In 2020, I wrote about a fundamental tension in the global monetary order: America's "Exorbitant Privilege" - a term famously coined by Valéry Giscard d'Estaing that's derived from the USD's status as global reserve currency - versus what I've come to think of as China's "Infinite Patience." This characterization of China's approach to foreign policy stems from its civilizational perspective. While America, barely two and a half centuries old, tends to think in terms of fiscal quarters and presidential terms, China draws upon millennia of history to inform its strategic thinking. This stark contrast in temporal perspectives manifests clearly in their approaches to monetary hegemony - where America sees decades, China sees centuries. Nearly five years after my initial post, that tension is reaching a critical breaking point as Trump's return to power threatens to accelerate what was once a gradual decline into a potential collapse of American monetary dominance.
The data already tells a concerning story: the US dollar's share of global currency reserves has fallen to 58% as of Q3 2024, down from 72% in 2001. But it's the acceleration of this decline that should worry us - we've seen a 5% drop in just the last two years, coinciding with growing anticipation of Trump's return to power. The Federal Reserve's latest projections that inflation won't return to 2% until 2027 at the earliest - largely due to concerns about Trump's promised policies on trade and immigration - suggest this decline could accelerate dramatically.
Trump's Return: Turning Evolution into Revolution
The Fed's concerns aren't theoretical. Trump has explicitly promised to reassert control over monetary policy, threatening Fed independence at the exact moment global markets crave stability. His nominee for Secretary of State, Marco Rubio, has already endorsed Trump's calls for aggressive dollar intervention. Meanwhile, Trump's threats of military action against allies and promises of punitive tariffs are pushing traditional U.S. partners to accelerate their search for alternatives to dollar dominance.
This brings us to three critical developments that could transform from gradual shifts to seismic changes under a second Trump term:
De-Dollarization of Oil Trade: From Trickle to Flood?
Remember my 2018 piece on PetroETH? While crypto-backed oil trading hasn't materialized exactly as speculated, the core thesis about the fragmentation of oil trade settlement has proven prescient. In 2023, 12 major commodity contracts, representing approximately 20% of global oil transactions, were settled in currencies other than USD - a dramatic increase from only 2 commodity contracts between 2015 and 2021. China has been particularly successful in expanding the narrative of yuan-settled oil trades, such as with its largest oil customer, Saudi Arabia, who has explored piloting petroyuan trades in recent years.
Trump's erratic foreign policy and threats of military action against allies could act as a catalyst. Saudi Arabia, already hedging its bets with China, may see Trump's return as a tipping point to further embrace yuan settlements. In 2023, the People's Bank of China and the Saudi Central Bank signed a local currency swap agreement worth 50 billion yuan ($6.93 billion), reflecting the deepening financial ties between the two nations. This agreement, valid for three years with an option for extension, aims to "strengthen financial cooperation, expand the use of local currencies, and promote trade and investment," according to a statement from China's central bank.
This agreement could mark the beginning of a broader shift. As yuan-settled oil trades continue to gain traction, the renewal of this swap agreement in 2026---coinciding with the potential appointment of Trump's pick for Federal Reserve Chair---could further accelerate the trend. It appears both Riyadh and Beijing are strategically positioning themselves for a future where the dollar no longer reigns supreme in global oil markets.
China's CBDC Leadership: The Patient Dragon
While Trump threatens to upend global institutions, China continues its methodical approach to building alternative systems. The digital yuan program has expanded dramatically, with over 250 million Chinese citizens across 29 cities now regularly using e-CNY for domestic transactions. More importantly, its efforts to establish cross-border CBDC bridge projects now include partnerships with key oil-exporting nations.
The contrast in approaches is striking: while Trump promises to "take back control" through force, China builds consensus through infrastructure. While Trump threatens allies, China creates alternatives. While Trump undermines institutions, China patiently strengthens them.
The New Bretton Woods Moment: Crisis or Opportunity?
The IMF's managing director recently called for a "new Bretton Woods moment" to address the fragmentation of the global monetary system. This isn't just rhetoric - it's recognition that the post-WWII monetary order I detailed extensively in my PetroETH analysis is under unprecedented strain. Trump's promises to potentially default on U.S. debt and engage in competitive currency devaluation could transform this strain into a breaking point.
2025-2026: Critical Years for Dollar Dominance
Several key events in the next two years could prove decisive:
- Trump's ability to replace Powell as Fed Chair in 2026 - markets are already pricing in increased volatility around this transition
- Saudi Arabia's exploration of yuan settlement coinciding with this transition
- The launch of the expanded BRICS+ currency initiative, explicitly designed to reduce dollar dependency
- Trump's promised trade war escalation, which the Fed warns could push inflation above 5%
The End Game: Privilege Meets Patience
The U.S. continues to benefit enormously from the dollar's reserve status, which enables persistent trade deficits and low borrowing costs despite federal debt now exceeding $34 trillion. However, Trump's policies threaten both the economic might and institutional credibility that underpin this privilege. His promise to use tariffs against allies, threats of military action against trading partners, and pledges to subjugate Fed independence create a perfect storm that could shatter global confidence in dollar stability.
China, meanwhile, appears content to play the long game - though they may find their patience rewarded sooner than expected. As Xi Jinping reportedly said in a closed-door meeting last year, "Time and momentum are on China's side." The question now is whether Trump's actions will accelerate China's timeline from decades to years.
Looking Ahead: From Evolution to Revolution?
The next four years will likely determine whether the transition to a multipolar monetary order happens through evolution or revolution. Trump's campaign promises, if enacted, could strike a fatal blow to the pillars of dollar hegemony - global trust, institutional stability, and military reliability. Meanwhile, China's patient, calculated strategy stands ready to capitalize on the voids created by U.S. instability. With Trump threatening to upend the very foundations of the global economic system, China's "infinite patience" may no longer be needed---it could instead be replaced by an accelerated push for a multipolar order. The next chapter of monetary history will be written not by those who hold power today, but by those who are best prepared to seize the opportunities created by chaos.