As the China-U.S. trade war intensifies, Washington may be fixated on tariffs and trade balances. But in doing so, it’s missing a deeper, more strategic battle: currency. While the United States turns inward with protectionist policies, China has been steadily working to elevate the international profile of the renminbi (RMB). Though progress has been gradual, it carries real risks to the U.S. dollar’s dominance in the global trade system.
Leveraging its $6 trillion in foreign trade, Beijing is building a robust financial infrastructure to support RMB-based transactions across a network of over 150 countries.
Since 2009, China has steadily promoted RMB settlement in key sectors like energy, infrastructure, and exports, particularly amongst developing nations. While avoiding direct confrontation with the United States, China is leveraging a multi-pronged strategy – establishing cross-border RMB settlement mechanisms including Cross-Border Interbank Payment System (CIPS), an expanding network of offshore RMB clearing banks, and a web of strategic currency swap agreements – to quietly steer the global financial system away a U.S. dollar reliance. In April, Argentina renewed a $5 billion currency swap deal with China despite U.S. pressure. Even Brazil, a major U.S. trading partner, has agreed to shed the dollar as an intermediary and settle bilateral trade in RMB, raising its RMB holdings from just over 1 percent in 2019 to nearly 5 percent by the end of 2023. While U.S. dollar holdings continue to dominate Brazil’s foreign exchange reserves at 79.99 percent, this shift signals a growing interest in alternatives.
By late 2023, China had inked currency swap deals with 40 countries and established 33 RMB clearing banks across 31 countries. That same year, Chinese institutions conducted over $7.8 trillion in cross-border settlements, a staggering 85.6 percent increase from 2022.
China’s expanding overseas lending – estimated between $1.1 trillion and $1.5 trillion – now surpasses the combined lending issued by the World Bank and Paris Club nations, further embedding the RMB in Belt and Road economies.
The RMB has steadily climbed in usage – from just 2.22 percent of global payments in 2019 to 4.33 percent by February 2025. This quiet momentum mirrors China’s rise in other sectors, like how BYD surpassed Tesla in global EV sales. For Beijing, the RMB is increasingly used to secure essential resources and fund projects abroad, increase global dependence on its exports, and help mitigate the impact of U.S. tariffs.
Meanwhile, the United States has seen its credibility eroded by erratic foreign policy, a retreat from global institutions, and trade tensions with allies. The consequences are visible. International investors are shedding U.S. bonds, and the dollar fell 10 percent against the euro from January to April.
Washington is aware of the slow erosion of the U.S. dollar, but its response has been underwhelming. While Trump has floated tariffs as high as 100 percent on countries distancing themselves from the dollar, such unilateral moves risk alienating allies and are no substitute for a systemic strategy. U.S. efforts to decouple with and isolate China face major challenges: The United States has yet to overcome structural weaknesses in its manufacturing sector and remains heavily reliant on Chinese goods.
As it stands, Trump’s tariff and trade policy will likely to lead to higher U.S. borrowing costs, increased consumer inflation, and a weakening of the United States geopolitical influence. Industries are at risk too: without coherent measures addressing China’s dominance in global manufacturing and critical mineral supplies and its push for RMB-based trade, American companies could, over time, face growing pressure to settle payments in RMB
Still, China’s ambitions face limits. Its global push is complicated by China’s own structural challenges – including political centralization, contested human rights practices, persistent global and domestic economic headwinds, and institutional opacity. The RMB lacks the credibility, transparency, legal protections, and predictable policymaking that underpins the U.S. dollar’s global status. Though Washington’s recent moves have undermined these institutional foundations, the structural challenges to the RMB remain foundational. Unlike the U.S. dollar, which is largely anchored in financial services and capital markets, the RMB is directly tied to China’s vast manufacturing base and supply of tangible goods. All of these make its complete replacement of the role of the dollar unlikely. Yet for many developing nations, the RMB offers practical utility – especially in trade for essential goods.
In a world navigating between two imperfect systems, the RMB is emerging as a functional, if limited, alternative. Washington cannot afford to overlook this shift. Tariffs may offer short-term political wins, but they fall short of a long-term vision. What is needed now is a coordinated, forward-looking strategy. That means restoring cross-sector coordination, listening to the advice of financial and national security experts, and reengaging with multilateral systems.
If Congress remains passive and the White House continues to respond in a piecemeal and reactive manner, the United States risks more than economic stagnation – it stands to forfeit both hard and soft power in an increasingly multipolar world.
In this world, it will be the American people – workers, consumers, and taxpayers alike – who will ultimately bear the costs.