Former US President Donald Trump recently warned that if the US loses a currency war against China, it would be like America losing a world war, leading the country to become a second-tier nation. These remarks came in an interview with Fox News, where Trump elaborated on the threats China poses to America’s economic dominance. According to Trump, China wants to change the existing currency standard, which could eventually result in an end to the US dollar’s supremacy, thus making the US lose its power and strength. Trump’s warning comes at a time when there is growing concern that China is trying to replace the US dollar as the world’s primary currency.
As China seeks to extend its global influence and challenge the existing world order, it has been trying to push for the yuan’s greater use and acceptance on the global stage. Beijing’s long-term goal is to create a digital yuan that could replace the US dollar’s role in the global economy. The digital currency would allow China more independence from the global financial system, reduce the value of the dollar and weaken US geopolitical influence. China has already signed currency swap agreements with several countries, allowing them to trade directly in yuan without needing to convert it into dollars. In recent years, China has also been increasing its purchases of gold, which is seen as a hedge against inflation and a potential hedge against the US dollar.
Trump further lamented that Western countries are already losing their influence to China, with Brazil and Colombia falling into the latter’s sphere of influence. According to him, Iran and Russia have already aligned themselves with China, posing a significant threat to US geopolitical dominance. Trump also commented on France’s relations with China and President Emmanuel Macron’s recent meeting with Chinese President Xi Jinping, stating that such overtures should have raised alarm bells for the US. He added that had he been in the White House, he would have contacted Macron and threatened him with penalties such as import reductions on French wine.
While Trump’s views may be controversial, there is no denying China’s growing economic and financial clout, which poses a significant challenge to US currency dominance. China is the world’s second-largest economy, and its central bank, the People’s Bank of China, is the world’s largest holder of foreign exchange reserves. With such financial and economic firepower, China is well-positioned to challenge the US dollar’s dominance, a move that could significantly alter the balance of power in the global economy.
However, the pace of this shift is still unclear, and it remains to be seen if China can replace the US dollar’s preeminence. While China has been making significant strides in promoting its currency, the yuan still lags behind the US dollar in terms of its use in international trade and investment. Additionally, the US dollar remains the primary currency for central banks’ foreign exchange reserves, with the euro being the second most common reserve currency. More importantly, the US dollar remains the currency of choice for the world’s largest oil-producing countries, with Saudi Arabia pricing its oil in dollars.
The Biden administration’s policies towards China will also play a crucial role in determining the future of US dollar dominance. While the Trump administration pursued a confrontational approach towards China, the Biden administration has signaled a more conciliatory tone, seeking cooperation on issues such as climate change and global health. However, the Biden administration has not ruled out taking a tougher stance on China in the future, especially regarding human rights issues and geopolitical competition.
In conclusion, Donald Trump’s remarks on the US-China currency war highlight the growing competition between the two countries and the potential threat to US currency dominance. China’s growing economic influence and attempts to promote the yuan pose a significant challenge to the US’s long-standing economic and geopolitical dominance. However, the US dollar’s preeminence still remains strong, considering its use in global trade and investment and its role as the primary currency for oil producing countries. The future of US-China relations and the US dollar’s dominance remains uncertain, and it is essential to watch this space closely as the situation evolves.
