# Dollar Dominance, Tariffs, and Sapiens By [Farf Fetched](https://paragraph.com/@farffetched) · 2025-06-09 --- I wish I had spent more time learning history. We live in what will go down as one of the most interesting times that man has ever experienced, and so many answers to what is to come lie in learning about the past. I'm sure countless experts and books discuss this in great detail, such as "Why Empires Fall", but it is becoming ever more clear that the United States, as the hyperpower it has become, is in some form of decline. Let me get it out of the way that I love America, but it is fascinating to note the parallels to past declines of empires to today. Most clear to me are conflicts like Russia and Ukraine. We live in a globalized world, and trying to ignore a conflict such as that is virtually impossible. We flail like the Empire of Rome struggled towards its end in attempting to defend distant borders and land through expensive military campaigns funded by a deeply indebted government. We have spent billions on a potentially futile war in Ukraine and recently imposed tariffs to attempt to swing back some of the debt in a form of tax that will most likely impact consumers more than anyone else. So we have some headwinds, and I won't dive too deep into history, but I think the tariffs are a great place to start to paint the path we go from here. One of the most significant victories the US had as a result of its dubs in the world wars was the establishment of the US dollar as the global reserve currency. International deals across energy, trade, and settlement are done in US dollars. This has resulted in many of the trade deficits that Trump views as "unfair" because one effect of this dominance is that it has kept goods from elsewhere cheap. Other countries want their currencies to be weak against the dollar to make their goods attractive. They've devalued them so much that we've even had to make agreements in the past (see the Plaza Accord of 1985) to collectively depreciate the dollar against other currencies to protect American manufacturing against foreign competition. So what are some of the second and third-order effects of this? Importantly, countries that receive those pretty green pieces of paper in exchange for their goods are more likely to reinvest in America. If you hold USD, it makes sense for you to purchase US assets, which keeps equities and debt demand. The US can also now impose its will on many countries as their dollar-denominated trade and loans are at the whims of the US government and, somewhat more importantly, the FED. Our chaotic printing and the no-longer-transitory inflation that led to the steepest rate hikes since the 1980s didn't just hurt the American home-buying spree, it figgity fucked other countries due to their USD-denominated debt. On the other hand, since dollar dominance is at the root of the trade deficits, it is part of the reason US manufacturing has struggled. For those concentrated pockets of America that work in tech, finance, and other high-margin industries, you've kept winning. But much of the country that depended on US manufacturing, such as the Rust Belt, has lost to foreign competition. It's a double-edged sword because globalization is deflationary, but having such dollar-dominance is not a sustainable state. More than anything, dollar dominance has let us play on easy-mode when it comes to influencing the global economy and printing as we please because there is so much demand for the dollar. Letting this run for decades has made it pretty hard to undo. It takes years to bring manufacturing up to speed, and US wages would make whatever goods we can be competitive at (incl. tariffs) relatively expensive. Still, the current administration has made it a point to get the best of both worlds by maintaining the dollar dominance while restoring manufacturing. Independence Day on April 2nd was a first, aggressive move in this direction. If we reduce our global imports, we reduce our export of dollars. Lyn Alden and some other macroeconomic researchers view this as a part of a trend towards a multi-polar global economy. The US has served as a form of Atlas, being so powerful that it has had to hold up the world and its struggling nations. Trump's tariffs and general "every man for themself" mindset are the moment that Atlas Shrugs (little Ayn Rand reference for ya). The point is that China, India, and others might not have that hunger for dollars, and their quickly growing economies may begin to divide the global market better. Alternative currencies could fill the void, and the future from there continues to be more interesting. One issue here is that I think a universally accepted asset has been good for the world. Yuval Noah Harari's book, "Sapiens," argues that money is one of the most essential tools of social coordination that has enabled our species to reach this contemporary stage. Money has allowed two parties that have no other reason to trust each other to be able to trade, exchange, and coordinate resources. That is an incredible feat and is the only reason we now live among billions of other advanced apes. This scales as the trust scales, and having a global reserve asset has made many of these international interactions much easier. So you can see where the dollar losing its spot may be worrisome. Thankfully, I believe that technology has produced a solution 16 years in the making for us. That’s right, I’m talking about crypto. To offer some perspective, BRICS (Brazil, Russia, India, China, South Africa, and now some of the Middle East) have tried for some time to develop an alternative currency for their separate nations, much like how the Euro has fostered international trust in Europe. As we've seen with the Euro, it's not easy to do with problems arising from a single monetary policy influencing local economies (and yes, that's the power the US has had all this time). Countries should be able to maintain their right to local currencies that best suit their citizens, but when that fails, doesn't an open-source, decentralized, globally accessible asset sound sort of appealing? ![Michael Scott: It's Britney Bitch - YouTube](https://storage.googleapis.com/papyrus_images/ac0f046303414d13ba315cbc1cde927a.jpg "Michael Scott: It's Britney Bitch - YouTube") Get in bitches, we’re talking crypto. Let's zoom out with a story to try to bring this together. After graduating from college, I spent two months in South America, mostly in Argentina. The Argentinian Peso was hopeless. The government had set a bogus public exchange rate while there was a flourishing black market for US dollars; the value of the Peso was half of that declared by the government. Citizens were stuffing dollars in their mattresses and doing whatever they could to not be subject to the harshest taxation faced in the world in the form of rampant inflation. When I then flew to Brazil and had some extra Pesos to exchange, no foreign currency exchange shop would take them! The outcome was the wealthy of Argentina stacking dollars while the rest of the citizens watched their savings depreciate daily. My biased perspective would say that digital assets such as Bitcoin, Ethereum, stablecoins, and even DOGE offer an alternative to anyone with an internet connection. My time in the industry has shown that this technology's power is in enabling social and financial coordination. I hope this becomes clearer someday, and its ability to supercharge the trust that money has given man can be properly harnessed. For now, all I know is that the US portion of global GDP is about 26% while the dollar’s portion of foreign exchange transactions is 88%. As Bing Crosby once sang, “fight it with all of our might… Chances are some heavenly star-spangled night… We'll find out just as sure as we live… Something's gotta give.” --- *Originally published on [Farf Fetched](https://paragraph.com/@farffetched/dollar-dominance-tariffs-and-sapiens)*