The escalating tariff war between the United States and China is not just a bilateral trade dispute—it’s a global economic tremor. Since 2018, both superpowers have imposed tit-for-tat tariffs on hundreds of billions of dollars’ worth of goods, affecting global supply chains, inflation rates, and investor sentiment. But as the US maintains pressure through tariffs and sanctions, China is now actively exploring economic alternatives, with one bold question rising above all: Can China really ditch the US dollar?
🇨🇳 A Brief Timeline of the Tariff War
- 2018: US imposes tariffs on Chinese steel and aluminum; China retaliates.
- 2019: The US escalates tariffs on over $250 billion of Chinese imports.
- 2020: Phase One deal signed but key issues remain unresolved.
- 2021–2024: Continued tensions, especially in technology (Huawei, TikTok) and semiconductors.
- 2025: Tariffs remain largely intact; geopolitical rivalry deepens amid Taiwan and South China Sea issues.
💰 Why the US Dollar Matters
The US dollar dominates international trade, comprising nearly 60% of global foreign exchange reserves. Most global oil, semiconductor, and commodity transactions are conducted in dollars. This gives the US immense economic leverage via:
- Sanctions control
- Swift-based financial exclusion
- Dollar-based debt pressure
To counteract this, China has been accelerating its dedollarization strategy.
🪙 China’s Alternatives to the Dollar
1. Bilateral Trade in Local Currencies
China has signed multiple agreements with countries like:
- Russia – settling gas and oil in yuan
- Iran – barter and yuan-based oil trade
- Brazil & Argentina – settling trade in local currencies
2. The Digital Yuan (e-CNY)
- Launched by the People’s Bank of China
- Already used in domestic payments
- Piloted for cross-border settlements in Hong Kong, UAE, and Thailand
- Designed to bypass SWIFT and offer an alternative to US-controlled finance infrastructure
3. Strengthening BRICS+ Alliances
- Push for a BRICS currency backed by a commodity basket
- Potential for trade agreements without the dollar across emerging markets
- China promotes the “Global South” financial system
4. Gold Reserves & Sovereign Wealth
- China is the world’s largest gold buyer in recent years
- Boosting gold reserves to back its currency indirectly
- Diminishing reliance on US Treasury securities
📉 Limitations of China’s Strategy
Despite China’s aggressive push, ditching the dollar won’t be easy:
- Lack of convertibility: The yuan isn’t freely convertible in global markets
- Capital controls: China’s tight capital flow restrictions deter foreign investors
- Trust factor: Global markets still see the dollar as more stable, especially in crises
- Infrastructure dominance: The US still dominates global payment systems like SWIFT
🏭 Impact on Global Trade
- ASEAN & Africa: Pivoting toward yuan settlements for infrastructure projects
- Europe: Caught in the middle, maintaining dollar preference but expanding yuan reserves
- India: Avoiding full alignment, but occasionally trading in rupees/yuan for Russian oil
- Multinational Companies: Hedging currency risks amid rising yuan-based contracts
🔮 What the Future Holds
- Short-term: Dollar dominance remains strong, but the cracks are visible
- Mid-term: More countries join local currency pacts to avoid US sanctions
- Long-term: A multipolar currency world may emerge, where the yuan, euro, and dollar share dominance
China’s strategy isn’t about replacing the dollar overnight—it’s about building resilience against its power.
📝 Conclusion
The US-China tariff war is not only reshaping global trade routes but also financial architecture. While China’s dream of ditching the dollar is ambitious, the groundwork is being laid brick by brick. The success of this plan depends not just on China’s policies, but also on the trust of the global financial community. One thing is certain—the era of unquestioned dollar supremacy is facing its toughest challenge yet.
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