The Dollar Loses Its Luster: Global Trade Practices in Transition

Paula Comings, the head of currency sales at US Bancorp, observes a significant shift in the payment practices of US importers. Increasingly, they hear from their foreign business partners the desire to be paid not in US dollars, but in other currencies such as the euro, the Chinese renminbi, the Mexican peso, or the Canadian dollar. This development aims to minimize the risks posed by fluctuations in the US dollar. This change in the stance of international suppliers is remarkable, given that the dollar was long considered an indispensable trading currency by them. However, the current instability of the US dollar—down by about 8% against a basket of currencies this year—has led many companies to rethink their payment strategies. Examples include a lumber company from the Midwest, which now processes its payments for European hardwood imports in euros, and a household goods retailer reshaping its negotiations with Chinese suppliers to pay in yuan in the future. A US food company also benefits by paying for its equipment from Italy in euros, thus obtaining more favorable terms. These new practices are emerging even though the widespread shift is not yet captured in official data. According to experts like Karl Schamotta from Corpay, this is, however, a trend gaining importance from East Asia to Latin America. Strategists from Citigroup confirm the changes and emphasize that new trade blocs in Latin America and Asia could further promote the shift away from the dollar in trade invoicing. The dominance of the US dollar in international trade invoices is increasingly being questioned. However, data from the International Monetary Fund and the Federal Reserve Bank of New York show that the dollar accounted for the majority of export invoices from 1999 to 2019, especially in the Americas and to a lesser extent in the Asia-Pacific region. In Europe, where internal trade dominates, the influence of the dollar is significantly lower.