Within a generation, as the contours of the emerging multipolar world take shape, the U.S. dollar’s expansive role as the global trade and reserve currency will morph into a more modest role as the dominant trade and reserve currency within its geostrategic sphere of influence and a secondary currency elsewhere. Likewise, the currencies of the other great powers will be dominant within their respective spheres of influence: the Chinese renminbi, the Russian ruble, the Indian rupee, and perhaps the European Union’s euro.
From the perspective of U.S. vital national interests, the overarching American strategic objective is to ensure that the international role of the U.S. dollar safeguards national security in its three inextricably intertwined aspects: military security, political security, and economic security.
The economic foundation of the emerging multipolar world order is Mercantilism 2.0, a new framework for international trade which seeks to: (1) promote cross-border trade among countries within the same sphere of influence; (2) support trade with other countries outside the sphere of influence that have (a) shared converging vital national interests or (b) no conflicting vital national interests; and (3) explicitly limit and carefully circumscribe trade with countries that have conflicting vital national interests.
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From Washington’s vantage point, countries such as Mexico and Canada would clearly fall in the first category, while Russia, China, and Iran would obviously fall into the third. Countries such as the United Kingdom, Germany, France, Japan, and Australia have vital national interests that, to varying degrees, converge with those of the United States, while countries such as Indonesia and New Zealand arguably have no vital national interests that conflict with those of the U.S. (or of China, Russia, India, or the EU). India straddles the second and third categories — its vital national interests (with respect to China) converge with those of the U.S., while its vital national interests (with respect to Russia) diverge.
Mercantilism 2.0 is driven by national security imperatives, not economic considerations. Manifestly, the economic logic of comparative advantage as the basis of global trade will become irrelevant. So, importing goods and services which could be produced by other countries at a lower economic cost while exporting goods and services that the U.S. could produce at a lower economic cost than other countries, will no longer be the primary driver of U.S. foreign trade.
What is the geographic reach of the mercantilist sphere of influence of the U.S.? Viewed through the prism of Mercantilism 2.0, such a U.S. sphere of influence consists of (1) the Americas in its entirety, (2) an Eastern Atlantic Area encompassing the Atlantic Ocean from the east coast of the Americas to the UK, and (3) a Western Pacific Area encompassing the Pacific Ocean from the west coast of the Americas to Japan, Australia, and New Zealand plus the three island states which are U.S. protectorates — Palau, Micronesia, and the Marshall Islands.
China is the world’s largest merchandise trading nation, with two-way trade in goods amounting to about $6.2 trillion or about 33% of the nominal GDP of $18.7 trillion as of 2024, per the World Bank. The comparable trade figures for the U.S. amounted to about $5.5 trillion, or about 19% of GDP of $29.2 trillion. China’s ambition is to be the dominant power in East Asia, with an envisioned sphere of influence including Mongolia, North Korea, Vietnam, Cambodia, Laos, Burma, and Pakistan, plus a maritime domain encompassing the Yellow Sea, East China Sea, and South China Sea. Beijing considers Taiwan to be an integral part of the Middle Kingdom.
Over the next two decades, Beijing will bypass the “payments chokepoint” created by the U.S. dollar’s role for trade. Instead, the Middle Kingdom will require Chinese exports to be invoiced in renminbi and Chinese imports to be invoiced in renminbi, rubles, or euros. For example, Chinese imports of Persian Gulf oil and gas will increasingly shift from U.S. dollar to renminbi invoicing. The same will be true of Chinese exports of critical minerals, electric vehicles, and green energy components (such as batteries and solar panels).
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Consequently, trade payments would be routed through systems controlled by China, Russia, and, possibly, the EU. China’s foreign exchange reserves will consist primarily of gold, rubles, and euros to reflect U.S.-China and U.S.-Russia trade decoupling and new geostrategic trading patterns.
By 2049, the centenary of the People’s Republic of China, the role of the U.S. dollar will be de minimis within China’s sphere of influence and quite possibly secondary to the renminbi within ASEAN.
Samir Tata is the founder and president of International Political Risk Analytics, an advisory firm based in Reston, Virginia, and author of the book Reflections on Grand Strategy: The Great Powers in the Twenty-first Century.