The Empire's Currency: Why Undermining The Dollar Hurts American Power

Donald Trump’s return to the political stage has brought renewed attention to one of the paradoxes that marked his first term and now looms large over his second: while advocating for a stronger, more independent United States, his economic rhetoric often targets the very structures that enable American global influence—chief among them, the primacy of the US dollar.

In recent months, Trump has sharpened his criticism of dollar strength, railing against the Federal Reserve and calling for more aggressive policies to weaken the currency. His stance reflects a longstanding belief that a strong dollar undermines American exports and hurts manufacturing competitiveness. But behind this economic argument lies a strategic contradiction: the more the United States undermines its own currency dominance, the more it risks eroding the foundation of its global power.

The Dollar as a Pillar of American Dominance

The US dollar is not just a currency. It is the backbone of the global financial system. Over 80% of international trade is invoiced in dollars, central banks hold more dollar-denominated reserves than all other currencies combined, and global commodities—from oil to grain—are priced in dollars. This status grants the US a unique economic and geopolitical advantage.

Washington can run sustained fiscal deficits and borrow at lower rates than any other sovereign issuer because of relentless global demand for US Treasuries. More importantly, the dollar gives the United States unrivalled coercive power. The US Treasury can cut off access to dollar clearing systems, making sanctions against adversaries uniquely effective. When the dollar moves, markets worldwide respond.

This structural dominance—often referred to as the “exorbitant privilege”—is what allows the US to exert outsize influence in international affairs without direct force. It is also a key enabler of the very foreign policy leverage Trump says he wants to expand.

Trump’s Assault on the Dollar

Trump has long positioned himself against the orthodoxy of strong-dollar policy. During his first term, he regularly accused the Federal Reserve of keeping interest rates too high and sabotaging economic growth by failing to devalue the currency. His trade agenda—tariffs on China, pressure on the EU, threats to exit multilateral trade deals—was framed around correcting what he saw as currency manipulation and unfair advantages enjoyed by weaker-currency countries.

Even more radically, Trump has questioned the value of US involvement in multilateral institutions like the International Monetary Fund and World Trade Organization, both of which reinforce dollar-centric global norms. He has floated the idea of disengaging from agreements that lock the US into maintaining a currency system that, in his view, constrains domestic economic sovereignty.

In rhetoric, Trump often frames these ideas as bold nationalism. In practice, they amount to attacks on the mechanisms that preserve American financial preeminence.

Strategic Contradictions

The strategic contradictions in Trump’s approach are becoming harder to ignore. The dollar is not simply a means of trade; it is the central artery of American global influence. Undermining its credibility threatens not only economic stability but also Washington’s ability to project power without deploying troops or expanding budgets.

Trump’s pressure on the Fed to weaken the dollar for domestic gain has the unintended effect of introducing political risk into currency policy. Markets begin to price in the possibility that dollar management could become a partisan tool rather than a neutral, institutional function. This erodes trust, and trust is the currency in which reserve status is truly denominated.

Moreover, Trump’s trade antagonism and isolationist tendencies have pushed some nations—China, Russia, and members of the BRICS group—toward experimenting with alternatives. These include cross-border settlement systems that bypass SWIFT and proposals for commodity-backed or basket-based currencies that would reduce reliance on the dollar. While these efforts remain fragmented and largely symbolic for now, they gain momentum when US political leaders appear willing to gamble with dollar stability.

The Risk of Unintended Consequences

Trump’s policies may succeed in delivering tactical wins—tariff concessions, short-term trade deals, or headline-grabbing growth spikes—but they risk introducing systemic instability. Markets are already sensitive to signals of dollar politicisation. When the White House threatens to intervene in currency markets or reshape the Fed, investor confidence can quickly erode.

Such shifts are not hypothetical. During Trump’s first term, his administration considered direct currency intervention through the US Treasury’s Exchange Stabilization Fund. While ultimately shelved, the mere discussion rattled markets and sparked internal resistance from the Federal Reserve. These moves raise the question: if the global financial system’s anchor starts to drift, where does stability come from?

The dollar’s dominance is based not just on economic scale, but on institutional credibility. If US leadership undermines that, the privilege could eventually erode.

Why Alternatives Still Lag

Despite growing frustration with dollar dependence, viable alternatives are scarce. The euro is constrained by political fragmentation within the EU and a lack of fiscal union. The Chinese yuan, while actively promoted through Belt and Road initiatives and bilateral swap lines, is hampered by capital controls and a rigid financial system. Emerging-market currencies lack the liquidity, scale, and trust required to function as global benchmarks.

Multilateral efforts, such as BRICS proposals for a shared reserve currency or Middle Eastern discussions around oil settlement diversification, are conceptually interesting but operationally distant. They lack the legal, institutional, and market infrastructure that supports the dollar system.

Ironically, Trump’s attacks on the dollar could accelerate interest in these alternatives—but without viable replacements, global markets are likely to remain tied to the greenback for the foreseeable future. The greater risk lies in creating enough uncertainty to weaken the dollar’s strategic role, without offering a stable new architecture to replace it.

Conclusion

Donald Trump’s campaign against the dollar’s strength is consistent with his economic nationalism and rejection of globalist frameworks. Yet by weakening confidence in the institutions that sustain dollar dominance, he may be undercutting one of America’s most powerful tools of influence.

The paradox is clear: in seeking to enhance American sovereignty and global leverage, Trump’s policies risk dismantling the very systems that make that power possible. The dollar is not merely a currency—it is the foundation of the American-led financial order. To erode that position is to erode the empire it supports.

Author: Ricardo Goulart