The End of the Dollar’s Reign?

For almost a century, the dollar has reigned as the undisputed currency of the international financial system. Neither the creation of the euro nor the economic expansion of China nor the rise of cryptocurrencies has managed to disrupt its dominance. Despite economic crises, trade wars and geopolitical tensions, the dollar has remained firm as a safe haven, the universal means of payment and the primary unit of account for global trade.

But that solidity could be faltering. Not because of a technological revolution or a geopolitical decision orchestrated from Beijing or Brussels, but because of the reelection of a president who does not believe in the foundations that have sustained that leadership. Donald Trump is back in the White House and has begun a process of dismantling the pillars on which the supremacy of his country’s currency was forged. Could this be the beginning of the end?

The hegemony of the dollar was not an accident but the result of deliberate strategy throughout the 20th century. First, there was the creation of a central bank in 1913 that guaranteed liquidity and financial stability; then, with the Bretton Woods agreement in 1944, the dollar was consecrated as the only currency fully convertible to gold and consolidated as the linchpin of the international monetary system.

Combined with the economic dominance of the United States after World War II, this put the dollar on the throne of the Western world sustained by three pillars, until now: the defense of international trade, the trust its institutions inspire and a foreign policy based on long-term alliances.

Today, all these principles are challenged by the worldview that Trump embodies: a closed and protectionist economy; an institutional system weakened by its confrontation with the central bank and multilateral organizations that have sustained the current economic order; and a foreign policy that abandons historical alliances in favor of a transactional and unilateral logic.

Trump’s recent imposition of “reciprocal” tariffs on almost every country is only the most visible symptom of this reversal. The proposed plan is to impose tariffs, based not on multilateral rules or economic principles, but rather on the mere existence of bilateral trade deficits with the United States. In Trump’s logic, such deficits are intrinsically harmful. International free trade, as we have known it for decades, could be coming to an end.

The reaction of international markets was swift. Instead of strengthening — as conventional economic theory would suggest in the face of measures that increase the cost of imports and reduce demand for foreign currency — the dollar collapsed.

Indices that measure its relative value against other currencies have been falling throughout the year and doing so more sharply since the tariffs were announced last week. The U.S. currency has lost value against the euro, the pound, the yen and the Swiss franc; even the currencies of emerging economies, such as the Mexican peso, have appreciated in relative terms.

Everything suggests that the announcement was interpreted not as a sign of strength, but as a sign of dysfunction. We will have to wait to see how this evolves before reaching more convincing conclusions.

This behavior is not trivial. In times of crisis, the dollar has historically functioned as a refuge; its value has tended to rise when global risks increase. But the response to the announcement of reciprocal tariffs suggests this pattern is being eroded. If, instead of appreciating, the dollar falls as uncertainty rises, then its status as a safe haven — one of the pillars of its role as a world reserve currency — could be in jeopardy.

Beyond the current situation, the most troubling concern regarding the future of the dollar is the strategic direction suggested by new U.S. policy under Trump 2.0. A hostile front has opened, not only against its economic rivals such as China, but against its historical partners. The European Union, Japan, South Korea and other traditional allies now face punitive measures previously reserved for strategic adversaries. This weakens confidence in the stability of the global financial order led by the United States.

The recent decline in the S&P 500, the yields of Treasury bonds, the increase in indices that measure market uncertainty and, above all, the weakening of the dollar, are signs that the concept of a reliable, predictable and central U.S. economy in the international system is losing strength.

The dollar has survived many crises: wars, recessions, political changes. But its strength has never been automatic. It has relied on an institutional, political and economic framework guaranteeing that, when all else fails, the dollar does not. If that network begins to collapse, as current events suggest, the fall of the dollar will not be a passing accident, but the first sign of a changing era.