With Dollar Hegemony At Risk, Could This Be Crypto’s Moment? #CriptoNews

On Wednesday, President Trump announced a much-needed 90-day pause on the steep tariffs he proposed last week during “Liberation Day”—likely prompted by the significant market turmoil his initial decision caused, including a troubling spike in key U.S. Treasury yields.

For now, most countries still face a substantial 10% tariff, with two notable exceptions: Russia, exempt from new tariffs but sidelined due to sanctions, and China, singled out with a punishing 145% tariff. For historical context, consider the infamous Smoot-Hawley Tariff Act of 1930, widely blamed for deepening the Great Depression. That measure raised the average tariff rate across goods to just 19.8%, and even then, it strategically targeted specific agricultural and industrial goods.

Economists rarely find consensus—but the empirical evidence against sweeping tariffs is nearly unanimous. Tariffs essentially act as an indirect tax on consumers, provoke retaliatory measures, drive inflation higher, and destabilize financial markets. While targeted and temporary tariffs can indeed protect nascent industries from premature foreign competition, these measures must be carefully phased out once industries mature. Similarly, selective tariffs might support essential national security supply chains, but only if implemented judiciously.

Yet, the last two weeks represented something unprecedented. To fully grasp the long-term implications, we must start with CEA Chairman Steve Miran’s recent comments on America’s role in providing “global public goods”: primarily, a global security umbrella, and secondarily, maintaining the dollar’s position as the global reserve currency.

What Miran overlooks is that these roles are inseparable: you cannot maintain reserve currency dominance without military strength. Geopolitical influence and credibility depend fundamentally on a nation’s capacity to protect its interests, both at home and overseas—whether safeguarding global maritime trade routes, undersea internet cables, critical energy resources and rare materials, or vital payment and financial infrastructures.

But Miran’s gravest misreading of economics emerges in his claim that being the issuer of the global reserve currency burdens the United States disproportionately. The reality, as most economists recognize, is precisely the opposite: the U.S. dollar’s reserve status confers an “exorbitant privilege.”

And what exactly does this privilege entail? The global appetite for dollars affords the U.S. government, businesses, and residents lower borrowing costs and greater purchasing power. It channels international capital into American financial markets, boosting growth. This unique position generates substantial seigniorage profits—effectively subsidizing American imports, facilitating persistent trade deficits without immediate economic repercussions, and reinforcing U.S. geopolitical dominance.

This privilege is so pronounced that even during severe global disruptions—such as the COVID-19 lockdowns or the 2008 financial crisis—investors consistently flocked to U.S. Treasuries as a safe haven, enabling flexible fiscal responses. In 2008, the demand for safety even outstripped the supply increase from government auctions used to fund massive bailouts.

Yet Miran, alongside Trump’s trade advisor Peter Navarro, disregards this reality, arguing instead that importing affordable goods in exchange for low-yield U.S. debt—essentially leveraging the trust in U.S. institutions—is a losing proposition. More dangerously, Miran flips economic logic entirely, asserting there is no privilege, only burdens, insisting the rest of the world should shoulder the costs.

Miran suggests that countries should either accept tariffs without retaliation or, even more boldly, simply “write checks to the U.S. Treasury.” This intriguing idea somehow overlooks the fact that these countries already effectively “pay” for the privilege of dollar access by sending actual valuable goods and services in exchange for dollars—currency the U.S. conveniently prints at will. This arrangement already generously supports America’s ability to finance deficits cheaply and repay its debts effortlessly in its own currency, which you’d think might be enough of a sweet deal without demanding extra compensation.

Yes, great power involves great responsibility. An excessive reliance on cheap capital risks the fate historically experienced by every prior issuer of the reserve currency. Ray Dalio repeatedly warned of this scenario: spiraling debt leading to economic and military overstretch, unchecked inequality, declining investments in education and infrastructure, ultimately eroding trust through endless debt accumulation and money printing.

But the real remedy lies in disciplined fiscal policy, structural reforms encouraging innovation, and strategic investments in education, upward mobility, and infrastructure. Miran and Navarro’s policies instead erode the very trust underpinning the dollar’s global status. Their strategy resembles Emperor Diocletian’s late Roman Empire policies—attempting to tax distant colonies heavily to sustain central power, ultimately weakening loyalty and accelerating decline. If allies doubt America’s commitment—both militarily and economically—the downward spiral only quickens.

Whether we like it or not, America’s leading “export” is arguably its financial sector. Certainly, rebuilding manufacturing capacity in critical sectors is important, but labor-intensive manufacturing jobs aren’t returning—those jobs are now migrating from China to Vietnam, India, and Bangladesh. The future depends on innovation and leadership in fields like artificial intelligence, robotics, and defense technology—not on chasing nostalgic dreams of past industrial glories.

Damaging relations with global trading partners, especially allies, through indiscriminate tariffs threatens the dollar’s dominance, prompting nations to seek alternatives for security and commerce. Losing reserve currency status means a dramatic decline in geopolitical, economic, and military influence—relegating America, like Spain, the Netherlands, and Britain before it, to the ranks of former global economic powers.

This risk explains why investors closely watched U.S. Treasury yields during the recent market turbulence. Rising yields—partly driven by hedge funds unwinding leveraged trades and foreign central banks selling treasuries to stabilize their currencies ahead of tariff fallout—likely pressured Trump into calling off his gamble. Continued erratic policy moves could erode investor confidence in U.S. Treasuries as safe assets, and ultimately threaten the dollar’s reserve currency status.

Thus, Miran and Navarro’s belief that America should tax the world for using dollars may ironically accelerate the dollar’s decline, inadvertently resolving the trade deficit—but in the most painful way possible.

If the Dollar Falters, Is It Crypto’s Moment to Shine?

Likely not—at least not immediately. Bitcoin might offer neutrality in a fragmented global system, but barring institutional collapse in the U.S., this scenario remains distant. Similarly, no fiat currency stands ready to clearly inherit the dollar’s role.

The Eurozone, despite boasting a robust economy, deep financial markets, and a credible, independent central bank, still faces significant challenges—fragmented fiscal policies, internal political tensions, and the absence of a unified and strong military presence. While the euro remains the second most-traded currency globally, its potential to become a dominant reserve currency is constrained unless it achieves deeper fiscal integration, resolves internal disputes, and expands trade alliances with the UK, Canada, and other global partners.

China’s RMB, supported by the world’s second-largest economy and extensive global trade presence, also faces considerable hurdles. Persistent capital controls, transparency concerns, and fundamental trust issues regarding the rule of law significantly hinder broader adoption by Western economies. Absent a major geopolitical transformation, akin to the shifts following World War II, the RMB’s global acceptance remains limited.

One potential solution could be a basket of currencies, similar to the approach we designed for the Libra project. However, determining the basket’s weighting would inevitably trigger endless geopolitical debates and infighting, as evidenced by the limited appeal of Special Drawing Rights (SDR), which never gained widespread traction beyond central bank use. Nevertheless, a currency basket could better capture today’s shifting global dynamics, balancing trade interconnectedness and recognizing the evolving international order. The real challenge, however, lies in creating a credible new unit of account—a monumental task, as even the EU discovered during its own integration efforts.

Trump’s gamble might be to pressure everyone but China into agreements ironically reminiscent of the Trans-Pacific Partnership (TPP), which was originally designed to lower tariffs and improve intellectual property and labor standards around the Pacific Rim, as summarized by investor Bill Ackman:

Yet, the risks are substantial, especially since China is unlikely to back down. If tensions persist and significant economic disruption occurs, many more scenarios become plausible. Countries worldwide, including Europe, might increasingly advocate for a neutral stance, underscoring the importance of forthcoming EU-China negotiations. Alternatively, the world could surprisingly switch to Bitcoin—which already functions as a somewhat unusual weighted basket representing various countries’ differing views about the future of monetary policy.

Ultimately, this is America’s game to lose—and ideally, sensible policies like free trade, serious investments in education and critical infrastructure, genuine innovation, and smart bets on strategic sectors will win out over short-term trade skirmishes and questionable economic theories. After all, undermining your own strengths is rarely a winning strategy.