Core Viewpoint - The U.S. faces a "dilemma" regarding the dollar, balancing between maintaining its status as the dominant international reserve currency and addressing domestic economic challenges [1][6][15]. Group 1: Global Trade and Currency Connection - The current global trade and tariff disputes are deeply intertwined with currency issues, particularly the dollar's role in international trade [1][5]. - There are two main channels connecting trade disputes to currency: traditional exchange rates and the impact of high domestic savings rates in countries like China [2][4]. Group 2: U.S. Dollar's Dilemma - The U.S. aims to promote a competitive dollar to enhance manufacturing and improve trade balances while also wanting to maintain its geopolitical leverage through the dollar [6][15]. - Achieving both objectives is seen as unlikely, as the dollar will have to concede some of its global dominance [6][15]. Group 3: Potential Challengers to the Dollar - Four currencies are identified as potential challengers to the dollar: the euro, the renminbi, Special Drawing Rights (SDR), and digital currencies [8][9][12]. - The euro faces challenges related to the EU's internal dynamics and lacks a corresponding fiscal authority [8]. - The renminbi has made progress in internationalization but still lags in global financial transactions and reserves [9][10]. Group 4: Opportunities for Reform - The current situation presents an opportunity for reform in the international monetary system, particularly if the U.S. allows the dollar to retreat from its dominant position [13][14]. - The role of SDR could be expanded to provide a more stable alternative to the dollar, promoting a multipolar currency system [12][14]. Group 5: Conditions for Currency as Reserve - For a currency to serve as a reserve, it must provide stable and secure assets, which is currently a challenge for alternatives to the dollar [19][20]. - The global demand for reserve currencies is complex, and the scale of dollar assets may not reflect the actual need for reserve currencies [20][21].

Core Viewpoint - The article discusses the conflicting goals of the United States regarding the dollar, highlighting the dilemma of maintaining its status as the dominant international reserve currency while also addressing domestic economic challenges [1][6]. Group 1: Global Trade and Currency Connection - The current global trade and tariff disputes are deeply intertwined with currency issues, which can be analyzed through two main channels: exchange rates and savings rate spillover [3][5]. - For smaller countries, exchange rates are effective tools for balancing international payments, but for major economies like the U.S., the impact of exchange rates is limited [3][5]. - The high domestic savings rate in Asia, particularly China, contributes to trade imbalances and strong foreign investment, which is linked to currency dynamics [3][5]. Group 2: U.S. Dilemma with the Dollar - The U.S. faces a dual challenge: promoting a competitive dollar to enhance manufacturing and trade balance while also using the dollar as a geopolitical tool [6][11]. - There is a contradiction in U.S. policy where it desires a weaker dollar for domestic benefits but also aims to maintain its global dominance [6][11]. - Achieving both objectives simultaneously is deemed unlikely, suggesting that the U.S. may have to concede some of its dollar dominance [6][11]. Group 3: Potential Challengers to the Dollar - The euro is the second-largest currency in the SDR basket but faces challenges such as unclear fiscal authority and insufficient market integration [9]. - The renminbi has made strides in internationalization, particularly after the 2008 financial crisis, but still lags in global financial transactions and reserves [10][11]. - The SDR could play a larger role in the international monetary system if it is recognized as a viable alternative to the dollar, promoting a multipolar currency system [13][14]. Group 4: Conditions for Other Currencies - For other currencies to gain prominence, they must meet certain conditions, such as having a significant trade deficit to export currency effectively [18][20]. - The ability to provide stable and secure assets is crucial for any currency aspiring to be a reserve currency, with the dollar currently seen as the most stable option [20][21]. - The global demand for reserve currencies must also be assessed, as the current volume of dollar-denominated assets may not reflect actual reserve needs [22]. Group 5: Opportunities for Reform - The current dilemma facing the dollar presents an opportunity for reform in the international monetary system, contingent on the willingness of the U.S. to adapt its stance [14][16]. - The potential for SDR to take on a more significant role hinges on achieving consensus among major economies and addressing the structural issues within the current system [15][16].