For every action, there is an equal and opposite reaction. In the case of international trade and global payments, the U.S. made aggressive use of sanctions and tariffs. With some merit, Washington has argued that these actions level the playing field for global trade or punish bad global actors. But a series of equal and opposite reactions are occurring as nations move to remove the role of the U.S. dollar at the center of global trade and finance.
This will have a long-lasting structural impact in ending the dominance of the dollar as the world’s reserve currency.
In November, 15 Asian countries, comprising 30% of global GDP, signed the Regional Comprehensive Economic Partnership (RCEP), creating a free-trade zone among the signatories. This agreement attempts to provide gains to trading within the regional partnership through reduction of trade and investment barriers, and increased incentives for economic integration. It is noteworthy that RCEP came about without participation of either the U.S. or Europe, and has effectively created the world’s largest trading bloc, according to the Rand Corp. Beyond the obvious benefits for economic growth in the region, a more-subtle byproduct of this agreement is to focus on bilateral settlement of trade, effectively removing the dollar as the standard unit of transaction for regional trade...
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