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End of the Empire is a once-monthly feature on all news relating to the transition from the unipolar world of the US Empire to a multipolar world.
Every time the global markets seem to have recovered from some shock of uncertainty arising out of a decision by President Trump, his outfit embarks on some new scheme to throw up more disorder. Whether or not the markets had finished or fully adjusted to the reality of the new tariff regime—unquestionably the most substantial sea change in global business in recent times—it was followed by the 12-day bombing of Iran, then a court battle over the tariffs’ legality.
Spending cuts promised on the campaign trail were overridden by the desire to have one big beautiful bill, which continued the Biden-era budget deficits of over $1 trillion per year. Then, Trump ordered the bombing of a peaceful nation and the seizure of its head-of-state, before proclaiming that A: the US would “run” Venezuela; B: the taxpayers would finance American oil companies’ multi-billion-dollar overhaul of the Venezuelan oil infrastructure; and C: the US might attack Colombia and Greenland as well.
As if this wasn’t enough, the Dept of Justice announced it was opening a criminal investigation into the Federal Reserve Chairman Jerome Powell—who subsequently said the investigation had nothing to do with the cost of the new Fed headquarters in DC, the focus of the case, but rather everything to do with Trump’s personal political vendetta against him.
It was called the greatest challenge for Fed independence in modern times.
Just as a backdrop to that, or perhaps as a reaction to it, gold, for the first time in 30 years, overtook the US Treasury bill as the greatest share of world bank reserves after record buying and massive increases in the price took global reserves to over $4 trillion. This coincided with news last year that US treasuries fell to their lowest share of global reserves in over 2 decades. The share stands by most recent research at around 40%, which means there’s still substantial daylight between the dollar and the euro, the second-largest fiat currency held in reserves, but a fall of 40% from only a few years ago.
Now, news has come out of China that despite Trump’s trade war policies and trade deals signed with the major Asian economies, the Chinese trade surplus has actually grown—topping $1 trillion for the first time ever. In fact, South China Morning Post described it as a result of “extensive efforts to diversify export markets and supply chains amid uncertainties from US President Donald Trump’s tariff war”.
“China’s trade surplus tops US$1 trillion mark as exports rebounded despite tariffs,” said Lynn Song, chief economist for Greater China at Dutch investment bank ING, noting growth of 22.1% over the same period last year.
This was registered even in the face of steep declines in exports to the United States, and increased imports which would lower the surplus on balance. Export declines to the US were recorded at 28%, while exports to the EU, Japan, South Korea and Africa grew by 14.8%, 4.3%, 1.9% and 27.6%, respectively.
Then, as 2026 dawned, the RMB-USD exchange rate fell below 7-1 for the first time in 15 months, as more global traders choose not to take issue with settling agreements in the Chinese yuan.
Taken as a whopping body of evidence, 2025 made itself a very good candidate for the year in which the dollar’s slow but seemingly inevitable dethronement in global trade, banking, and finance really began in earnest.
Coup de grace?
Approximately $10 trillion in US Treasury debt is set to mature in 2026, which by the end of the year will represent about one-fourth of the total outstanding government debt. This maturing debt will need to be refinanced through new issuance, creating a significant refinancing challenge.
Trump and his team will be eager to get Powell ex situ so as to install the much-anticipated Trump yes-man before the majority of this refinancing occurs. The existing Trump agent on the Fed’s Open Market Committee has already called over over 150 basis points in interest rate cuts this year, regardless of waiting to see what happens to the persistent, above 2% price inflation.
In other words, Trump has made it plain he wants lower interest rates—the rate at which US banks borrow from the Fed, in order to make the economy appear more productive, and to rollover this massive portion of debt at lower interest rates. Chairman Powell held interest rates at 4-5% for most of the last 3 years. If Trump’s plants on the FOMC could get them below 2%, then the US government would be able to be funded at much lower costs, and allow for much larger spending over the coming years, including on the military needed to fight the nation’s endless list of targets.
However, while a sub-2% rate (a negative interest rate) would greatly benefit the US government’s ability to run up debt, it certainly wouldn’t be too appealing for foreign investors, those whom the US will inevitably rely on to buy a big chunk of those newly issued treasuries.
If substantial portions of that debt isn’t taken up by foreigners with weaker currencies, the methods for the federal government to finance itself would either have to be substantially-higher taxation, or, the much more likely case, those tools most often ascribed to the dysfunctional governments we refer to as “banana republics.”
China and gold give the rest of the world a better partner than the US for the first time in decades: the former in trade, the latter in reserves. WaL
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PC: Matt Benson on Unsplash
