Exclusive: US 'reciprocal tariffs' may hurt greenback's dominance

The United States' push for so-called reciprocal tariffs may hurt the greenback's dominance, accelerating the global trend of de-dollarization, said Zhao Zhongxiu, president of the University of International Business and Economics and a renowned expert in international economics.

In an exclusive interview with China Daily on Thursday, Zhao said the US trade deficit and the dollar's global dominance are two sides of the same coin — tolerating trade deficits is essential for maintaining the dollar's global role.

The new push for trade balance through "reciprocal tariffs", however, will likely trigger global dollar liquidity flowing back to the US, reduce dollar liquidity abroad and undermine the dollar's global payment function.

Particularly, US trading partners may see reduced dollar income as exports to the US decline and may have to sell US Treasuries to obtain the dollar liquidity needed for international payments and settlements, bringing challenges to the US' role as a reserve currency.

The policy shift could also deal a heavy blow to the multilateral trade system and global commercial practices, meaning that world trade could experience severe disruptions in the short term. All this, he said, would undermine US credibility and push more countries to settle trade in non-dollar currencies.

Ultimately, the US tariff policy could lead to greater economic isolation of the US, Zhao said. On the other hand, China, as the world's second-largest economy, should strive to foster a more open and stable market environment to provide the outside world with more opportunities for mutual benefit, helping avoid any severe global economic recession.

On exchange rates, Zhao urged a rational view of the renminbi's pressure against the dollar, with exports to the US now accounting for just about 14 percent of China's total exports.

He said that China's consumption upgrades, tech progress and supply chain resilience will underpin the yuan's stability, adding that the US tariff push could even accelerate China's industrial upgrading and productivity gains in the long term — helping offset some of the negative impact on exports.