The BRICS nations embarking on a journey towards de-dollarisation has been a recognised geopolitical fact for more than a decade now. Particularly, China, Russia and other nations on the same strategic page assert for transactions in the regional currency to counter the American economic hegemony and protect the domestic economy. India, on the other hand, considered the United States as a vital strategic partner in the geopolitical calculus. Under many circumstances, New Delhi has reiterated that it is not aiming to craft a regional BRICS currency. Yet, India champions for strategic autonomy, economic stability and independence.
India aims to calibrate an effort to reduce dependency on the dollar-dominated assets and earmark an independent economic and strategic pathway, which is devoid of the uncertainties escalating within the US economy as an impact of the Trump administration policies. In this direction, India has reduced the aggregate US treasury holdings to a drastic extent and is looking towards gold as credible, trusted and reliable assets in the foreign exchange market. India is also vouching for trade and transactions in regional currency to protect the domestic economy from the global volatilities, as the stability of the assets pegged to US dollar is highly unpredictable under the transactional rule of Trump.
The latest story of economic independence and bold strategic assertiveness is not of the BRICS nations or India against the US hegemony. In the biggest geopolitical churn, the dismantling from the US treasury holdings is accelerated by the European Union, which is indeed a NATO partner and an ally of the US. In a major strategic move to secure the European economy from the volatilities triggered by the Trump administration and to send a clear strategic signal to Trump, the EU has decided to distance itself from the US federal assets. Lately, the European Union has dumped the dollar-denominated US treasury holdings worth USD 9 billion and has drawn a clear red line, which is also deemed as a major strategic setback for the Trump administration.
EU decision to dump dollar assets comes amidst Trump warning
The European Union has decided to dissociate from the dollar-pegged US treasury holdings despite a strong warning from the US President Donald Trump. Thus, Europe selling the US treasury holdings not just aims to secure the domestic economy, but indeed sends a strong geopolitical warning intended towards the hegemonic acts of Donald Trump. In this direction, two bulwark European pension funds are swiftly selling off their US treasury holdings. A Danish pension fund sold around USD 100 million worth of US treasury bonds. Another Sweden government backed pension fund named as AP7 sold the US treasury holdings worth USD 8.8 billion.
This reflects the spiking trust deficit among the European governments with respect to the US treasury holdings, which testifies a larger picture of lack of strategic trust in the US economy as an impact of the irrational or self-centric deeds of the Trump administration. However, the reason underlying the dumping of the US treasury bonds is not just economical, but much beyond that. It is clearly geopolitical in nature. By detaching from the US federal holdings, the European Union aims to send a clear signal to the US President and his unilateral hegemonic actions. Europe seeks to speak about its autonomy and sovereign decision making credentials by asserting that it is not solely dependent on the US bonds.
Fissures in US-Europe foreign policy goals fractures the US federal reserves
The European pension funds firms reiterate the political instability, lack of accountability, dwindling rule of law in the United States under the Trump administration as reasons to dump the US treasury holdings. The fiscal cliff of the American economy is escalating drastically thus eroding trust in the US bonds. This is considered as a major diversion from the historical practices between the US and Europe. European firms always vouched on the dollar-dominated US assets as safe, stable, risk-free, neutral and credible in the forex market. However, with Trump 2.0, the scenario is undergoing a massive structural change and the trust deficit is escalating as strategic contestations spike.
As a bloc, the European Union holds a vast US debt summing to USD 1.6 trillion. Under the Trump administration, there is gradual subsidence from the dollar-pegged assets. This is a pivotal strategic backwardness experienced by the US economy which is hitherto entangled in inflation, heightened cost of living and soaring fiscal deficit due to Trump policies. But, Europe intends to send a strong strategic message. It can be related to Trump’s bully towards NATO, Ukraine, Greenland etc. For example, Trump threatens to pull back from the NATO military alliance & cut down the contribution. He also threatens to annex Greenland at any cost. Thus, by denouncing the US treasury bonds, Europe aims to assert strategic independence, sovereignty and territorial integrity.
The issue is not about the billions of dollars. But it is about the lost trust and partnership in the geopolitical chessboard. From the historical US adversaries such as Russia and China to balanced strategic partners such as India to allies such as Europe, every actor on the geopolitical spectrum is taking a conscious foreign policy approach towards the Trump administration as they are averse towards his deeds. Though, dollar remains a strong currency in the forex market and the US is the world’s largest economy, trust and transactions in the dollar are gradually, but firmly & visibly eroding leading to a sound recalibration of the multilateral order. Ultimately, the message is clear. The irrational unilateral hegemonic actions of Trump is not tolerated even by allies such as Europe.
