While nations across the world have continued in their pursuit of global influence, the currency that has served as the bedrock for global change has stayed stagnant; for the last 80 years, the United States dollar has been the reserve currency of the world. Since then, the dollar has continued to pile in influence worldwide with approximately 60% of world trade and cross-border commerce being priced in dollars, and, 90% of foreign exchange outright involving the dollar. That fact alone has allowed the United States to wield a larger scale of power than otherwise possible as its ability to dictate its currency could be used to control other nations through means such as sanctions and dollarization.
Yet after decades of uncontested power, many critical nations like China, India, and Mexico are trying to win back the currency battle. The concern stems back to 2006 when Brazil, Russia, India, and China created the “BRIC” group. While the group was initially founded at the base of economic partnership the agenda is starting to change. The group itself led rapid expansion inviting Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE which are some of the biggest emerging world powers. But many believe these recent additions are part of a deeper plan to create a currency that could feasibly challenge the dollar. Nations like Brazil have been quite fond of moving away from the US dollar so much so to the point where it has removed its use in trade with China, opting for using the yuan instead.
But the global currency fiasco isn’t just affecting rising global superpowers but developing nations as well who are now running currency experiments at home. A prime example of such a trend would be El Salvador becoming the first nation in the world to fully adopt Bitcoin, mandating all legal vendors accept the currency. However, while some nations have been trying to reduce dependency on foreign currency, others are running towards it. Under the new Javier Melie, Argentina is undergoing sweeping financial reforms. One of which was to switch to the dollar as a federal currency, removing the federal reserve, but perhaps most importantly rejecting an invitation to join BRICS.
As nations are and will continue to be in a currency scramble, what does this mean for the bigger picture? Given that the US hegemony with the dollar was unprecedented and allowed the US to fast-track its way to becoming one of the world leaders in trade, the stakes are high for other nations trying to contest the dollar. Because of this, nations who hope to increase the influence of their currency will continue to partner with like-minded countries as seen everywhere from BRICS to the US and Argentina. While undermining US hegemony in global trade overnight is a near impossible task, one thing is clear now more than ever: the nation that can turn the tide and win the currency war may not just control global trade, but control global politics altogether.