‘They’re going to need it in spades’

Leaders of the BRICS countries—Brazil, Russia, India, China, and South Africa, plus newer members from Egypt to Indonesia—meet in New Delhi on Saturday. Their finance ministers are there this week to talk about settling more of their trade with one another in their own currencies. India, the host, keeps insisting this isn’t “de-dollarization.” U.S. President Donald Trump has threatened 100 percent tariffs on any BRICS country that backs a currency to “replace the mighty U.S. Dollar.”

In Washington, the U.S. Treasury is working to hold down what it costs the government to borrow. In August, investors were demanding more to lend to it for 30 years than at any time since 2007, so Treasury Secretary Scott Bessent doubled the Treasury’s buybacks of its own long-term bonds, starting this week. Japan, the largest foreign holder of U.S. government debt, usually defends its currency by selling dollars—which can mean selling U.S. bonds. On July 31, the Americans bought yen alongside it—for the first time since 1998.

Russia’s President Vladimir Putin is headed to New Delhi, too. His spokesman, Dmitry Peskov, says Russia isn’t out to get rid of dollars: “No, no, to the contrary.” Under Western sanctions, Russia already settles about 90 percent of its trade with BRICS partners in national currencies. “If they don’t let us use their money,” Peskov says, “we use our own money.”

So how much ground is the dollar losing?

Nicholas Mulder is an assistant professor of history at Cornell University and the author of the forthcoming The Age of Confiscation: Making and Taking Property in the Creation of the Modern World. Mulder says the dollar plays several key roles globally, and it’s losing ground in two of them: as the currency central banks hold in reserve, and as the currency the world borrows in. Central banks have been moving into gold and other currencies since the U.S. and its allies froze Russia’s reserves in 2022. And borrowers, from developing economies to Western banks, are turning to the Chinese renminbi, which costs less to borrow. But trade still runs on dollars, U.S. markets are still the deepest in the world, and investors still favor American stocks.

Part of what keeps the dollar on top, Mulder says, is an American economy that runs on finance. Wall Street profits when foreigners borrow, save, and invest in dollars—and it has no direct interest in the factories Trump says his tariffs will bring home …

Gustav Jönsson: How strong is the dollar’s position these days?

Nicholas Mulder: It’s still dominant, I’d say on account of five things—five pillars:

1. As a reserve currency.

2. As a borrowing currency—the currency loans are denominated in.

3. As a currency of invoicing, which is about trade, the balance of payments, and relative surpluses and deficits.

4. As an engine of liquidity, which I’d separate from borrowing, because liquidity is really about the depth of U.S. financial markets.

5. As an investment vehicle, especially for big global money managers investing in the United States.

Three of them are likely to stay strong: invoicing, liquidity, and investment. U.S. financial markets are so enormous that the dollar will keep providing liquidity. American stocks tend to outperform foreign ones, so the U.S. will stay a prized destination for investment. And since the U.S. runs such a large trade deficit, the dollar will stay a currency of invoicing: When American companies buy imports—say, when tech firms buy computing equipment from Asia—they pay in dollars.