipping away at the dollar's dominance. This, coupled with a decline in public confidence in U.S. institutions, is speeding up the de-dollarization process.

A clear sign of this shift occurred in mid-2025 when a massive sell-off of U.S. assets caused the dollar to suffer its largest fall since the 1973 oil crisis, dropping over 10% against other major currencies. The event triggered widespread volatility in financial markets, including a stock market crash followed by a strong rally.

Historically, in times of financial stress, dollar liquidity was seen as the ultimate safe haven. However, the 2025 sell-off showed that this confidence is eroding. While Trump has proven adept at managing short-term market volatility, his unpredictable style leaves everyone guessing when the music might finally stop for the dollar.