Tariffs & the Shifting Role of the U.S. Dollar
This article is written by HedgeFlows For decades, the U.S. dollar has reigned supreme as the world’s reserve currency, underpinning global trade, investment, and economic stability. This dominant position, often referred to as the “exorbitant privilege,” has enabled the U.S. to maintain cheaper borrowing costs, predictable exchange rates, and larger deficits without significant economic fallout. But the ground is shifting. Global tariffs unleashed by Trump and geopolitical tensions, particularly between the U.S. and China, and an increased focus on supply chain security have triggered unprecedented shifts in global trade dynamics led by President Trump’s administration. To those at the helm of mid-market enterprises, these seismic changes may have felt slow-moving and distant until recently. Still, the events of the last two weeks and their potential impact on financial strategy, procurement, and everyday operations cannot be overstated. What’s changing, and why does it matter now? For decades, nations like Japan and China have willingly accepted U.S. dollars as payment for goods and services sold to U.S. companies and consumers, using them as a safe reserve currency. However, as global economic dynamics shift, the long-term dominance of the greenback as the world’s primary reserve currency is increasingly being called into question. Europe is navigating its evolving relationships with the United States, while China has grown powerful enough to engage in a full-scale trade war with the world’s leading superpower. These developments are reshaping the financial landscape, challenging the greenback’s once-unquestioned supremacy. Consider this striking fact: foreign governments and institutions currently hold over $7 trillion in U.S. Treasury securities – more than the total government debt the US has to refinance over the next 24 months. These holdings not only reflect confidence in the U.S. dollar but have also formed a crucial support system for America’s economic structure. They fund unprecedented deficits that the US has enjoyed for decades. A shift away from such reliance could have wide-ranging consequences for businesses globally. What’s Driving the Shift? 1. Onshoring Push in the U.S. Amid Trump’s government tariffs rollout and renewed calls for supply chain security, the U.S. is focused on producing more goods domestically. Geopolitical tensions with China and vulnerabilities exposed by the pandemic have accelerated this transformation. Goods once predominantly imported, such as semiconductors and essential technologies, are increasingly being manufactured on home soil. While this shift is good for domestic industries, it reduces the global demand for the U.S. dollar in trade transactions, an effect mid-market businesses must prepare for. 2. China’s De-Dollarisation Efforts China, long dependent on the U.S. dollar for trade, has launched de-dollarisation campaigns aimed at reducing that reliance. Recent agreements to settle oil trades with Brazil in yuan exemplify this strategy. Additionally, the rise of digital currencies, including central bank digital currencies (CBDCs), is further disrupting dollar-dominated trade norms. China has been increasingly pushing for the use of the renminbi (RMB) in its global trade engagements. One significant milestone in this effort is the trading of oil futures in Shanghai, priced in RMB rather than U.S. dollars, which has gained traction among Middle Eastern oil producers. This move not only strengthens the renminbi’s position as a viable currency for international trade but also challenges the hegemony of the U.S. dollar in global energy markets. By encouraging its trade partners to adopt the RMB, China aims to enhance its economic influence and reduce exposure to dollar-based fluctuations, marking a decisive shift in global financial dynamics. A significant concern among investors is how China’s dollar strategy might unfold. If market participants begin to anticipate large-scale selling of U.S. Treasuries by China, this could trigger capital flight, eroding the dollar’s strength. Something that came to the fore the week after Trump’s recent tariff announcement on the 2nd of April 2025. 3. Rise of Digital Currencies and Non-USD Trade Technological advancements, combined with geopolitical motives, are fuelling the adoption of alternative currencies in global settlements. Whether it’s Russia-India trade conducted in rubles or yuan trading agreements with African nations, the share of non-USD payments is rising. The result? A Diminished USD Demand These trends collectively lower the global need for USD reserves. Businesses could face increased volatility in cross-border transactions as the cushion provided by widespread dollar usage starts to thin. What Is the Exorbitant Privilege and Why It Matters The U.S. dollar has historically benefitted from being the world’s reserve currency, giving it a unique edge. Here’s why that’s significant: For private businesses, access to cheap capital and stability in currency has been an indirect boon, streamlining operations and growth. However, mid-market CFOs need to recognise that these advantages may weaken in the years ahead. What Could Change and What CFOs Should Watch Over the next 5–10 years, several risks could arise for businesses heavily reliant on the dollar-dominated global economy. Potential Risks CFOs Need to Monitor Strategic Takeaways for Mid-Market Finance Leaders For CFOs of mid-market businesses, navigating the shifting role of the U.S. dollar requires strategic foresight and agility. Here are key steps to consider: 1. Build Resilience Against Volatility Invest in systems such as HedgeFlows that enable faster, real-time decision-making for treasury and risk management. Budgeting and forecasting tools that incorporate dynamic scenarios are invaluable when economic conditions are unpredictable. 2. Diversify Funding Sources Explore non-dollar-denominated funding options or global capital markets to hedge against dollar-specific risks. 3. Monitor Risks Proactively Regularly assess creditor, supplier, and even banking risks. Be prepared to act swiftly in response to economic or geopolitical changes. 4. Manage Currency Exposure Strategically Adopt robust FX risk management strategies. Consider currency hedging where needed to reduce exposure in global transactions. 5. Stress-Test Your Financial Models Run scenarios assuming sharper interest rate hikes or heightened FX volatility to ensure preparedness for potential shocks. 6. Stay Educated and Proactive Keep a close watch on insights from trusted organisations like the Federal Reserve, IMF, and financial publications. Diversify the information sources to avoid falling prey to echo chambers. Closing Thoughts: What Comes After the Dollar? “There are decades where nothing happens; and there are weeks where decades…
Franklin
Visa × Yellow Card: Transforming Corporate Treasury in Emerging Markets
From Treasury Masterminds June 2025 — Visa and Yellow Card have announced a strategic partnership to accelerate stablecoin adoption across Africa and the broader CEMEA region. Yellow Card, a licensed stablecoin orchestrator active in over 20 countries with more than $6 billion transacted since 2019 will leverage Visa’s network—including Visa Direct—to enable faster, cheaper blockchain-based USD (stablecoin) transfers Why stablecoins matter for corporate treasurers How the stablecoin on-/off‑ramp works Here’s a simplified flow: Stage Corporate Treasury Action Stablecoin Flow On‑ramp Treasury transfers local currency into Yellow Card wallet via bank transfer or mobile money. Yellow Card issues USD‑pegged stablecoins. Local fiat → stablecoins Cross‑border Treasury transfers stablecoins via Visa‑linked on‑chain rails directly to another Yellow Card account or partner in another country. Blockchain transfer (USDC/USDT) Off‑ramp Recipient converts stablecoins back into local fiat via Yellow Card and receives funds via bank or mobile wallet. Or optionally, stablecoins enter Visa Direct to credit bank/card accounts. Stablecoins → local fiat Visa Direct integration means businesses can also pay employees or suppliers directly to bank/card-linked accounts using stablecoin settlement rails—blending blockchain efficiency with traditional payout infrastructure. How this benefits corporate treasury teams Emerging market context & future outlook Stablecoins now represent 43‑50 % of crypto transaction volume in Sub‑Saharan Africa, driven largely by limited USD availability With Visa processing $225 million+ in stablecoin settlements since 2023 and plans to expand into more CEMEA markets through 2026 this collaboration signals a major shift in treasury infrastructure. Nevertheless, regulatory clarity remains important—e.g., Ghana’s central bank recently issued warnings over unlicensed stablecoin providers, underscoring the need for treasury teams to partner with compliant, regulated entities Bottom line For corporate treasurers operating in emerging markets: This marks a pivotal moment: treasury teams can now harness digital USD rails, combining cryptocurrency resilience with traditional finance compliance—ushering in a new era for global liquidity and FX risk management. In summary The Visa × Yellow Card partnership delivers a corporate treasury-ready stablecoin infrastructure: opening trapped liquidity, mitigating FX volatility, and enabling speed and transparency—all while integrating with established systems like Visa Direct. Tanya Kohen, Treasury Masterminds Board Member, comments: One of the most transformative features of stablecoins for corporate Treasury is their programmability. Unlike traditional bank money, programmable digital cash can be embedded directly into algorithmic workflows allowing Treasury teams to automate how and where cash moves based on predefined rules and real-time data. This unlocks new levels of efficiency and control: from optimizing working capital in trade transactions, to automating cash management across jurisdictions, to dynamically reallocating liquidity between banks and investment vehicles in line with a company’s investment policy. Crucially, this can all happen without being bound to the limitations of traditional bank products or cut-off times. In this light, stablecoins aren’t just a workaround for emerging market constraints, but a foundational technology for building smarter, more autonomous treasury infrastructure on a global scale. What’s equally compelling is how this shift impacts treasury governance. With programmable money, policy enforcement becomes embedded in code. Investment guidelines, counterparty limits, even ESG criteria can be enforced automatically reducing manual oversight and the risk of policy drift. This could ultimately shift treasury’s role from transaction execution to ruleset design and oversight, pushing finance teams to think more like system architects than process managers. Royston Da Costa, Treasury Masterminds Board Member, comments: Although I am a big fan of stable coin and digital currencies (not crypto currencies due to their volatility), I also feel it is my duty to flag some issues that Treasurers may not be aware of: 1. Trapped Funds There are regulatory grey zones and potential legal risks that treasurers face as most emerging markets have explicit capital controls, and moving money abroad—even via stablecoins—may violate local currency and AML laws. Regulators are catching on, and treasurers using this workaround could be exposed to penalties, license risk, or retroactive enforcement. The benefit of using stable coin to extract cash from restricted markets is still a powerful one, and one can only hope that local regulators try to work with stable coin rather than drive it ‘underground’. 2. Stablecoin FX Exposure Isn’t Risk-Free either If you’re a treasurer trying to manage FX risk, trading local currency volatility for stablecoin counterparty and depeg risk may just shift the problem, not solve it. Having said that, the risk is still limited and manageable. 3. The Myth of “80% Cheaper” Cross-Border Transfers Claiming 80% fee reduction assumes: In reality, on-/off-ramping stablecoins often incurs hidden costs, and recipients may need to pay a premium to convert into usable local currency, especially in markets with shallow liquidity. I believe this will reduce in time as it scales up. 4. Operational Simplicity? Or Complexity in Disguise? Introducing blockchain-based rails means treasury teams now must: What’s pitched as “simpler” is actually a new layer of operational and compliance burden. Unless a company is crypto-native, this is a significant cultural and technical leap. Again, this could be a normal part of the Treasury function in the future and no different to perhaps how some Companies are set up to run an intercompany netting system or in-house bank today. 5. Visa’s Involvement Doesn’t Eliminate Risk Visa’s presence adds an aura of legitimacy, but let’s be clear: There are still positives to be taken from Visa being involved i.e. the size and scale that Visa has to offer, making stable coin a more widely accepted alternative form of payment. 6. Regulatory Risk Is Rising, Not Falling This area has to be tightly regulated as it evolves, and not surprisingly, the examples below confirm this. Today’s “opportunity” may become tomorrow’s legal liability. Contrarian Bottom Line The Visa–Yellow Card partnership is not a “pivotal moment” for treasury innovation—it’s an experimental bet wrapped in enterprise clothing. For corporate treasurers under fiduciary and legal duty, stablecoin-based strategies: Rather than embracing this as a saviour for emerging market treasury, a prudent treasurer might ask: Are we replacing the devil we know with one we don’t understand? To be clear, I still believe that Digital Currencies like Stable coin are the future, however, I also…