The Bretton Woods Agreement, established in 1944 by 44 allied nations, created a new international monetary system to stabilize exchange rates, prevent competitive devaluations and promote economic growth. The system was designed to mimic the gold standard, with the US dollar pegged to gold and other currencies pegged to the dollar. The Bretton Woods system collapsed a few decades later, when President Nixon, under pressure due to inflationary factors like the Vietnam War, suspended the dollar’s convertibility to gold, effectively ending the fixed exchange system in 1973.
Notwithstanding, the US dollar remained the preferred reserve currency because of its stability due to scale and liquidity. After more than half a century of dominance, the US dollar is now under siege. The BRICS nations representing more than 40% of the global population and nearly a quarter of the world’s GDP are pursuing trading relationships between member nations in non-dollar denominated currencies. This could weaken the US’ hegemony on global markets and tilt the balance of financial power eastwards.
The tariff war that President Trump has unleashed, particularly against the BRICS members, is an outward manifestation of an attempt to curb the erosion of financial power that the US has enjoyed post Bretton Woods.
Trump’s policies are designed to create preferential trade pacts and friends — shoring incentives to keep supply chains inside allied, dollar-friendly jurisdictions; more sectoral tariffs and quotas aimed at preserving strategic industries; and greater use of export controls and tech restrictions, as sanctions become less reliable if adversaries use non- dollar systems.
Regardless of the winners and losers from Trump’s tariff wars, whilst the dollar remains important, it may no longer be the unquestioned global anchor. The coming year will be key in defining US trade policy in a declining dollar era — whether it ushers in Trump’s promised “Golden Age” or whether the US will need to adjust to a new reality of having to share global financial power with trade blocs such as BRICS.