Since the collapse of the Bretton Woods system in 1971, where the US dollar reigned as the central international currency system established after World War II, the dollar has been dominating the global financial arena. It has been used in international trade, sovereign loans, and central bank reserves, allowing the United States to borrow at low costs and wield significant financial influence worldwide. President Donald Trump’s administration has been perceived as adopting a tough stance towards perceived competitors, earning labels like “neo-Monroe Doctrine,” which can be understood from the perspective of maintaining dollar hegemony and fending off challenges from emerging powers like China and Russia.
Despite the dollar’s continued dominance in the global financial system, its influence has been on the decline in recent decades. According to data from the International Monetary Fund (IMF) and various central banks, the dollar’s share in global foreign exchange reserves has dropped from over 70% in 2000 to below 60% in recent years. This reflects efforts by countries to reduce reliance on the dollar and achieve currency diversification. Meanwhile, the share of China’s currency has significantly increased.
Countries are increasingly moving towards de-dollarization, which entails reducing the use of the US dollar in international trade and foreign exchange reserves. Part of this trend is driven by nations aiming to lessen the impact of US currency policies and sanctions, including tariff increases and unilateral economic measures against trade partners and adversaries.
The BRICS countries (Brazil, Russia, India, China, South Africa) have been a focal point challenging dollar hegemony. In various summits, the BRICS nations have proposed issuing a BRICS currency or a common alternative currency, potentially anchored to gold, to attract countries wary of fiat currencies. The value of fiat currencies is not backed by gold but relies on convention, oil trade flows, and America’s dominance in the global economy and military.
While Kremlin officials deny imminent plans to introduce a unified currency to replace the dollar, discussions on non-dollar currency transactions and alternative settlement systems are ongoing. The historical context of the gold standard and its relation to currency confidence are integral aspects of these discussions.
Since taking office, President Trump has made defending the dollar a core component of his foreign economic policy. He has threatened to impose 100% tariffs on BRICS nations or countries supporting alternative currencies in international trade. Clearly, the current administration believes the dominance of the dollar is non-negotiable.
By linking trade access to recognition of the dollar’s status, the current government seeks to reinforce global reliance on the dollar in trade settlements and foreign exchange reserves. This strategy ties its broader tariff and industrial policy agenda to maintaining the dollar’s global dominance.
The dollar’s unique position has historically been reinforced by its role in the oil market, known as the “petrodollar system.” Given that oil pricing and trading are predominantly in dollars, global demand for the dollar has been supported by energy trade. Some analysts suggest recent strategic moves by the Trump administration in oil-rich regions like Venezuela aim to strengthen the petrodollar system and retain key energy resources in dollar-dominated markets.
From a perspective of currency preservation, such efforts are reasonable. Despite being a major oil producer and exporter itself, the US benefits from maintaining the dollar’s pricing in energy markets to sustain demand for the dollar.
The dollar’s dominance brings immense benefits to the world and the US. It reduces transaction costs for American importers and exporters, solidifies America’s position in the global value chain, simplifies trade settlements with countries having less stable currencies, and supports liquidity and depth in US capital markets, enabling low-cost borrowing for investments in technology and innovation. Furthermore, the dollar in the form of US treasuries has long been a safe haven for long-term investments and savings globally.
The dollar’s standing also contributes to America’s leadership in areas like artificial intelligence, computing, and finance, as trading and financial infrastructure priced in dollars facilitate global scalability in these sectors. Dollar devaluation could lead to a fragmentation in global capital flows and weaken financing mechanisms historically fostering US technological leadership.
Ultimately, maintaining the dollar’s position enhances America’s military strength, making it easier to fund defense expenditures and sustain global military projection capabilities. If the dollar’s dominance wanes, the cost and complexity of upholding global military presence would increase, potentially diminishing US global strategic influence. Analysts argue that safeguarding the dollar’s status is not only a defense priority but also a financial one. Without the dollar, other competing nations or blocs could rush to fill the power vacuum, leading to global turmoil.
From this perspective, some argue that Trump’s “neo-Monroe Doctrine” not only reflects America’s ideological reassertion of influence in the Western Hemisphere but also embodies strategic maneuvers to defend dollar hegemony. As BRICS countries explore alternative solutions, including establishing settlement units tied to gold and increasing pressures towards de-dollarization, Washington faces mounting economic and geopolitical challenges. These factors help explain the administration’s aggressive stances on tariffs, trade, and strategic energy markets.
The continuity of dollar hegemony is not just about finance but also about upholding America’s influence in global affairs, including trade, sanctions, capital markets, and defense. As long as potential alternatives exist, US policy may continue to position the dollar as a key element of national security and global leadership, beyond just an economic asset.
The fundamental reason behind President Trump’s “neo-Monroe Doctrine” is to maintain the dollar’s status and America’s hegemonic position in the world. This is why actions in Venezuela aim at preserving the financial system that underpins US economic and military might.