2025: Trump implemented the "America First" policy: The global status of the dollar is facing challenges

In 2025, President Trump of the United States promoted the "America First" policy, focusing on protectionism and economic nationalism, using tariffs and trade wars to reshape the global economic order, affecting the dollar's global status. The trade deficit widened, foreign investments pulled out, the dollar weakened, and the de-dollarization trend accelerated, creating monetary and geopolitical challenges for the United States. This article examines the policy background, the methods of implementation, and their effects on the dollar's international standing.

America First: The Return of Protectionism

Since 2017, the Trump administration has promoted the "America First" policy, advocating for rebuilding American manufacturing and the middle class through tariffs, trade barriers, and renegotiation of trade agreements. According to a report by The Center Square, Trump believes that decades of free trade policies (such as NAFTA, WTO, and China's most-favored-nation status) have severely harmed American workers and industries, resulting in the outsourcing of manufacturing and the shrinking middle class.

In 2024, the U.S. trade deficit reached $1.2 trillion, with an agricultural trade deficit of $39 billion, indicating a deepening reliance on foreign imports. In response, the Trump administration increased tariffs, imposing duties ranging from 20% to 140% on goods from multiple countries and removing exemptions, causing global supply chain disruptions and market panic.

Tariffs and the Dollar: Contradictory Policy Goals

Stephen Miran, an economic advisor to the Trump administration, argues that the dollar's long-term overvaluation is the root cause of the U.S. trade deficit. He points out that to provide global reserve assets, the U.S. must issue a large amount of Treasury securities (USTs), attracting foreign capital inflows, which in turn raises the dollar's exchange rate and weakens export competitiveness. Miran suggests using tariffs and other means to force foreign countries to reduce their purchases of U.S. debt, thereby lowering the dollar.

However, this strategy contradicts the goal of maintaining the dollar as the global reserve currency. According to The Washington Post, the dollar's reserve status allows the U.S. to raise funds at low interest rates, supporting large fiscal deficits and social spending. If foreign countries stop buying U.S. debt, it would lead to rising interest rates and increased fiscal pressure.

De-dollarization: Global Reactions and Trends

Trump's tariff policies and tough diplomatic stance have prompted many countries to seek de-dollarization. According to an analysis by the Council on Foreign Relations, the Russia-Ukraine war and U.S. sanctions policies have accelerated emerging markets' efforts to settle trade in local or other currencies (such as the renminbi and euro). BRICS countries (Brazil, Russia, India, China, South Africa) have started conducting energy and raw material transactions in renminbi.

China Daily Asia notes that the U.S. government is promoting the development of digital dollars and stablecoins as a means to counter China's digital renminbi and the BRICS payment system. These digital tools are seen as key to maintaining the dollar's global influence, but their effectiveness remains to be seen.

Market Reaction: Dollar Weakening and Capital Outflows

According to a report by RSM Real Economy, since early 2025, the dollar index has fallen by 9.25%, depreciating by 10.9% against the euro, and showing significant depreciation against the Swiss franc and Japanese yen. The yield on U.S. Treasury bonds with maturities of 10 to 30 years has risen, indicating a decline in market confidence in U.S. fiscal and monetary policies.

ABC News Australia reports that Trump's trade war and foreign policy have caused turmoil in global capital markets, leading to the sell-off of U.S. bonds, withdrawal of foreign capital, and even impacting monetary policies in Australia and Asia. The Reserve Bank of Australia (RBA) is considering consecutive interest rate cuts to address the global economic slowdown.

Policy Contradictions and Domestic Pressure

Despite Trump's claim that tariffs can rebuild American manufacturing and the middle class, according to Yahoo News, tariffs have led to rising inflation in the U.S., with interest rates remaining at 4.2% to 4.5%, and private loan rates reaching 6% to 7%, placing pressure on low- and middle-income families. The three pillars of the U.S. economy—consumption, investment, and exports—are all suffering, shaking market confidence.

Additionally, Trump's proposed "Tariff Humanitarian Corridor" policy, which requires products to contain 20% U.S. added value to enjoy lower tariffs, is putting pressure on supply chain countries like Taiwan, South Korea, and Japan. Taiwanese scholars point out that this could lead to industrial relocation and reduced local investment, further affecting exports and employment.

Historical Review: From Nixon to Trump

Trump's policies have precedents. In 1971, the Nixon administration, in response to the trade deficit, ended the dollar's convertibility to gold and implemented a 10% import surcharge, forcing other countries to appreciate their currencies. In 1985, the Reagan administration used the "Plaza Accord" to prompt the appreciation of the yen and the German mark, improving the U.S. trade balance.

However, Trump's strategy is more aggressive. According to The Washington Post, Miran even suggested imposing a "U.S. debt holding tax" on uncooperative foreign governments or removing military protection to force them to appreciate their currencies and increase defense spending. This approach of using economic means to achieve geopolitical goals is reshaping the U.S.'s relations with its allies.

References

• Op-Ed: In defense of President Trump’s America-first trade policy
• The Dollar: The World’s Reserve Currency
• Accelerated De-dollarization, Bearish Sentiment on the Dollar Reaches Historic Extreme! Can the Dollar Index Hold 100?
• Requiem for the dollar?
• Trump's 'America First' is threatening US financial dominance
• Mar-a-Lago accord signals US’ break from global integration
• Trump’s America First Trade Policy: How UK SMEs can remain resilient - Finance Derivative
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