Half of global trade uses the dollar as its primary currency, according to a U.S. congressional analysis.

The U.S. government has the ability to print its own currency. In addition, central banks and other major financial institutions often hold dollars in their reserves. 

This currency is widely used in international trade and is considered, in most cases, as a reserve currency. 

In addition to the U.S. dollar, other major reserve currencies in the world include the euro, the yen, the pound, the renminbi (RMB), the Swiss franc and the Australian dollar. 

Global trade

This Saturday, U.S. President-elect Donald Trump threatened Brazil, Russia, India and China (BRICS members) with 100% tariffs if they “move away” from the dollar.

According to Seabridge Gold, the BRICS are trying to reduce their exposure to Western markets, both in dollars and euros, for three reasons:

• Currency inflation.
• Sovereign debt risk.
• Threat of sanctions. 

In a post on Truth Social, Trump said, “The idea that the BRICS countries are trying to move away from the dollar while we stand idly by and watch is OVER.” 

Trump added right away, “We demand a commitment from these countries that they will not create a new BRICS currency, nor will they back any other currency to replace the mighty U.S. dollar or else they will face 100% tariffs and should expect to say goodbye to sales in the wonderful U.S. economy.”

U.S. dollar

A reserve currency is one that central banks hold in large quantities. It is commonly used for international trade and financial transactions. This helps reduce the costs associated with settling transactions between different currencies.

Since World War II, the dollar has been the world’s primary reserve currency. According to the same analysis by the U.S. Congress, currently, about 60% of central bank foreign exchange reserves are in dollars. In addition, approximately half of the world’s international loans and global debt securities are denominated in dollars.