The full effect of President Trump's 'America First' doctrine is not yet known, but for economist Jeffrey Sachs, the US dollar is likely to suffer. At a recent conference hosted by Columbia University, Mr Sachs argued that Trump's tariffs and his broader affinity for upending trade agreements and multilateral treaties would diminish the US's role on the world stage. Eventually, he said, we'll see an alternative payments system in which the dollar, euro and China's renminbi share the global reserve currency spotlight.
While multiple reserve currencies have co-existed before, and of course dominance today does not guarantee dominance in the future (see: the British pound), the dollar's demise looks a long ways off. And the Chinese yuan — the most likely alternative (sorry, Mr Juncker) — has lost much of its momentum as a reserve currency.
There is perhaps no better reminder that the US dollar is dominant than the ongoing rout across emerging market economies. As we wrote recently, the worst-performing currencies this year share a disproportionate reliance on the greenback. Economists Ethan Ilzetzki of the London School of Economics and Carmen Reinhart and Kenneth Rogoff of Harvard University found that as of 2015, 62 per cent of countries anchor their currencies to the dollar and about the same percentage of developing countries borrow in the currency. On the other hand, less than 30 per cent of countries use the euro as an anchor for their exchange rates and only 13 per cent of external debt for developing countries is euro-denominated. The pound and the yen barely show up in the data.