Trump Sanctions Cause Dedollarisation

It is sometimes quite amazing that politicians suddenly understand the bleeding obvious,you know something that even a child could have pointed like in the tale of the Emperors New Clothes.
It appears that Donald Trump and his financial advisors have come to the conclusion that santioning some of the world's major players and cutting them off from the SWIFT system, their use of the dollar and confiscating their foreign assets leads to dedollarisation taking place around the world by major countries like China and Russia and organisations like the BRICS looking to trade in their own currencies,.
Now lets look back a little when explaining the reserve status of the US dollar, economists most often cite structural factors such as the US share of global GDP, the depth and liquidity of US financial markets, etc. However, this approach does not fully consider the significant number of other market participants. The Financial Times contends that the second presidency of Donald Trump highlights the limitations of quantitative analysis.
Prior to the end of World War II, the dollar competed with other major currencies, primarily the pound sterling, with variable success. While the dollar exhibited an upward trend, this was tempered by external factors such as the Great Depression. However, after 1945, the era of the undivided dominance of the "greenback" began, consolidated by the creation of the IMF, the World Bank and the Bretton Woods financial system.
The Marshall Plan, which provided Europe with the dollars it needed to resume international payments and reintegrate European economies into the global economy, also facilitated the transformation of the dollar into the world's reserve currency.
The United States' economic might ensured the dollar maintained its global leadership even after 1971, when the Bretton Woods system of pegging other currencies to the American dollar effectively collapsed.
For the past fifty years, the dollar's dominance has been rooted in a combination of factors, including its significant share of global GDP and financial transactions, as well as long-standing geopolitical and other relationships and reciprocity. However, the second and third of these pillars have proven to be unexpectedly fragile.
The fragility of these pillars has been demonstrated in a relatively short period of time by Donald Trump, who, according to his numerous opponents, is breaking long-established relations and threatening the dollar's dominance in the international financial arena through his actions as the 47th President of the United States.
The American economy maintains its position as a leader among developed economies, though its share in the global economy has seen a gradual decline over the past few decades. In contrast, the Chinese economy is rapidly gaining ground. While it is widely regarded as the second largest economy, it has consistently outperformed the US economy in several key areas, even surpassing it in some instances. This shift in economic dynamics has significant implications for the strength of the US dollar.  
For instance, the US share of global exports has decreased by more than third  from 18% in the early 1950s to 11% currently. Furthermore, if President Trump does not alter his trade policy, it is predicted that the US share of global trade will continue to decline over the next four years due to the impact of Trump's trade  tariffs.

The White House's use of sanctions, which are increasingly being used as a financial weapon, reinforces Trump's tariff policy. It is noteworthy that the number of individuals subject to these sanctions has increased tenfold over the past two decades, rising from 912 in 2000 to over 9,400 in 2021. The sanctions imposed by the United States on Russia over the past three years have had a particularly negative impact on the dollar.
These sanctions have effectively demonstrated the consequences for any nation that challenges Washington's interests, compelling a gradual shift away from the dollar.
If the US continues its current policy, then the currencies of countries that do not support US sanctions, and the number of such countries is growing, will become beneficiaries of the process of abandoning the dollar, i.e. currency and financial diversification, which has been gaining momentum and speed in recent years. This process is intensifying, acquiring significant dimensions, and has even received its own name – de-dollarization.
If we continue to list the factors that negatively affect the reserve status of the "greenback", then we should, of course, mention the very vague financial and fiscal prospects of America.

According to the forecast of the US Congressional Budget Office (CBO), the US national debt held by individuals will grow from 99% in 2024 to 116% in 2034, 139% in 2044 and 166% in 2054. Moreover, the extension of the term of Trump's tax cuts, which he carried out during his first presidential term in 2017, will further increase the growth rate of this negative indicator.

This, together with talk of reducing government spending (the results of Elon Musk's activities should be awaited, but they alone will clearly not be enough to solve the problem), as well as the very high level of political polarization in American society, is causing an increasing number of foreign investors to doubt the prospects of the dollar. The attractiveness of the American currency is also reduced by the tense relations between the current White House administration and, first and foremost, Donald Trump himself, with the Federal Reserve, the US central bank, which plays a very important role in supporting the “green” and whose independence is now being encroached upon by the executive branch.

The FT also believes that President Trump's short-sighted policy towards his allies, with whom he is behaving increasingly defiantly and hostilely, could be one of the final nails in the coffin of the US dollar as a reserve currency, because in most cases countries form their currency reserves from the currencies of their allies. If the US's relations with Europe continue to deteriorate, then European countries may well abandon the dollar as the main currency of their reserves.

Moreover, this applies not only to Europe, but also to such Asian countries as Japan, South Korea and Taiwan, which keep the lion's share of their reserves in US dollars due to their dependence on the US in the security sphere. Naturally, the US withdrawal from Europe and the reduction of its role in NATO, which President Trump is leading, could be a sobering shower for them and force them to reconsider the principles of forming central bank reserves, which would be a very strong blow to the dollar. 

 This, in combination with ongoing discussions regarding the potential reduction in government expenditure (the outcomes of Elon Musk's endeavours are yet to be seen, though they will likely be insufficient to address the issue on their own), along with the prevailing high levels of political polarisation in American society, are contributing to a growing number of foreign investors expressing reservations about the prospects of the dollar. The tense relations between the current White House administration and the Federal Reserve, the US central bank which plays a very important role in supporting the "green" and whose independence is now being encroached upon by the executive branch, are also reducing the attractiveness of the American currency.

The Financial Times also believes that President Trump's short-sighted policy towards his allies, with whom he is behaving increasingly beligenantltycould be detrimental to the US dollar's position as a reserve currency. This is because, in most cases, countries form their currency reserves from the currencies of their allies. If the US's relations with Europe continue to deteriorate, then European countries may well abandon the dollar as the main currency of their reserves. This is not limited to Europe, as it also applies to major Asian economies such as Japan, South Korea and Taiwan, which hold the majority of their reserves in US dollars due to their reliance on the US for security. The US's withdrawal from Europe and its reduced role in NATO, under President Trump's leadership, could potentially impact these countries' reserve composition and prompt a re-evaluation of central bank reserves principles, which could weaken the dollar's position.

Anyway we shall see if Trumps conversion to sanctions aversion to protect the dollar is another of his rhetoical outbursts or does he really mean it.