US President Donald Trump’s tariffs announcement has sent shockwaves through global markets, causing a sell-off in stocks, bonds, and currencies. The dollar fell by over 1% against a basket of other currencies, reaching its lowest level in three years, as investors question the safe-haven status of the US currency.
Markets are not only experiencing a traditional market downturn but also seeing the dollar lose value in sync with US equities, government bonds, and Treasuries. This is unusual behavior, as investors normally seek refuge in dollars and Treasury bonds during periods of uncertainty.
The dollar’s loss of status as the global reserve currency has been attributed to Trump’s erratic policy changes and trade war with traditional allies and enemies alike. Economists warn that this could lead to a recession in the US, with some speculating that interest rates may be cut by the Federal Reserve.
“This is not a global crisis,” said Pascal Lamy, former EU trade commissioner. “The US is 13% of world imports, but there’s no reason for the remaining 87% to be contaminated by these voodoo economics.”
Some economists see little problem with the US’s persistent trade deficits, but others warn that the dollar’s loss of status could lead to severe damage for the world economy.
As countries consider contingency plans, the EU has emerged as a potential alternative to the dollar. José Luis Escrivá, governor of the Bank of Spain, stated that the bloc can offer a large economic area and a solid currency, benefiting from stability and predictability in sound economic policies and the rule of law.
The IMF has shown that the US dollar accounts for 60% of global foreign exchange reserves, with the euro at around 20%. However, the use of alternative currencies such as the Canadian, Australian, Swiss francs, and yen is on the rise, further undermining confidence in the dollar.
Source: https://www.theguardian.com/business/2025/apr/11/the-damage-is-done-trumps-tariffs-put-the-dollars-global-reserve-status-at-risk