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The leading role of the US currency in global trade, international payments and reserves is unlikely to be threatened in the coming years.
This opinion was expressed by Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, when asked by Ukrinform “How will Donald Trump’s policy affect the currency markets and the dollar’s position as the world’s reserve currency?”
According to him, the economic policy of any country is aimed primarily at the domestic consumer, at fulfilling election promises. For this, elected politicians are responsible to their voters.
“Trump wants to change the global rules of the game, which have long been built on the strengthening of globalization and free trade in the economic sphere and were perceived as a common and unconditional good, allowing developing countries to demonstrate catch-up economic development, thereby fueling the growth of the global economy. This has helped to significantly reduce poverty around the world over the past 50 years,” the MP explained.
According to him, such a policy had its advantages for the United States, but with the formation of significant trade deficits in relations with major partners, the emergence of China as a global superpower, which is the second in terms of nominal GDP and the first in terms of purchasing power parity, it has increased the risks. Hence the attempts to change the balance in global trade during Donald Trump’s first presidential term.
“The same, but more profound attempts are taking place now, which is reflected in the US protectionist policy to protect the domestic market (imposing protective duties against neighbors – Mexico, Canada – as well as China itself, threatening duties on EU countries, India, and Brazil), the announced policy of reducing dependence on critical raw materials, increasing energy production, aggressive use of AI, and supporting the development of manufacturing and innovation,” Hetmantsev stated.
At the same time, he recalled that previous episodes of trade wars (in particular during Trump’s first term) usually led to a strengthening of the dollar against major currencies and a “sinking” of the currencies of countries against which the United States imposes duties. At the same time, many other factors affect the price of the dollar on global markets. The main one is the difference (differential) in interest rates between the Fed’s rate and the rates of the world’s central banks, which affects investors’ interest in government domestic debt. Other factors include geopolitical influences, oil prices, economic dynamics of major countries, etc.
“As for the dollar’s position as a reserve currency, I think that despite the growing global uncertainty, intensification of trade wars, catalyzing various formats of regional trade, development of decentralized cryptocurrencies, the leading role of the US currency in global trade, international payments, international reserves, etc. is unlikely to be threatened in the coming years. Because there are currently no close alternatives. Of course, there is the euro, the second reserve currency after the dollar, but its share in international reserves is three times smaller (20% for the euro and almost 60% for the dollar), and it is also much smaller in other areas of use in the global economy. The use of other currencies is even more limited,” summarized Danylo Hetmantsev.
As reported, this week the dollar fell to a three-month low due to concerns about the negative impact of additional tariffs imposed by the United States on the economy. Fears have increased that the global trade war will affect economic growth and force leading central banks to cut interest rates even further. Although the US dollar is considered the world’s safest currency due to its liquidity and political stability, Deutsche Bank AG has questioned this. Some other banking groups and international experts expressed similarly negative forecasts for the US currency.
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