China Getting Ready to Steamroll the US Trade Dollar

Xi’s plan to position China’s currency, the yuan, for “international trade, investment, and foreign exchange” is perfectly matched to Trump’s plan to destroy the dollar for all of those same purposes. Thanks to the Trump Tariffs against all nations, China is on the road to becoming the alternate trading partner in the United States’ former lead position, with a currency big enough to match the dollar’s old role.

China’s global trade has grown to a size worthy of a global trade currency. Its yuan will obviously become much more valued as a trade currency as more trade begins to happen in goods originally priced in yuan than in goods from the once-powerful US, which have been made much more expensive in almost all nations outside the US because those nations have enacted their own retaliatory tariffs against US goods, but not against each other. This has given Chinese products a new leading edge over US products.

Meanwhile, hatred for the United States’ weaponized currency is growing right alongside the growing interest in China, causing the world to long for an alternative trade currency. US sanctions against nations at war, like Russia, Iran, Syria, etc., have long stirred animosity against the US dollar. Now that tariffs are regularly being used as a club in order to take over other nations, such as Greenland (a territory of Denmark) and Canada, rage against the trade dollar is an offshoot of rage against the US.

“What constitutes a strong financial nation?” Xi had said. “First, it should have a powerful currency, widely used in international trade, investment, and foreign exchange markets, holding the status of a global reserve currency.”

The part I italicized there is, of course, the source of the dollar’s downfall that I said all of last year would emerge from the Trump Tariff Wars as they hugely bite into international trade with the US and, therefore, into the need for dollars in foreign exchange. Now you are reading about it happening in the mainstream press. Xi’s got the formula right because China learns by copying, and Xi has recognized those are exactly the traits the US dollar has long enjoyed, which gave the US dollar its global currency status. Xi sees the current cracks throughout the dollar system and is ready to penetrate them and bust them apart.

The excerpts listed what Xi described as the key features of a financial powerhouse — “a strong economic foundation”, global leadership in technology and industry, and a currency that is widely used and trusted across the world.

It’s hard to trust a dollar weaponized all the time for war sanctions, and hard to trust a nation that constantly reneges on its trade agreements, frequently flashing its TACO tariffs higher and lower, on again, so no one trusts trade happening in dollars with the US.

He said a strong financial system also needs an effective central bank, a sound monetary policy, strong risk control, globally competitive financial institutions and international financial centres with pricing power.

Again, all traits where the US used to dominate. Perhaps it still does, but unfortunately, retributive tariffs imposed by all the nations the US has attacked with higher tariffs are diminishing the need for US dollars.

(I will lay out for paying subscribers some of the issues for the average person that will come from the rapidly developing decline of the dollar. As I pointed out in the many points of my weekend Deeper Dive, it seems Trump has a cryptocurrency to pitch as a replacement for the dollar, so naturally, devaluing his arch competitor is seen as a good thing, and he has the home-field advantage of having a lot of control/influence over the dollar. China sees the value in striking now while the dollar is in rapid decline. The damage from this transition may be something the US can never fully recover from in terms of its present powerful position because the world doesn’t want it to.)