Shockwaves caused by US President Donald Trump between United States allies and business partners are also raising questions about US assets – including the dollar. Although the American currency should not lose its status of the main global currency anytime soon, new uncertainties arise as the world has pondered on future US reliability.
The planet is facing a crisis of confidence with the United States-and this can affect financial markets, including the Almighty Dollar. For now, the currency follows as the main reserve and a means of global transaction, ensuring the US what many call “exorbitant privilege.”
But Trump has shook historical alliances since he arrived at the White House. He approached Russia and said that if NATO members do not increase their defense spending, the US may stop helping them.
“The US signature is now worth nothing”
Given this, David Roche of Quantum Strategy said this month that “NATO is dead” and “no one else will trust a US -signed treaty.” According to him, the Japanese yen became the new coin of refuge, beating the dollar.
Doubts about US commitment to NATO also led Canada and Portugal to reconsider the purchase of F-35 stealth fighter, while Europe moves to strengthen its military capacities.
In addition, Trump’s insistence on Canada and Greenland to be incorporated into the US, not to mention the tariffs imposed on Canada and Mexico – even after the signing of a commercial pact with neighbors during its first term.
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“Trump made it clear that the US signature in any document is now irrelevant-be the US-México-Canada agreement, which he himself negotiated, the North Atlantic Treaty, the covenants of the waters of the great lakes and the Columbia or even border agreements with Canada signed,” wrote Philip Cross of MacDonald-Laurier Institute, in an article on the article Wall Street Journal.
Alliances and the dollar
Alliances are crucial to the strength of a coin, according to Barry Eichengreen, professor of economics and political science at the University of California in Berkeley. He warned, in a column at the Financial Times, that “the global role of the dollar will be harmed if the US is seen as betraying its allies.”
Historically, countries often adopt nations coins with which they maintain strategic alliances. Germany and Japan, for example, supported the dollar in the 1960s for valuing their defense pacts with the US.
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Currently, the American currency still represents a significant slice of the international reserves of Taiwan, South Korea and Japan due to the “security umbrella” provided by Washington.
“The destination of the dollar will ultimately depend on the willingness of US leaders to defend the rule of law, respect the separation of powers and honor commitments to foreign partners,” concluded Eichengreen.
Desolarization
Wall Street begins to evaluate the impacts of the new geopolitical scenario on the future of the dollar – both in value and status.
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Rabobank strategist Jane Foley said in a recent statement that Trump’s trade war, US removal from military alliances and speculation about the incorporation of Canada and Greenland “can accelerate the trend of decolarization and undermine the value”, according to the currency, according to Bloomberg.
George Saravelos, Deutsche Bank’s main currency strategist, also warned that the risk of the dollar losing his safe port status “needs to be recognized as a possibility.”
The White House did not immediately respond to requests for comment. Although the government shows a preference for a weaker dollar to improve trade balance, both Trump and Treasury Secretary Scott Bessent said the currency should maintain its dominant position.
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The confidence crisis even came to central banks, traditionally protected from political pressures. Sources told Reuters Which European authorities have already wondered if the Federal Reserve can still be reliable to fulfill its role as a global financial stabilizer – providing dollars in times of stress.
Although they are unlikely that the Fed refuses to act as a security network, authorities informally discussed scenarios in which the US government can press the Central Bank.
The Fed did not comment, but gave no sign that it would no longer provide dollars in crises. Trump, in turn, said he does not intend to dismiss Fed President Jerome Powell, who has also stated that the president has no power for it.
Dollar x Gold
Of course, doubts about the future of the dollar are not new. Moody’s has recently warned that American debt – at extreme levels for decades – can weaken the central role of the coin and treasure titles in the global financial system.
Western sanctions against Russia after Ukraine invasion in 2022 also encouraged countries to reduce dollar dependence and diversify assets – especially gold.
Nassim Nicholas Taleb, author of The Black Swan logic, highlighted this risk last year by stating that sanctions were one of the greatest financial errors of the 21st century.
Meanwhile, central banks and consumers around the world continue to buy gold, which has doubled since 2022 e. Bank of America predicts that metal can reach $ 3,500.
“The question remains: Why would countries keep the dollar as the main currency if the US becomes increasingly isolationist? There is increasing concerns that ‘America First’ evolves into an ‘Alone’, which can accelerate the diversification of foreign exchange reserves,” wrote the bank’s analysts, concluding: “Gold will be the winner.”
