The Trump Effect: Navigating a Fragmented Global Currency Order

by Masatoshi Nishimura

The global currency landscape is shifting—but perhaps not in the way most people think. Recent geopolitical tensions, economic shifts, and political developments—particularly involving former President Donald Trump and the turbulent U.S. domestic landscape—signal something profound: while discussions about the "end of the dollar" dominate headlines, the U.S. dollar isn't going anywhere. Instead, what's happening is a subtle yet strategic reshaping of global finance, with significant implications for Europe, Canada, and other traditionally allied economies.

Why the Dollar Isn't Collapsing—But the Global System Is Shrinking

Today, the U.S. dollar (USD) accounts for approximately 58% of global currency reserves. Many have speculated about dramatic de-dollarization, fueled partly by Trump's vocal criticism of globalization and America’s contentious relationship with both allies and adversaries. However, a deeper analysis suggests otherwise. Instead of the dollar losing significant market share, the global financial pie itself is shrinking due to increased fragmentation, regionalization of trade, reverting back to the real economy (manufacturing and resource) and Trump's legacy of economic nationalism.

The dollar won't collapse because:

  • Most global trade, particularly commodities like oil and gas, remains priced in USD.
  • No credible immediate replacement exists—neither the Euro (EUR) nor the Chinese Yuan (CNY) provides the necessary depth, liquidity, trust, or military backing.
  • Central banks and global investors remain deeply entrenched in USD-denominated assets, especially U.S. Treasuries.

However, Trump's tariffs, trade wars, and "America First" rhetoric have contributed to increased regionalization and bilateral trade agreements, subtly shrinking the global scope of dollar-denominated transactions.

Europe's Struggle Amidst Trump's Shadow

Europe, Canada, and the UK find themselves particularly vulnerable. Trump's confrontational stance on NATO, his imposition of tariffs on European products, and the uncertainty created by Brexit significantly weakened Europe’s economic cohesion and resilience:

  • The Eurozone lacks fiscal and military unity, unable to effectively project hard power to back its currency.
  • Europe's real global GDP share continues to shrink (currently around 15%), undermining its 20% reserve share.

Consequently, the Euro could realistically drop from 20% to as low as 10% of global reserves, triggering inflation, currency depreciation (from EUR/USD 1.10 potentially down to 0.85), and fueling social unrest. Europe's diminished economic role strengthens populist movements across the continent, reflecting the political disruption echoed by Trump's style of nationalism.

How Trump's Policies Continue to Undermine Allies

While it's not America's strategic interest to collapse the Euro outright, Trump-era policies established a precedent of managing European autonomy carefully:

  • Increased NATO obligations strain Europe's budgets, exacerbating fiscal fragmentation (Sweden to increase defence spending sharply to 3.5% of GDP, Financial Times)
  • Trump’s provocative comment suggesting Canada become the 51st state hints at the possibility of Canadian provinces, particularly resource-rich Alberta, becoming on the part of U.S. balance sheet. Such a move could involve Canada's natural resources backing the U.S. dollar, simultaneously strengthening USD and weakening CAD.
  • Continued subtle financial pressures or trade negotiations quietly discourage the rise of Euro-based or CAD-based alternative payment systems.

This quiet financial diplomacy, influenced heavily by Trump-era norms, ensures Europe and Canada remain dependent on U.S. financial markets.

Rise of the BRICS and Alternative Assets Amidst Geopolitical Turbulence

As Europe struggles, alternative financial centers emerge:

  • BRICS nations (Brazil, Russia, India, China, South Africa), previously emboldened by Trump's isolationist policies and America's increased use of sanctions, have explored developing parallel financial systems. However, contrary to expectations of increasing their Yuan reserves significantly, BRICS nations' share of reserves held in Yuan, currently around 3%, is unlikely to change substantially. This is because BRICS countries lack strong incentives to establish an open alternative financial system independent from established global networks.
  • Consequently, the Yuan's reserve share within BRICS will likely remain relatively stable. Rather than growing their portion of the global financial market, BRICS nations will witness a contraction in the total volume of international financial trade, resulting in a smaller overall financial "pie." In this scenario, the Yuan's market share remains unchanged not due to increased adoption, but due to stagnation or contraction of the broader international financial market itself.
  • Alternative stores of value like Bitcoin, gold, or commodity-backed tokens gain prominence as hedges against geopolitical volatility, driven by distrust of traditional financial structures amplified by Trump’s polarizing economic legacy.

Implications for Corporations and Individuals

European and Canadian companies increasingly rely on American capital markets, essentially becoming economically subsidiary to the U.S. market. Trump's regulatory and sanctioning legacy continues impacting corporate decisions:

  • Reduced financial autonomy.
  • Increased vulnerability to U.S. regulatory shifts and trade sanctions.
  • Enhanced attractiveness of BRICS-aligned alternative markets, albeit at a regional rather than global scale.

For individuals:

  • Living standards in Europe, Canada, and the UK could stagnate or decline due to imported inflation and reduced purchasing power.
  • Growing political polarization, mirroring Trump-era nationalism, leading to increased populism and political instability.
  • Rising interest in alternative assets like gold or Bitcoin as distrust in government-backed currencies grows.

Shrinking the Pie, Not Rebalancing

Rather than losing dominance, the USD maintains roughly 60% market share, but within a smaller global financial ecosystem:

Gold + Bitcoin share of wealth increases significantly over Euro, but remain stable across USD/Yuan

Conclusion: Navigating Trump's Legacy in a New Currency World Order

We're not approaching the simple end of dollar dominance. Instead, we're witnessing fragmentation into smaller, regionally oriented, politically aligned currency blocs—a process accelerated by Trump-era economic nationalism and geopolitical disruption. The U.S. dollar remains dominant within its shrinking sphere, BRICS nations build a parallel system, Europe fades in strategic relevance, and alternative assets gain prominence.

Understanding these dynamics isn’t just about currency speculation—it’s about preparing for a fundamentally reshaped global economic landscape shaped significantly by recent U.S. political developments.