Dollar Dominance Under Threat as Geopolitics Shift
The US dollar's dominance in global trade and finance is being challenged by geopolitical shifts and a growing desire for payment autonomy. De-dollarization refers to the decline of the dollar's use in global transactions, which can have significant implications for the US economy and its role as a global leader.
According to Luis Oganes, head of Global Macro Research at J.P. Morgan, de-dollarization involves changes in the structural demand for the dollar that affect its status as a reserve currency. This includes areas such as transactional dominance in FX volumes or commodities trade, denomination of liabilities, and share in central bank FX reserves.
The dollar's decline is driven by two main factors: erosion of confidence in the US, which can undermine the perceived safety and stability of the dollar, and the rise of credible alternatives. For example, China has increased the share of its goods trade settled in yuan to around 28% in 2025, up from 12% in 2018.
BRICS nations are also exploring a common currency to reduce their dependence on the US dollar. However, there are currently no scalable alternatives to the dollar, and it remains the world's primary reserve currency.