By Peter C. Earle

With Donald Trump’ s return to the White House in January 2025, renewed focus has been placed on a set of policies informally known as the“ Mar-a-Lago Accord”— a loosely defined framework aimed at revitalizing American industry by confronting what it identifies as the corrosive effects of a chronically strong US dollar. Central to this diagnosis is the United States’ role as issuer of the global reserve currency. The dollar’ s use in international trade, debt issuance and commodity pricing ensures an almost constant level of global demand, irrespective of US export competitiveness. To facilitate trade, defend exchange rates and manage reserves, foreign governments and multinational firms stockpile dollars— often in the form of US Treasury securities. This persistent demand for Treasuries has helped suppress interest rates and enabled the United States to accumulate nearly $ 37 trillion in federal debt since 1980.

While this has financed decades of consumption and borrowing, the Mar-a-Lago camp argues that it has also hollowed out domestic manufacturing and skewed incentives toward financialization and services over the production of goods.

A global reserve currency is the backbone of international commerce and finance. It is the currency held in large quantities by central banks and international institutions for settling crossborder transactions, pricing commodities, facilitating debt issuance and maintaining currency pegs. Reserve currencies enable trade stability and liquidity across nations that may not share political alignments or economic similarities. Historically, the currency of the world’ s leading economic power has tended to dominate this role, but the rise of multipolar geopolitics, technological disruption and macroeconomic imbalances is calling the current system into question. With the US dollar still commanding a dominant share of global reserves, questions are emerging from both critics abroad and observers at home: Does the United States still benefit from this role? If so, is it sustainable?

What Is a Global Reserve Currency?

A global reserve currency is a national currency that is used internationally for trade, finance and reserves. It must satisfy multiple criteria: liquidity, convertibility, trust, legal stability and widespread use in transactions and investment. Most importantly, it must be backed by the economic and institutional strength of its issuing country. A reserve currency is not only used by private actors, but by governments and central banks as well to manage exchange rates, settle trade imbalances and build financial reserves that offer safety and flexibility.

These currencies serve several functions simultaneously. They act as units of account for global pricing( especially for commodities like oil, gold and agricultural exports), as media of exchange in international payments and as stores of value in bank

12 FINANCIAL HISTORY | Summer 2025 | www. MoAF. org