De-Dollarization: 40 Countries Set to Move Away from US Dollar

De-Dollarization: 40 Countries Set to Move Away from US Dollar

De-Dollarization: 40 Countries Set to Move Away from US Dollar. A growing wave of de-dollarization is taking shape across the globe as over 40 countries have signed agreements with China’s central bank to use the yuan for trade, signaling a shift away from the US dollar. This development marks a significant milestone in the global economy, as the yuan’s share of international trade currency has increased from just 2% in 2019 to over 4.6% by April 2024.

The shift is primarily fueled by the rise of economic and political factors such as Western sanctions, geopolitical tensions, and the global push towards financial sovereignty. Countries previously subjected to stringent US sanctions have been at the forefront of this movement, with Russia and Iran leading the charge. Both nations, heavily sanctioned by the West, have officially moved away from the US dollar in favor of local currencies, initiating bilateral trade agreements in rubles and rials.

In a recent statement, Mohammad Reza Farzin, Governor of the Central Bank of Iran, revealed that Iran and Russia have fully eliminated the use of the dollar in their trade agreements, opting instead for local currencies: “We have entered into a currency agreement with Russia and fully removed the US dollar. Now we only trade in rubles and rials,” Farzin said.

This move is in line with broader efforts by the BRICS (Brazil, Russia, India, China, and South Africa) bloc, which has consistently advocated for local currency trade. The BRICS countries have been pushing to reduce dependency on the US dollar for international transactions, seeking to enhance economic cooperation among emerging markets and reduce their vulnerability to US financial dominance.

The de-dollarization movement has gathered significant momentum in recent years, particularly in light of US foreign policy decisions, including the imposition of tariffs and economic sanctions on several nations. As a result, many countries have been seeking alternatives to the US dollar to safeguard their financial independence and protect their economies from punitive measures.

However, US President-elect Donald Trump, set to take office on January 20, 2025, has vowed to tackle this trend directly. Trump has publicly stated that his administration would impose 100% tariffs on countries that abandon the dollar, asserting that the US would not tolerate the loss of its economic influence. “Many countries are leaving the dollar. They’re not going to leave the dollar with me. I’ll say, you leave the dollar, you’re not doing business with the United States because we’re going to put 100% tariff on your goods,” Trump declared in previous remarks.

Despite his stance, experts caution that such an aggressive approach could backfire. Imposing tariffs could further alienate countries already moving away from the dollar, potentially accelerating the de-dollarization trend. The global economic landscape has shifted significantly, with many nations now prioritizing alternatives to the US dollar, including the Chinese yuan, the euro, and even cryptocurrencies in certain cases.

The continued shift towards de-dollarization is also reflected in the growing use of digital currencies and central bank digital currencies (CBDCs). These emerging financial instruments provide countries with more control over their monetary systems and facilitate cross-border trade without relying on traditional reserve currencies like the US dollar.

While the full implications of de-dollarization are yet to unfold, the trend signifies a major transformation in global finance. As more countries seek alternatives to the US dollar, the dominance of the greenback could gradually diminish, reshaping the future of international trade and geopolitics.

As the world moves toward a more diversified financial system, it remains to be seen whether the US can maintain its economic hegemony or if the de-dollarization trend will continue to gain ground, potentially altering the dynamics of global power and influence.

Facebook
Twitter
LinkedIn
WhatsApp