The Dollar and the Triffin Dilemma Intertwined Again
The so-called "Triffin Dilemma" refers to the issue that arises when a country's sovereign currency becomes the global reserve currency. It must maintain a long-term international balance of payments deficit to provide liquidity, but this pattern can weaken currency credibility and induce a confidence crisis. The collapse of the Bretton Woods system half a century ago is a typical validation of this theory. Today, the United States attempts to narrow its trade deficit through tariff policies, which may directly conflict with this international monetary operation logic.
Tariff Tools Narrow Deficit but Suppress Capital Inflow
In recent years, the U.S. government has frequently used tariffs as a bargaining tool to force trade partners into new agreements. Such measures have indeed improved the trade deficit to some extent, but at the cost of dampening foreign investors' interest in purchasing U.S. securities. Analysts point out that reducing the trade deficit means compressing the space for international capital inflow, and the contraction of capital accounts could weaken the dollar's foundation as a reserve currency.
In the capital flow data disclosed by the U.S. Treasury, it is evident that even though the overall funds still maintain a net inflow, the growth has slowed, and private investors' willingness to hold U.S. securities has significantly weakened. This "marginal change" has become an important reason for the pressure on the dollar index.
Intensifying Divergence in Foreign Investment Structure
Although foreign investors are overall still increasing their holdings of U.S. Treasury bonds, their interest in U.S. corporate bonds and stocks is declining, indicating global capital's concern over U.S. economic prospects. Especially within the context of fluctuating trade policies and rising geopolitical risks, funds tend to prefer the low-risk Treasury assets, steering clear of high-risk equity investments.
Meanwhile, some official investors choose to increase their holdings of U.S. debt when the dollar weakens, but such operations are often temporary and cannot compensate for the long-term decline in private capital inflow. The market generally worries that if U.S. tariff policies continue to exert pressure, even official capital may become more cautious in the future.
Global Dollar Reserve Share May Continue to Decline
According to the International Monetary Fund, the dollar's share in global foreign exchange reserves has remained below 60% for several consecutive quarters. Although it still maintains an absolute advantage, the downward trend is quite evident. Some countries are gradually increasing the proportion of gold or other currency assets in their reserves to reduce dependence on the dollar.
The new trade agreements pushed by the U.S. require some countries to increase direct investment in the U.S. In the short term, this may stimulate U.S. manufacturing, but it also means less capital allocated to the securities market from a limited capital pool, further weakening the impetus for global dollar reserve accumulation.
Structural Conflict between Tariffs and Dollar Status
Under a dollar credit-based system, the U.S. needs to provide dollar liquidity to the world through a sustained trade deficit, which is an implicit responsibility of maintaining dollar hegemony. However, when the U.S. compresses the deficit through tariff measures, this cycle mechanism may be weakened. The combination of trade contraction and reduced capital inflow creates a new contradiction for the dollar's international status: the need to maintain domestic industry and employment, while also preserving the global monetary center position.
Economists generally believe that current U.S. policies may result in a pattern of "short-term gains, long-term risks." Tariffs may garner support in domestic politics, but from a global perspective, the outcome could be the gradual erosion of the dollar's status as a reserve currency.
