We Can't Afford to Diminish the Dollar

When the Administration announced sweeping new tariffs last month, Washington quickly turned to familiar debates: would the bond market force a retreat? Could the Administration strike “90 deals in 90 days” as promised? Would consumer prices spike before the midterms?

These questions, while not unimportant, miss the real story. Beneath the noise, a deeper shift is underway — one that could do more lasting damage to America’s global position than any trade disruption. The new tariffs have accelerated a growing trend of de-dollarization, as both allies and adversaries alike explore alternatives to the dollar. The U.S. political community has yet to fully grasp what this rapid erosion of the single greatest source of American economic and geopolitical leverage could mean for our foreign policy and national security. If the Administration’s proposed “Mar-a-Lago Accord, ” which aims to weaken the dollar to reduce trade deficits, revive manufacturing, and realign international economic relationships, becomes reality, implementation would require a precarious balancing act to successfully weaken the dollar without undermining its global dominance. With financial markets and trade and economic partners already more than a little queasy, any misstep could lead to capital flight, spark inflation, or accelerate moves by countries like China and Russia, and even U.S. allies, to diversify away from the dollar.

The movement away from the dollar is not new. But the increased willingness to use tariffs as a tool of foreign policy, as well as the Administration’s embrace of cryptocurrency, has accelerated it. The result is a rising threat to the foundation of U.S. global economic strategy, at a time when rivalry with China demands greater strategic coherence.

For over seven decades, the dollar has served as the world’s primary reserve currency, enabling Washington to project power globally. It is what makes U.S. sanctions regimes so devastating, affords America the ability to finance deficits at low cost, and makes New York the heart of global finance.

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