“Is America’s Promise in Jeopardy? Global Concerns”
President Donald Trump’s actions have not only caused alarm among American allies and trade partners but also prompted uncertainties about US assets, particularly the dollar. While the dollar is still the dominant global currency, doubts are emerging about the reliability of the US in the future. This lack of trust could potentially affect financial markets and the status of the dollar worldwide.
Despite the current dominance of the dollar in global reserves and transactions, recent events have raised concerns. President Trump’s unconventional approach to international relations, such as warming up to Russia and questioning commitments to NATO, has eroded trust in America. Some experts have even suggested that other currencies, like the Japanese yen, could replace the dollar as a safe haven.
The President’s policies and statements have led to skepticism regarding US commitments, with implications for alliances and financial stability. Concerns about the US honoring treaties and agreements have prompted reevaluations by countries like Canada and Portugal, impacting decisions on defense spending and trade relationships.
Barry Eichengreen, an expert on economics and political science, has warned that the US risks losing its global influence if it alienates its allies. The historical connection between alliances and currency usage underscores the importance of maintaining strong partnerships for the stability of the dollar.
As the geopolitical landscape evolves, Wall Street analysts are beginning to contemplate the potential consequences for the dollar’s value and role in the world. There are growing concerns that President Trump’s policies, such as trade disputes and shifts in military alliances, could hasten the process of de-dollarization and weaken the greenback’s position on the global stage.
Deutsche Bank’s foreign-exchange strategist, George Saravelos, has cautioned about the potential for the dollar to lose its safe-haven status as global markets adjust to shifts in the world order. The White House has not responded immediately to requests for comment. While the administration has hinted at a preference for a weaker dollar to enhance the US trade balance, both President Trump and Treasury Secretary Scott Bessent have emphasized the importance of the dollar maintaining its prominent role.
Trust in central banks, typically shielded from political influence, has also been eroded. Reports suggest that some European central banking and supervisory officials are questioning whether the Federal Reserve, an independent agency, can be relied upon to fulfill its crucial role in providing dollars to alleviate market strains. Although the scenario of the Fed shirking its backstop responsibilities is deemed highly improbable, officials have informally discussed potential instances where the US government pressures the Fed.
The Fed has refrained from commenting and has shown no indication of withholding dollar funding in times of crisis. President Trump has affirmed that he will not remove Fed Chairman Jerome Powell, who has likewise stated that the president lacks the authority to dismiss him.
Concerns regarding the dollar’s future are not uncommon, with Moody’s cautioning about the overwhelming US debt potentially offsetting the dollar and Treasury bond market’s pivotal roles in global finance. Following Western sanctions against Russia for its actions in Ukraine in 2022, other nations have sought to lessen their reliance on the dollar by diversifying their reserves with assets like gold.
Notably, the price of gold has surged, doubling and surpassing $3,000 per ounce since 2022. Analysts at Bank of America anticipate this trend continuing, forecasting a possible increase to $3,500. Speculation abounds regarding the motivation for countries to continue using the dollar as their primary currency, particularly if the US adopts a more insular stance. Concerns persist about whether the “America First” approach may evolve into a policy of “American Alone,” possibly prompting further diversification of foreign exchange reserves, with gold emerging as a favored alternative.
This article was originally published on Fortune.com.
