Trump’s legacy may well turn out to be how the U.S. loses its world reserve currency status, with all the attendant problems that will create, both internationally and within the United States itself.
Wall Street and investment bankers are doing everything possible to allay fears that de-dollarization is even possible, yet the trend towards de-dollarization has now become a constant beating of the drum, like the sound of artillery encroaching on a battlefield.
Not a comforting reality for this U.S. administration, no doubt.
There is a global movement and impetus to replace the U.S. dollar, partly due to a wilful desire to undermine America’s economy by nations wishing to end U.S. financial dominance, create a new multi-currency reserve status, as well as limiting exposure to what those nations see as attempts at extortion by the current Trump administration.
According to a watcher.guru and Vinod Dsouza’s article of June 12, 2025, entitled; BRICS: 71 Countries Settled Trade Without the U.S. Dollar;
“The BRICS alliance is advancing in the de-dollarization agenda by cornering the U.S. dollar on the global stage. Local currencies are given prominence while the greenback is being sidelined for international transactions. Many countries like Nigeria and Iraq have also imposed a blanket ban on the USD in foreign exchanges and oil settlements.”
The focus of the BRICS Summit Program for 2025, going on today and tomorrow in Brazil is as follows;
Sunday, July 6, 2025
- 09:30 AM — Official arrival ceremony of Heads of State and Government
- 10:30 AM — Family photo of Heads of State and Government of BRICS member countries
- 10:50 AM — Plenary session “Peace and Security and Reform of Global Governance”
- 12:35 PM — Working lunch and debate on the topic “Peace and Security and Reform of Global Governance”
- 2:45 PM — Official arrival ceremony of Delegation Heads from International Organizations, External Engagement Countries, and Partner Countries
- 4:00 PM — Plenary session “Strengthening Multilateralism, Economic-Financial Affairs, and Artificial Intelligence”
- 8:00 PM — Official reception offered by the President of the Republic and Ms. Janja Lula da Silva for the Heads of State and Government and leaders of International Organizations
This agenda specifically takes aim at America’s hegemonic rule in relation to it possessing the world currency reserve, and it isn’t just BRICS, already accounting for 36.4% of the world’s nations actively working to de-dollarize.
On July 1st, J.P. Morgan published an article entitled;
“De-dollarization: Is the US dollar losing its dominance?”
In it, the publication suggests the following.
- De-dollarization is unfolding in central FX reserves, where the share of USD has slid to a two-decade low.
- In fixed income, the share of foreign ownership in the U.S. Treasury market has fallen over the last 15 years, pointing to a reduced reliance on the dollar.
- De-dollarization is most visible in commodity markets, where a large and growing proportion of energy is being priced in non-dollar-denominated contracts.
“Importantly, this structural shift is distinct from the cyclical demand for the greenback, which is shorter in term and has in recent years been driven by U.S. exceptionalism, including the relative performance of the U.S. equity market. The world has become long on the dollar in recent years, but as U.S. exceptionalism erodes, it should be reasonable to expect the overhang in U.S. longs to diminish as well,” Oganes said. (Luis Oganes, head of Global Macro Research at J.P. Morgan.)
Causes
- Increased polarization in the U.S. which underpins its role as a safe haven.
- Ongoing U.S. tariff policy causes investors to lose confidence in American assets.
- A shift in the balance of power, will reshape the global economy and markets. De-dollarization will likely lead to a broad depreciation and underperformance of U.S. financial assets versus the rest of the world.
- “For U.S. equities, outright and relative returns would be negatively impacted by divestment away from U.S. markets and a severe loss in confidence. There would also likely be upward pressure on real yields due to the partial divestment of U.S. fixed income by investors, or the diversification or reduction of international reserve allocations,” (Alexander Wise, Long-Term Strategy at J.P. Morgan.
https://www.jpmorgan.com/insights/global-research/currencies/de-dollarization
Again, according to J.P. Morgan, “the main de-dollarization trend in FX reserves, however, pertains to the growing demand for gold…led by emerging market (EM) central banks — China, Russia and Türkiye…in the last decade.”
What may be of even greater concern is the present, and possible future situation on the Bond Markets.
“Although foreign demand has not kept pace with the growth of the Treasury market for more than a decade, we must consider what more aggressive action could mean. Japan is the largest foreign creditor and alone holds more than $1.1 trillion treasuries, or nearly 4% of the market. Accordingly, any significant selling would be impactful driving yields higher,” said Jay Barry, head of Global Rates Strategy at J.P. Morgan.
According to J.P. Morgan’s research, “each 1 percentage decline in foreign holdings relative to GDP (or approximately $300 billion of Treasuries) would result in yields rising by more than 33 basis points (bp). While this is not our base case, it nonetheless underscores the impact of foreign investment on risk-free rates, Barry added.”
As for who also holds significant American treasuries (U.S. debt): China ($749.0 billion), the United Kingdom ($690.2 billion), Luxembourg ($373.5 billion), and Canada ($328.7 billion). In total with Japan’a $1.1 trillion, a total of approximately 3 Trillion in U.S. debt.
The same problems can be seen in the commodities market, where “the de-dollarization trend in the commodity trade is a boon for countries like India, China, Brazil, Thailand and Indonesia, which can not only buy oil at a discount, but also pay for it with their own local currencies,” (Natasha Kaneva, head of Global Commodities Strategy at J.P. Morgan)And with respect to deposit dollarization in emerging markets, “deposits have grown mostly uninterrupted over the last decade, reaching around $830 billion.
However, China is the exception, “as its dollarization rate has been persistently falling since 2017, fed by “trade wars and growing diplomatic, security and geopolitical tensions.” (Jonny Goulden, head of EM Fixed Income Strategy at J.P. Morgan).
Overarching Cause
Trust. Or the lack of it in America.
The decline in trust with the U.S. since Trump became President of the United States, has been precipitous. Allies have been attacked financially with threats, and what can only be seen as outright attempts at extortion.
America has even threatened Canada with annexation, and Canada not only perceives the U.S. as untrustworthy, but a threat to its sovereignty and future.
Trump’s lies, and the fact that the entire GOP support Trump, almost unilaterally, has clearly illustrated to foreign governments throughout the world, that America should not, and cannot be trusted.
America is acting like a rogue state, and as such, countries are moving their trade and faith in the U.S. (and the greenback) away from America, — as fast as possible.
De-dollarization will likely continue unabated, and; if Trump continues his illegal and counter-productive trade tariff policy, (as determined by the WTO, GATT and ITO), it will result in what the Guardian states will be the following;
“That the global use of the U.S. dollar as a currency may decline further to 40-45% usage within the next 2-3 years.” (Amit Bansal (Reid), March, 19, 2023.)
https://sundayguardianlive.com/news/de-dollarization-world-faces-threat-of-economic-catastrophe#
And this was predicted before Trump’s disastrous tariff policies came to fruition over the last six months.
As for Canadians?
Canada appears intent on diversifying trade and seeking a multinational currency focus in the future, aligning itself ever closer to Europe and the Euro.
While the Euro or Yuan have not replaced the U.S. dollar as the international reserve currency, the focus of the world has become the removal of America’s ability to threaten foreign nations by their moving away from the greenback.
Canada’s aim, irrespective of short-to-medium pain, is to escape America’s gravity and drastically increase its trade with the EU, Japan, Korea and China, along with inking new agreements with emerging economies on the Indian sub-continent.
Due to Trump’s actions, it would definitely seem that Canada is highly unlikely to return to trade or, business as usual, with the United States.
It would seem that Canada’s recent willingness to drop the taxes on American Social Media companies, was part of a strategy intended all along, — one to be used as leverage with Trump, who believes he made Canada ‘blink’.
Whatever Trump believes, the talks are back on between Canada and the U.S.
As for any new agreements with the United States that come from these talks?
As Prime Minister Carney recently intimated, it will only happen if an agreement works for Canadians.
Trust is now vapour-ware in relation to the U.S., as Canada can never again afford to trust the U.S., in any event.
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