Core Viewpoint - The article discusses the decline of the US dollar's credibility as the world's dominant currency due to various factors, including tariff policies and increasing national debt, which threaten its status as a global reserve currency [1][3][10]. Group 1: Impact of Tariff Policies - The US dollar has experienced a downward trend, particularly influenced by Trump's tariff policies, which have created significant risks for the global economy and the US economy [3][4]. - The average effective tariff rate in the US has reached 18.3%, the highest level since 1934, which has led to a loss of dollar credibility despite achieving some trade negotiation successes [3][4]. - Tariff policies raise trade barriers, making it harder for non-US countries to obtain dollars, thereby reducing the demand for the dollar and undermining its traditional influence [4][5]. Group 2: National Debt and Fiscal Deficits - The US national debt has surpassed $36.2 trillion, with interest payments becoming the fastest-growing part of government expenditures, projected to exceed $1 trillion in fiscal year 2024 [10][12]. - The increasing fiscal deficit, which reached $1.83 trillion in the previous fiscal year, has led to a cycle of rising national debt and interest payments, further eroding the credibility of the dollar [10][11]. - The Congressional Budget Office (CBO) predicts that the national debt could increase by $20 trillion over the next decade, raising concerns about the sustainability of the US government's ability to service its debt [11][12]. Group 3: Shift Towards De-dollarization - Many countries are actively seeking to reduce their reliance on the US dollar, creating alternative payment systems and exploring the establishment of new currencies to bypass dollar dominance [15][16]. - Initiatives such as bilateral trade agreements using local currencies and the establishment of regional payment systems indicate a growing trend towards a multi-polar currency system [15][17]. - The historical context suggests that the transition from a dollar-centric system to a diversified currency framework will be gradual and complex, reflecting the challenges of restoring trust once damaged [17].

Group 1: Dollar's Role and Challenges - The dollar has transitioned through various roles, from a dominant currency post-World War I to a key player in the Bretton Woods system, but its fundamental financing function is being misaligned [1][4] - The dollar is increasingly used as a tool for financial sanctions by a few countries, leading to a deconstruction of the credit preference associated with it [1][4] - Tariff policies under the Trump administration have negatively impacted the dollar's credibility, as increased tariffs create risks for global and U.S. economies, reducing the demand for dollars [2][3] Group 2: Economic Implications of Tariff Policies - Trump's tariffs aim to reduce trade deficits and encourage domestic manufacturing, but they may ultimately decrease dollar outflow and international demand for the dollar [3][4] - The focus on goods trade neglects the service trade, where the U.S. has a surplus, and retaliatory measures from other countries could further diminish dollar influence [3][4] Group 3: U.S. National Debt and Dollar Credibility - The U.S. national debt has surpassed $36 trillion, with interest payments becoming the fastest-growing part of government spending, raising concerns about the sustainability of U.S. fiscal policy [7][8] - The cycle of increasing fiscal deficits and national debt issuance is eroding the credibility of the dollar, as the government struggles to manage its financial obligations [6][8] Group 4: Global Shift Away from the Dollar - Countries are actively seeking alternatives to the dollar, establishing bilateral trade agreements and payment systems to reduce reliance on the dollar [10][11] - The trend towards "de-dollarization" is gaining momentum, with various nations exploring digital currencies and alternative payment mechanisms, indicating a shift towards a more diversified global monetary system [11][12]