Erika Larsson

If Donald Trump secures the Republican nomination and wins the 2024 presidential election, he will inherit a world grappling with complex geopolitical challenges, particularly the ongoing Russia-Ukraine conflict and the volatile situation in the Middle East since October 2023. Trump’s task will not be easy.

On the Russia-Ukraine front, Trump has repeatedly claimed that the conflict would resolve swiftly under his leadership, often citing his supposed rapport with Russian President Vladimir Putin. He has also criticized President Joe Biden’s policies as contributors to the turmoil in the Middle East, implying that a return to his presidency would stabilize these regions.

However, the geopolitical landscape has been profoundly altered by recent events, particularly the sanctions imposed on Russia following its invasion of Ukraine. In response, many countries are actively seeking to reduce their reliance on the U.S. dollar, a phenomenon known as “de-dollarization.” As of 2023, the U.S. dollar accounted for approximately 59% of global reserves, but that dominance is now being challenged.

The BRICS+ grouping, which expanded in January 2024 to include Iran, Egypt, Ethiopia, and the United Arab Emirates, has been exploring a common currency and developing an inter-payment system that has garnered participation from 159 countries. Moreover, nations traditionally allied with the U.S., such as India, the UAE, and Saudi Arabia, are also moving toward local currency trade, particularly for commodities. Notably, 20% of global oil trade in 2023 was conducted in non-dollar currencies.

A Misguided Approach to Economic Issues

In this context, Trump’s simplistic approach to economic warfare raises significant concerns. During his previous term, he imposed tariffs on multiple countries, straining relationships with allies and partners. Now, he has threatened to impose a 100% tariff on goods from countries that engage in de-dollarization. Speaking at a rally in Wisconsin on September 7, 2024, Trump declared:

“You leave the dollar and you’re not doing business with the United States because we are going to put a 100% tariff on your goods.”

Such statements reflect a lack of nuance in understanding the intricate dynamics of global trade and finance. Trump’s proposed punitive measures—tariffs and export controls—could exacerbate tensions, not only with adversaries but also with allies who are exploring alternatives to the dollar.

The Need for a Thoughtful Response

In conclusion, while Trump’s rhetoric on economic and foreign policy issues should be approached with skepticism, the real test will come when he is in power. His previous economic policies alienated even U.S. allies, and a rash approach to de-dollarization could further complicate diplomatic relations.

It is critical for a potential Trump administration to avoid hasty actions and instead engage in a thoughtful examination of why countries are seeking to reduce their dependence on the dollar. While the dollar is likely to remain the dominant global currency for the foreseeable future, dismissive attitudes towards its status may be overly pessimistic and simplistic.

The challenge lies not just in preserving the dollar’s dominance but in understanding the shifting landscape of global economics. A strategic, nuanced approach is essential if the U.S. is to navigate these turbulent waters successfully and maintain its standing in a rapidly changing world.