The US dollar remains the undisputed global gold standard of currencies – it's the world's primary choice for investing, trading, and reserve holdings. But with the turmoil caused by President Trump’s tariffs, markets are wondering whether its global grip is loosening, or simply hitting a speed bump.

What’s going on here?

“De-dollarisation” and “changing world order” are terms being thrown around, speculations of the end of the almighty dollar’s reign. Some central banks are adjusting their reserve portfolios, governments are experimenting with non-dollar bonds, and alternative payment systems could emerge.

However, the dollar still accounts for about 60% of global foreign exchange reserves – the next closest competitor (the euro) only stands at around 20% according to IMF data. 

The recent tariff tensions have, however, raised some eyebrows. The White House has hit its trading partners with unpredictable new import duties and that shift toward economic nationalism has made their allies uneasy. Global markets like stability – and that’s being tested right now. Since the start of the year, the US dollar has lost about 10% of its value against a wide basket of currencies.

But this isn’t all about one US president. When Russia invaded Ukraine in 2022, a string of sanctions sent a clear reminder – the dollar can be a powerful weapon. That was a wake-up call for countries like China and India, prompting them to explore ways of reducing the risk of being cut out of the dollar-based system. 

What’s the takeaway?

It's important to maintain perspective. The US dollar still holds a central place in global finance and US markets continue to offer unmatched depth and liquidity. However, if your entire portfolio is invested solely in USD-oriented assets, like US stocks, you might be overconcentrating your risk.

It’s always a good idea to diversify your investments across countries, asset classes, and currencies – it's a sensible approach to managing risk while capturing opportunities worldwide (if you’re looking for a ready-made portfolio like that, check out General Investing.) Gold is likely to keep shining as well – it doesn’t rely on any one government and it’s been the ultimate hedge against uncertainty for thousands of years (if you’re looking for an easy way to invest in gold, check out our Flexible Portfolios.)

📰 In Other News: China's growth surprise – the calm before the tariff storm?

China’s GDP grew by a better-than-expected 5.4% year-on-year for the first quarter, but analysts don’t expect that economic resilience to last. With the US now placing tariffs of up to 245% on Chinese imports, it's easy to see why they're pessimistic.

Eager to ship stuff to customers before those increased costs set in, the country’s factories have likely been pushing production lines into overdrive, contributing to that healthy growth number. That figure was also fueled by the retail side of things – helped along by state-sponsored spending incentives, Chinese shoppers spent 5.9% more this March than the last, far above the 4.2% analysts predicted.

These articles were written in collaboration with Finimize.

📖 A Little Context: The almighty dollar

The US dollar's role as the world's reserve currency dates back to the 1944 Bretton Woods Agreement, when 44 countries agreed to peg their currencies to the dollar. It has since maintained its position through sheer economic momentum and trust. Being the world's reserve currency gives the US the ability to borrow more cheaply, conduct international trade in its own currency, and project financial power globally.