The U.S. dollar has been key to the global financial community in the years following World War II, but there are rising headwinds to the greenback’s standing – and serious risks to the U.S. economy and businesses if it were to lose its reserve currency status. The BRICS countries, which include Russia and China, have been pursuing strategies to reduce dollar-facilitated transactions by conducting more trade settlements in their own countries. They’ve also been working on a digital payment platform known as the BRICS Bridge. The development has caught the attention of U.S. President Donald Trump, who threatened tariffs of 100% on the nations in November and again in January. “We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs,” he said in a Jan. 30 post on Truth Social. The BRICS Bridge isn’t the only effort being made to reduce reliance on the dollar: China has tried to internationalize the renminbi, which rose to 3.8% of global and international payments within the SWIFT interbank payment processor in late 2024 — overtaking the yen. Beijing has also created the Cross-Border Interbank Payment System to rival SWIFT. CIPS managed to notch $15 trillion in transactions in 2023, according to the Institute of International Finance. Though none of these efforts appear immediately poised to replace the dollar — the greenback still accounts for roughly half of all international transactions, according to the IIF — rising trade tensions are threatening the perceived safety and stability that support dollar dominance. This is leading some investors to wonder whether “de-dollarization” might gain more traction. “We do not write this lightly. But the speed and scale of global shifts is so rapid that this needs to be acknowledged as a possibility,” Deutsche Bank strategist George Saravelos wrote in a note earlier this month. Saravelos noted that the correlation between the dollar and risk assets — “which has been at the core of portfolio construction for many real money investors over the last decade” — has declined in 2025. The dollar, historically viewed as a safe haven asset, has tended to strengthen during global market sell-offs. The U.S. dollar index , which measures the greenback against a basket of currencies, jumped from around 71 in March 2008 to roughly 86 in March 2009 as traders bought U.S. Treasurys during the Global Financial Crisis. Similar trends were seen in the March 2020 market sell-off that was spurred by the Covid-19 outbreak, as well as in 2015 when China experienced an unexpected yuan devaluation. However, in 2025, the dollar and the U.S. market have moved more in tandem. The dollar index has dropped around 4% year to date, not too far off from the S & P 500 ‘s roughly 5% drop during the period. .SPX .DXY YTD mountain The S & P 500 vs. the ICE U.S. dollar index in 2025 “What could be the challenge for such a strong position? The challenge, in my opinion, is Washington,” Marcello M. Estevão, managing director and chief economist, Institute of International Finance, said at a policy conference at the National Association of Business Economics (NABE) in March. Effects of an eroding dollar De-dollarization could lead to a weaker greenback. However, this risks higher inflation for U.S. customers as the relative price of imports would become more expensive. The impact of a loss in dollar dominance “would be most acutely felt in the U.S., where de-dollarization would likely lead to a broad depreciation and underperformance of U.S. financial assets versus the rest of the world,” according to an October note from JPMorgan’s global research team. American companies have benefited from the dollar’s dominant status owing to less foreign exchange risk compared to other global companies, which often have to hedge their currencies to maintain stability against the dollar. The pain would extend to the U.S. federal government, which is now grappling with a record high deficit level. The Congressional Budget Office projected in its March 2025 Long-Term Budget Outlook that the U.S.’s debt-to-GDP ratio is projected to reach 107% of economic output by the 2029 fiscal year. Up until now, the U.S. has been able to borrow at a lower cost relative to other countries thanks to steady global demand for dollars. “Because the world loves our assets, we are compelled to run deficits,” Stephen Jen, CEO at Eurizon SLJ Capital Limited, said in a panel discussion at the NABE conference. However, de-dollarization — effectively a decline in demand from foreign parties for dollar holdings — would mean that the U.S. government would have to offer higher interest rates on its debt, worsening the deficit. While the dollar’s collapse doesn’t seem immediately on the horizon, the risks of a fall in dollar hegemony are higher than ever for the U.S. “The fiscal trajectory is unsustainable, and I think time is collapsing on us right now. … I don’t know if the dollar reserve currency status ends completely. But I do think we’re in a period of very rapid change in the global capital markets,” said Julia Coronado, founder and president at MacroPolicy Perspectives. —CNBC’s Michael Bloom contributed to this report. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. 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