Shift from petrodollars to petroyuan proposed?

In the early stages of 2025, the United States economy showed a growth recovery, with the GDP increasing by about 3% in Q2. This growth, however, may overstate the underlying economic strength, with slower overall growth compared to 2024. The Trump administration's policies, such as preventing tax increases, controlling federal spending, deregulation, and boosting domestic energy production, have contributed to a positive labor market and inflation control, supporting domestic prosperity.

However, the global economy is expected to underperform due to the uncertainty caused by Trump's trade policies. The ongoing trade war and policy shifts have increased global economic uncertainty, dampening investment and demand momentum worldwide. The International Monetary Fund forecasts a slowdown in global growth to 2.8% in 2025.

Trump's focus on bilateral trade deals and unilateral tariffs creates instability for emerging markets, which often rely on stable global trade rules and multilateral frameworks. The undermining of global institutions and increased great-power rivalry reduce multilateral cooperation that typically benefits emerging economies.

Trump's second term continues the trade war and economic competition with China as a central theme, framing the relationship as a great-power rivalry. His administration bypasses multilateral institutions like the WTO, opting for direct bilateral negotiations and unilateral tariffs to reshape global trade, targeting China’s role and economic status. This has led to a "lose-lose" scenario where both economies face adverse effects, and no decisive resolution achieved yet.

The current world trade system is seen as unsustainable without major reform. Trump’s attempts to alter China’s status, counter "overcapacity," and propose alternatives such as tariff alliances or century bonds have yet to mature, leaving the future global trade architecture uncertain.

The timing and sequence of Trump's policies will have a significant impact on the US economy. Some analysts caution that the growth may overstate the underlying economic strength, with slower overall growth compared to 2024. Global investors may be underestimating the disruptive impact of Trump's second term.

In the geopolitical arena, Trump's preference for unilateralism and bilateral dealings weakens the post-World War II Western-led multilateral system and consensus on democratic and institutional norms, accelerating a move toward global multipolarity with more fragmented international relations. This undermines the cohesion previously maintained among Western allies and contributes to geopolitical instability.

As the second Trump term unfolds, a roundtable discussion on US-China relations, a potential response from Beijing to potential trade actions from the US, and an OMFIF Live broadcast on the role of the dollar and potential dedollarisation scenarios are scheduled. Additionally, Joachim Nagel, president of the Deutsche Bundesbank, will deliver a lecture on the natural rate of interest, and Max Castelli, head of strategy, sovereign institutions at UBS Asset Management, will speak on the role of the dollar and dedollarisation scenarios.

Argentina is relying on a US-backed IMF lifeline, according to Hector Torres, senior fellow at the Centre for International Governance Innovation. Saudi Arabia has joined Project mBridge, which could have potential implications for the incumbent dollar-based financial system.

In summary, Trump's second term is marked by domestic economic measures aimed at growth and protectionism, coupled with a geopolitical strategy of direct confrontation with China and erosion of multilateral institutions, resulting in complex effects on the global economy, emerging markets, and U.S.-China relations. The timing and sequence of Trump's policies will have a significant impact on the US economy, and global investors may be underestimating the disruptive impact of Trump's second term.

Despite the United States economy showing growth recovery in Q2 of 2025, the data may not accurately represent the underlying economic strength due to slower overall growth compared to 2024.
The Trump administration's policies, such as preventing tax increases and boosting domestic energy production, have contributed to a positive labor market and inflation control in the United States.
However, the global economy is expected to underperform due to the uncertainty caused by Trump's trade policies, with the International Monetary Fund forecasting a slowdown in global growth to 2.8% in 2025.
Trump's focus on bilateral trade deals and unilateral tariffs creates instability for emerging markets, as they often rely on stable global trade rules and multilateral frameworks.
In the geopolitical arena, Trump's preference for unilateralism and bilateral dealings weakens the post-World War II Western-led multilateral system, accelerating a move toward global multipolarity with more fragmented international relations.
In response to Trump's policies, Argentina is relying on a US-backed IMF lifeline, while Saudi Arabia has joined Project mBridge, which could have potential implications for the incumbent dollar-based financial system.
Upcoming events include a roundtable discussion on US-China relations, a lecture on the natural rate of interest, and a talk on the role of the dollar and potential dedollarisation scenarios in the geopolitical and financial spheres.