The global trade dynamics is evolving. The U.S. dollar's long-standing hegemony is facing geopolitical tensions. American tariffs have accelerated the push toward dedollarisation. Countries are consciously reducing reliance on the USD for international transactions. Of course, the USD still dominates as the primary reserve currency. It holds about 58% of global foreign exchange reserves. However, according to the latest IMF Currency Composition of Official Foreign Exchange Reserves data for the first quarter of 2025, its position is showing signs of gradual erosion. This shift is driven by trade wars, U.S. sanctions, and collaborative efforts by BRICS nations to foster alternatives. Dedollarisation is not an abrupt overthrow but a slow multipolarisation of the global financial system. The euro, Russian ruble, Chinese yuan, Japanese yen, and Indian rupee are gaining ground in niche regional and bilateral trades. But no single contender can claim global supremacy as yet. So, globalisation is not collapsing but morphing into a more fragmented, regionalised model. This phenomenon is influenced by deglobalisation trends and what economists term the "5 Ds”, which are deglobalisation, decarbonisation, demographics, debt, and digitalisation. We shall explain this a bit later.
Challenges to Dollar’s Status Without Immediate Replacement
Since the Bretton Woods agreement in 1944, which collapsed in the early 1970s, the dollar has anchored global trade. It supports over 80% of international payments and the petrodollar system for oil trades. Yet, by September 2025, dedollarisation efforts have intensified, thanks to the U.S. policies under Trump’s administration. The tariffs were initiated via Executive Order 14257 in April 2025. It imposed a 10% blanket rate on all imports, escalating to 20% for select goods and up to 60% or higher on Indian and Chinese products. Additional hikes have been threatened on items like fentanyl-related imports. These measures have disrupted global supply chains, prompting nations to diversify away from USD exposure to avoid sanctions and volatility.
Global efforts are on to mitigate risks from U.S. monetary policy swings and extraterritorial sanctions. By mid-2025, Russia's foreign trade settlements in rubles surpassed 54%, with imports at 56.2% and exports following suit, marking a historic overtaking of the dollar. BRICS nations are advancing a SWIFT alternative—a blockchain-based payment system dubbed “BRICS Pay”. This could facilitate 20-30% of intra-BRICS trade by 2026. Experts point out that dedollarisation is not an immediate threat to the dollar but it is real. It is a slow and continuous shift that can change the global economic power.
Empirical data from the IMF indicates the dollar's reserve share dipped from 61% in 2021 to 58% by the first quarter of 2025, while its role in Asian trade invoicing has declined amid U.S.-China frictions. ASEAN countries have accelerated non-dollar settlements. Various projections suggest further momentum from tariff disruptions. In 2025 the dollar has depreciated by 10% against major currencies. However, the dollar's liquidity and safe-haven status remain. J.P. Morgan reports that foreign ownership of U.S. Treasuries was at 30% in early 2025, underscoring persistent trust. So, while diversification creates a mosaic of currencies for targeted trades, the dollar's outright replacement remains elusive.
Case Study: India-Russia Trade as a Dedollarisation Model
The India-Russia bilateral trade exemplifies dedollarisation in action. India has defied U.S. sanctions and tariffs by continuing to import Russian oil at discounted rates, settling payments in rupees and rubles rather than dollars. This shift intensified after the 2022 Ukraine conflict but accelerated in 2025 amid Trump's tariffs. India imported over 1.5 million barrels per day of Russian crude in the second quarter of 2025, priced at $3-4 below global benchmarks. The settlements were made via Special Rupee Vostro Accounts (SRVAs). This mechanism, facilitated by the Reserve Bank of India, has seen 156 SRVAs opened across 30 nations by February 2025, holding Rs. 134.55 billion in balances.
The arrangement mitigates dollar volatility and risks of sanctions, allowing Russia to use accumulated rupees for imports from India like pharmaceuticals and machinery. However, challenges persist. Rupee surpluses in Russian accounts have led to imbalances. This has resulted in calls for diversified investments. So, while dedollarisation has its practical value in bilateral ties, it has certain limitations in scaling globally, since a broader infrastructure is not available.
The Potential for Euro Dominance in Global Trade
According to the European Central Bank or ECB’s annual report, the euro holds about 20% of global reserves. The currency has remained stable in 2025 despite Eurozone economic challenges. ECB President Christine Lagarde has positioned the euro as a hedge against USD volatility. This highlights "strategic autonomy" through integrated markets and digital initiatives like the digital euro. However, the euro may roll out after October 2025. The EU is enthusiastic about propping up euro because of its vast trade network and the push for deeper capital markets union.
The ECB's 2025 report confirms the euro's role was "broadly stable" in 2024, extending into 2025. It has 20% reserve share versus the dollar's 57.8%. Euro invoicing has been boosted by 750 billion euro energy deal between EU and U.S. that is partially in euros. In addition there have been Free Trade Agreements with India and ASEAN. Yet, fragmented fiscal policies hinder its rise. Various National Bureau of Economic Research analyses note that it lacks the dollar's "international stature". ECB's Isabel Schnabel advocates for enhanced euro use amid investor shifts to Europe in June 2025. Regionally, the euro dominates energy and trade with neighbours, complementing rather than supplanting the dollar.
Ruble's Rising Role Amid Sanctions and Trade Shifts
The Russian ruble has defied expectations in 2025. It has appreciated 45% against the dollar early in the year due to capital controls, attracted high interest rates (peaking at 16%), and trade surpluses. Ruble settlements reached 54% overall by April, with imports at 56.2%. Thanks to sanctions, Russia pivoted to ruble-based deals with India, China, and Africa.
Despite being the world's best-performing currency early on, forecasts predict the ruble’s weakening to 90-100 per USD by year-end due to import slowdowns. Globally ranked 34th, the ruble thrives in Eurasian contexts but remains niche.
Yuan's Internationalisation: A Key Challenger
China's yuan has surged. Its internationalisation index has risen 11% to 6.06 in 2024, sustaining into 2025 amid tariff threats. Plans for yuan-backed stablecoins aim to erode petrodollar dominance. As the world's top trader, China promotes yuan to foster multipolarity. Yuan is also being increasingly used in cross-border trade. Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging their price to a real-world asset, such as a commodity, a financial instrument or legitimate national currency also known as fiat currency. Experts foresee yuan as "the next global currency".
Yen and Indian Rupee: Limited but Growing Influence
The Japanese yen is widely regarded as a safe-haven currency due to Japan’s political stability, robust capital markets, and substantial foreign exchange reserves, which stood at approximately $1.2 trillion as of mid-2025. However, the yen’s global role remains limited compared to the U.S. dollar.
Japan’s persistent trade deficits, driven by reliance on imported energy and materials, weaken the yen but enhance export competitiveness. Companies like Toyota and Sony benefit as a weaker yen lowers prices abroad, supporting export-led growth. The yen’s safe-haven status makes it appealing, especially if the Bank of Japan normalises monetary policy, raising interest rates from near-zero levels.
RBI's August 2025 circular eases SRVA rules and promotes the rupee in trade. With 156 SRVAs operational, the rupee use grows in neighbourhoods like Bhutan and Nepal. UPI's global expansion to seven countries by July 2025 aids this.
Both yen and rupee gain regionally amid tariffs but lack global reach.
Is This the End of Globalisation?
Globalisation evolves amid deglobalisation, shaped by the 5 Ds. Deglobalisation fragments supply chains; decarbonisation drives green transitions; demographics strain aging populations; debt burdens economies; digitisation boosts efficiency but results in inequality. IMF forecasts global growth of merchandise trade for 2025 at 3.0%, while WTO pegs it at 0.9%. Tariffs raise costs, spurring reshoring, yet interconnectedness endures.
Case Study: Southeast Asia's Response to Deglobalisation
Southeast Asia illustrates globalisation's transformation. ASEAN nations like Vietnam and Indonesia have ramped up regional pacts through local currency settlements. Vietnam's exports to the U.S. fell 12% in the second quarter due to tariffs, prompting diversification to EU and BRICS markets. Formalised local-currency frameworks under the BRICS influence have reportedly cut transaction costs by 20%. However, challenges like supply chain disruptions highlight vulnerabilities. Still, resilient regional blocs are emerging from global fragmentation.
In conclusion, global trade diversifies currencies amid dollar challenges, with euro, yuan, and others rising regionally. This mirrors globalisation's shift to a multipolar, resilient paradigm.
Bretton Woods, Dedollarisation, BRICS, EU, ASEAN, yuan, yen, ruble, rupee, euro, IMF, RBI, Trump, Vietnam, Indonesia, India, China, Russia, globalisation, SRVAs, petrodollar, ECB,
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