U.S. Dollar Drops as Protectionist Policies Drive De-Dollarization
(MENAFN) The US dollar's grip on global finance is loosening as protectionist trade measures and rising geopolitical tensions lead to a surge in de-dollarization efforts, with increasing calls for alternative global currency systems.
The US Dollar Index plummeted by over 11% in the first half of the year, reaching a low of 97—its most significant first-half drop since 1973. In fact, the index has dipped 7% since President Donald Trump imposed sweeping reciprocal tariffs on April 2, a move that has raised concerns about the dollar's future stability.
Global trade fragmentation and geopolitical instability are pushing central banks and investors to diversify away from the US dollar, turning instead to assets like gold, the euro, and even the Chinese yuan.
In 2025, the dollar lost more than 12% against the euro, largely attributed to Trump's policies. While these policies aimed to reduce the US trade deficit, they also spurred fears about escalating borrowing costs.
Meanwhile, China has kept the yuan closely tethered to the dollar, enabling its export prices to remain competitive, especially within the European market.
The BRICS nations—Brazil, Russia, India, China, and South Africa—have ramped up efforts to bypass the dollar in trade deals, further contributing to the rising de-dollarization trend. Trump reacted to the bloc’s moves, accusing them of trying to "destroy the US currency" and promising to counteract it.
According to a recent survey by the Official Monetary and Financial Institutions Forum, 80% of central banks expressed concerns over US political developments, while 16% indicated plans to boost their euro reserves in the next 12–24 months. Additionally, 32% of central banks aim to increase their gold holdings during the same period.
With the future of the US dollar increasingly uncertain, financial powerhouses are actively seeking alternatives, signaling a possible shift in the global economic order.
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