Why do we buy the dollar if America becomes an economic island?

In light of US President Donald Trump’s imposition of the highest customs duties the United States has seen more than a century, the controversy over the most prominent currency in the world is. Is the US dollar still a safe haven, or is it more like one of the five fragile currencies in emerging markets, which is quickly affected by the change of market moral and warm money flow? So far, no clear verdict has been issued. The dollar was a remarkable decline last week after the White House announced the imposition of punishment on the most important commercial partners of the United States. However, the depth of the decline in stock markets and the increase in financial pressure has forced investors to avoid buying the dollar. However, anxiety still arouses the scene. If Trump is actually trying to build a self -sufficient US economy through high customs walls, will there remain a reason for other countries to retain large quantities of the dollar? In fact, the dollar began to lose part of its hegemony on the global trade and financing scene. According to the International Monetary Fund, the dollar’s part of the global reserves has dropped to 58% over the past year, compared to more than 70% two decades ago. This decline was accompanied by the growing use of unconventional currencies such as the Australian dollar and the Chinese Yuan. The withdrawal of investors threatens the dollar to represent a world in which free trade exists, but without the participation of the United States. Thanks to the progress of automatic market industry systems and liquidity management, new commercial partners can complete their transactions using their local currencies directly, without the dollar having to go through the dollar as a mediator to settle payments. In this context, the fear that foreign investors are coming from the private sector is not central banks, which is currently the basic basis for purchasing US assets. Although this hot money has previously supported the dollar climbing track, it poses great risks because this capitalist flow is quickly volatile. From last year, the value of US equities owned by foreign investors reached about $ 18 trillion, equivalent to about 60% of US GDP, compared to less than 40% ahead of a decade. If these investors decide to reduce their belongings by no more than 5%, the resulting sales operations can lead to a doubling of the current account, which Trump is difficult to reduce. Previously, chronic older women in the US current account enabled foreign commercial partners to earn and accommodate dollars. At the same time, strong economic growth and the high returns of the S&B 500 are attracted to international asset managers to increase their investments in the US market. But today, the image has changed completely, as Trump is on its way to the separation of the United States of the global economic system, while analysts expect a sharp contraction in the country’s gross domestic product this year. Trump unfortunately ignores the power of the service sector, Trump seems to look at the world through an old lens. He has strongly criticized foreigners trying to achieve wealth by selling cheap commodities to US consumers, and ignoring that the United States is a clear source of services. From financial products to cloud computing services, the demand for US manufactured products is still large among foreigners. Since the global financial crisis, these investors buy evil for US stocks, which implicitly indicates their constant belief in what is known as the concept of US exception. But the US president focuses only on a part of the image. Maybe it’s time Trump reconsidered his understanding of the world. Until he does, the dollar can unfortunately be a side victim of his policy.