US Dollar Dominance in International Trade and the Impact of Trump’s Policies

Abstract

This paper delves into the status of the US dollar as a world reserve currency and its profound impact on China's economy. It emphasizes the significance of capital account convertibility for governments and advocates the necessity for reform in the international monetary system. The study sheds light on China's remarkable economic growth and its reliance on the US dollar, while also exploring the emergence of an alternative currency basket featuring the Chinese yuan (RMB). With the gradual depreciation of the US dollar on the horizon, the potential consequences for China's economy are thoroughly examined.Additionally, the paper addresses the risks associated with de-dollarization and the potential flight of USD-denominated debt to alternative assets like gold. A detailed analysis of how Trump's economic policies, especially the trade war with China, have impacted the global role of the US dollar is presented. Furthermore, the paper provides a comprehensive historical review of the international monetary system, spanning from the gold standard to the Bretton Woods system and the Jamaican system. It critically discusses the flaws and instability inherent in the current system, including issues related to currency over-issuance and the multi-currency reserve system.In conclusion, the paper examines the policy signals of the Federal Reserve and the US Treasury, along with the ramifications of Trump's economic policies on the US dollar and the global economy. The findings underscore the urgent need for measures to address the challenges posed by the current monetary system and its potential impact on China's economy. The study advocates for a proactive approach to international monetary system reform to ensure economic stability, promote balanced global economic growth, and address the complexities arising from the dominant status of the US dollar as a world reserve currency.

Keywords

• Trade
• Dollar
• Convertibility
• CNY-USD exchange rate
• Currency basket
• De-dollarization
• Globalization

References

1. Baranyi, A., Csernák, J., & Csiszárik-Kocsir, Á. (2022). Methods for developing financial literacy. Online Journal Modelling the New Europe, 39. 174-195.
2. Borazan, A. (2023). Setting the record straight on the recovery from the 1920–1921 recession. Cambridge Journal of Economics, 47(2), 289-308.
3. Csapó, L. A., Czikkely, M., & Földi, P. (2018). Az információ menedzsment szerepe az okos városok vállalatfejlesztésében és kontrollingjában. Controller Info, 6(4), 27–35.