Online Reporter
Kundai Darlington Vambe
THE United States dollar has long been the cornerstone of global finance underpinning international trade reserve holdings and economic stability.
However a confluence of geopolitical and economic forces — escalating US-China tensions, the rapid expansion of the BRICS bloc and China’s strategic retreat from US Treasuries — is accelerating a seismic shift away from dollar dominance.
With Donald Trump’s return to the White House in January 2025 the stage is set for a high-stakes battle over global financial supremacy, one that the United States may not be equipped to win.
Trump’s Second Term: A Full-Scale Economic Offensive
Donald Trump’s re-election in November 2024 has ushered in a new era of economic confrontation building on the trade wars of his first term, but with far greater intensity.
His administration has doubled down on decoupling the US economy from China, targeting not only trade, but also technology finance and critical supply chains. This aggressive posture is reshaping global alliances and threatening the dollar’s superiority.
Tariffs as a Weapon of Economic Disruption
In January 2025 Trump imposed a staggering 60 percent tariff on Chinese electric vehicles (EVs) citing national security concerns and the need to protect American automakers.
This followed steep tariff hikes on semiconductors (45 percent) steel (30 percent) and critical minerals like lithium and cobalt (25 percent) which are vital for renewable energy and defence technologies.
These measures aim to cripple China’s export-driven economy and bolster domestic manufacturing, but they have triggered fierce retaliation.
China responded by restricting exports of rare earth elements which account for 90 percent of the US’s supply for defence technologies, including fighter jets missiles and drones.
Beijing also banned $20 billion worth of US agricultural imports targeting politically sensitive states like Iowa and Nebraska, which rely heavily on soybean and corn exports.
The tit-for-tat escalation has disrupted global supply chains driven up commodity prices and fuelled inflation with US consumers facing a 3,8 percent increase in grocery costs in Q1 2025 alone (US Bureau of Labour Statistics).
The Tech War: A Battle for Supremacy
The US-China technological rivalry has reached a boiling point. The Biden administration’s semiconductor sanctions which restricted China’s access to advanced chips have been tightened under Trump.
The US has pressured allies like the Netherlands (home to ASML the world’s leading producer of photolithography machines) and Japan (Tokyo Electron) to halt exports of chipmaking equipment to China.
In response Beijing has accelerated its “Xin Chuang” (New Creation) initiative investing $300 billion over five years to develop a self-sufficient semiconductor ecosystem.
By Q2 2025 Chinese firms like SMIC have achieved 7-nanometre chip production narrowing the gap with global leaders like TSMC and Intel. This tech decoupling is not without costs.
US chipmakers like NVIDIA and AMD have lost billions in revenue due to restricted access to China’s market while American manufacturers face higher costs for consumer electronics.
Meanwhile, China’s push for technological independence is fostering innovation in AI quantum computing and 5G positioning it as a formidable rival in the Fourth Industrial Revolution.
Financial Warfare: Targeting the Dollar’s foundations
The US has escalated financial sanctions threatening secondary penalties on Chinese banks facilitating trade with Russia North Korea and Iran.
These measures aim to isolate China from global financial networks, but they have backfired by pushing Beijing closer to Moscow and other anti-Western powers.
China and Russia have deepened their partnership through alternative payment systems like Russia’s SPFS and China’s CIPS which bypass the SWIFT network. In 2024 35 percent of Russia-China trade was settled in yuan or rubles up from 10 percent in 2020 (Bank of International Settlements).
Trump’s financial brinkmanship risks alienating allies as well. The European Union wary of being caught in the crossfire has resisted US calls for stricter sanctions on Chinese firms citing the need to maintain trade ties with Beijing. This divergence highlights the limits of US financial leverage in a fracturing global economy.
China’s Silent Treasury Dump: A Strategic Retreat
China’s holdings of US Treasuries have fallen to $760 billion as of May 2025 the lowest since 2009 down from a peak of $1,3 trillion in 2011 (US Treasury Department).
Rather than aggressively selling these bonds which could destabilise global markets Beijing is employing a subtler strategy: letting bonds mature without reinvesting the proceeds.
This approach avoids spiking Treasury yields which would crash bond prices and disrupt global markets while steadily eroding the dollar’s foundation.
Why This Strategy Works
A sudden dump of $100 billion in Treasuries could push 10-year Treasury yields above 6 percent triggering a bond market rout and forcing the Federal Reserve to hike interest rates further straining the US economy.
By contrast China’s gradual withdrawal minimises market disruptions while signalling to global investors that the dollar is no longer a safe bet.
This slow-motion divestment is complemented by China’s diversification into alternative assets, including gold infrastructure and yuan-denominated debt.
Where is the money going?
China’s gold reserves have surged to 2 300 tonnes in 2025 making it the world’s second-largest holder after the US (8 133 tonnes).
This gold accumulation serves as a hedge against dollar volatility and a potential foundation for a future reserve currency.
Simultaneously China is channelling billions into its Belt and Road Initiative financing infrastructure projects across Africa Asia and Latin America.
These investments lock recipient nations into yuan-based trade agreements with countries like Nigeria and Pakistan now settling 15 percent of their Chinese trade in yuan (International Monetary Fund).
China is also promoting the yuan’s internationalisation through digital innovation. The digital yuan (e-CNY) is now used in 40 percent of China’s cross-border transactions with Belt and Road partners reducing reliance on dollar-based clearing systems.
By 2030 analysts project the yuan could account for 10 percent of global trade settlements up from 4,5 percent in 2025 (SWIFT).
BRICS 2025: A Formidable Anti-Dollar Alliance
The BRICS bloc—now expanded to include Saudi Arabia Iran the United Arab Emirates Egypt and Ethiopia—has evolved from a loose coalition into a potent economic force.
Representing 45 percent of the world’s population and 35 percent of global GDP (PPP) BRICS is actively challenging the dollar’s dominance through coordinated de-dollarisation efforts.
The Petroyuan Threat
The petrodollar system which has underpinned US financial power since the 1970s is under unprecedented strain. In 2024 Saudi Arabia began accepting yuan for 25 percent of its oil exports to China a historic shift that undermines the dollar’s monopoly on global energy markets.
Iran a BRICS member since 2023 conducts 80 percent of its oil trade with China in yuan while the UAE has introduced dirham-yuan swaps to facilitate trade.
These moves reduce the need for dollar reserves eroding US influence over global oil markets.
De-dollarisation in trade
BRICS nations are rapidly diversifying their trade currencies.
Russia and India now settle 60 percent of their bilateral trade in rupees and dirhams bypassing the dollar entirely.
Brazil and China have shifted 90 percent of their soybean trade to yuan a critical development given Brazil’s role as the world’s largest soy exporter.
These agreements are supported by local currency swap lines which have grown to $200 billion among BRICS central banks (People’s Bank of China).
BRICS Bridge: A SWIFT Alternative
The BRICS Bridge a blockchain-based digital settlement platform is being piloted in 2025 to facilitate cross-border transactions without relying on SWIFT.
Nineteen countries, including non-BRICS members like Turkey and Vietnam have expressed interest in joining.
While still in its infancy the platform could disrupt the dollar’s dominance in global payments by offering a cheaper faster alternative to Western financial networks.
The Federal Reserve’s Looming Crisis
The US faces a growing debt crisis as foreign demand for Treasuries wanes and domestic borrowing costs soar. The implications for the dollar’s global status are profound.
Collapsing Foreign Demand
Foreign investors now hold just 30 percent of US debt down from 50 percent in 2008 (Federal Reserve). China’s retreat is compounded by other nations including Japan and Saudi Arabia reducing their Treasury purchases. This forces the US to rely on domestic buyers who demand higher yields to compensate for inflation risks. As of June 2025 10-year Treasury yields have climbed to 5,4 percent up from 4,2 percent a year earlier increasing borrowing costs across the economy.
Exploding interest payments
The US now spends $1.2 trillion annually servicing its $34 trillion national debt—more than its $1,1 trillion defence budget (Congressional Budget Office). This figure is projected to rise to $1,7 trillion by 2030 as yields increase and maturing debt is refinanced at higher rates. The growing burden limits fiscal space for infrastructure healthcare and social programmes fuelling domestic discontent.
The Debt Spiral Risk
Economists warn of a potential “doom loop”, where rising yields increase borrowing costs forcing the government to issue more debt which further drives up yields.
If this cycle accelerates the Federal Reserve may face a stark choice: impose austerity risking a recession or monetise the debt potentially triggering hyperinflation. Either scenario would undermine confidence in the dollar.
The Endgame: A Multipolar Currency World
The dollar’s decline is not imminent but the trajectory is clear. By 2030 the yuan could double its share of global trade settlements to 10 percent while the euro and other currencies gain ground in reserve portfolios (International Monetary Fund). The emergence of a BRICS-backed trade currency potentially tied to gold or a basket of commodities could further erode the dollar’s grip on global liquidity.
China’s Long Game
China’s strategy is not to topple the dollar overnight but to gradually reduce its dependence on US financial systems. By expanding the yuan’s role in trade building alternative payment networks and securing strategic assets like gold and infrastructure Beijing is positioning itself as a leader in a multipolar world.
The US’s Waning Leverage
Trump’s aggressive tariffs and sanctions have galvanised the anti-dollar bloc alienating even traditional allies. The European Union for instance has pursued “strategic autonomy” by deepening trade ties with China and exploring euro-based energy contracts. Meanwhile US sanctions have lost their bite as targeted nations like Russia and Iran find workarounds through BRICS and bilateral agreements.
A Post-Dollar Future
The dollar will likely remain a dominant currency for the next decade but its unchallenged reign is over. A multipolar currency system where the dollar competes with the yuan euro and potentially a BRICS currency will reshape global finance. This shift could reduce US borrowing capacity limit its ability to fund deficits and erode its geopolitical influence.
Conclusion: The Dollar’s Decline Is Inevitable
Trump’s economic nationalism may deliver short-term wins for American industries but it is hastening the dollar’s decline. China’s methodical retreat from US debt coupled with BRICS’ growing financial clout signals a world preparing for a post-dollar era. The question is no longer whether the dollar will lose its throne but how quickly the transition will unfold—and whether the US can adapt to a multipolar financial order. As global power shifts America faces a stark choice: reform its fiscal and foreign policies to preserve the dollar’s relevance or risk a chaotic unravelling of its economic dominance. The clock is ticking and the stakes could not be higher.
Kundai Darlington Vambe (LLB, University of London) is a lawyer. He writes in his personal capacity.
