De-dollarisation for real?

🔎 What Does the Data Reveal

Feb 26, 2025

Is De-Dollarisation Gaining Momentum?
Is the Global Financial Order Shifting?
ICYMI: Germany’s 2025 Election: Mainstream Parties Weaken, Populism Surges

Is De-Dollarisation Gaining Momentum?

U.S. President Donald Trump recently took to social media, claiming that BRICS nations (🇧🇷 Brazil 🇷🇺 Russia 🇮🇳 India 🇨🇳 China 🇿🇦 South Africa etc.) are actively seeking to reduce their reliance on the U.S. dollar in favour of alternative currencies. In response, he announced a "reciprocal tariff" policy, aiming to match the tariffs imposed by countries such as Canada, Mexico, China, Japan, the EU, and India on American imports. At the World Economic Forum in Davos, Trump further warned that any attempts to undermine the dollar’s dominance could provoke U.S. retaliation.

💵 Does the Data Support Trump’s Concerns?

Despite fears of de-dollarisation, the World Bank Database (WDI) paints a different picture. Between 2000 and 2023, the U.S. share of G7 economic output rose from 46% to 59%, surpassing the combined GDP share of all other G7 nations. In contrast, Germany, the largest economy in Europe, saw an average growth rate of just 0.3% during the same period.

Group of 7: 🇺🇸 USA 🇨🇦 Canada 🇬🇧 UK 🇫🇷 France 🇩🇪 Germany 🇮🇹 Italy 🇯🇵 Japan

Key Pillars of U.S. Economic Dominance:

Technology: The U.S. leads global innovation, with 17 out of the world’s 20 largest tech companies based in the U.S. (the remaining 3 are in Asia, with Europe absent from the list).
Energy: The shale revolution transformed the U.S. from an energy importer to one of the world’s top LNG exporters, with over 60% of exports directed to Europe (notably the UK, France, and the Netherlands).
Finance: The Federal Reserve’s interest rate hikes have bolstered the dollar index, reaching a 20-year high and further cementing the currency’s global appeal.

💱 Is the Global Financial Order Shifting?

While the U.S. continues to dominate, this advantage is not solely due to its own expansion. Structural weaknesses in other economies—such as Europe’s slow fiscal integration and Japan’s stagnant growth—have amplified America’s relative strength. SWIFT data suggests a significant shift in global payments:

The dollar’s share in global transactions surged from 29% in 2012 to 49% in 2024, reinforcing its dominance in international finance.
Meanwhile, the euro’s share has plummeted from 44% to 22%, marking its largest historical decline, largely due to Europe’s economic challenges—with Germany’s industrial output down 2.4% from pre-pandemic levels and France’s fiscal deficit exceeding 5.1%.

While SWIFT remains the dominant global payments network, China's Cross-Border Interbank Payment System (CIPS) has been expanding its role in RMB-denominated cross-border transactions, providing an alternative for international settlements, particularly among China's trading partners.

At the same time, alternative currencies are gaining ground. The Chinese yuan (RMB) has seen a 15-fold increase in global transactions since 2012, now making up nearly 4% of cross-border payments, particularly in energy and commodity trading. If de-dollarisation continues, the IMF projects the dollar’s share in global payments will remain below 50% by 2035, as currencies like the yuan and rupee expand their influence.

Yet, the broader shift in global finance extends beyond currencies. The G7 nations’ share of global GDP has steadily declined from over 40% in 2000 to below 30% in 2024, reflecting a more fundamental power transition. This decline is largely due to China’s rapid economic ascent, which is not only reshaping trade and investment flows but also driving a new wave of innovation in AI and technology.

🚀 How is China’s AI boom fueling this transformation? From Alibaba’s latest AI investments to the rise of China’s own Magnificent 7, discover how tech stocks are capitalising on this shift. Get all the insights in our Friday premium edition for just USD $6/month (or GBP £5/month)!

Join 36,000+ savvy investors who believe "Your money deserves better."

Start a free trial

🇩🇪 Germany’s 2025 Election: A Political Shake-Up That Redefines the Country’s Future

Germany’s February 23, 2025, election wasn’t just another routine vote—it was a seismic shift that will shape the nation’s social, cultural, and political landscape for years. The results reveal a country grappling with deep divisions between mainstream politics, rising nationalism, and a dissatisfied electorate.

📉 Mainstream Parties Weaken, Populism Surges

Germany’s postwar political stability has long been built on the strength of its centre-right (CDU/CSU) and centre-left (SPD) parties. However, this election signalled the erosion of traditional political dominance.

CDU/CSU (28.5%) secured first place but performed below expectations, struggling to unite conservatives and moderates.
The far-right AfD (20.8%) surged to second place, marking its strongest-ever result and forcing mainstream parties to acknowledge its growing influence.
SPD (16.4%) faced its worst result since WWII, failing to inspire confidence in its leadership.
The Greens (11.6%) and FDP (under 5%) saw reduced influence, reflecting voter disillusionment with the previous government’s policies.

🔍 What Happens Next? A Difficult Road Ahead

🔹 Coalition Negotiations Will Be Complex
CDU leader Friedrich Merz is attempting to form a government with SPD, a coalition that could be fragile and short-lived due to ideological differences.

🔹 AfD’s Role in Parliament Will Grow
Despite being shut out of coalition talks, AfD’s strong parliamentary presence will make it harder for mainstream parties to ignore nationalist rhetoric and anti-establishment demands.

📊 Key Concerns: Economy & Immigration

Germany’s recent federal election has brought both optimism and caution about the country’s economic outlook. Friedrich Merz’s conservative CDU/CSU victory was well-received by investors, as reflected in a 0.5% rise in the DAX index (Germany’s leading stock market index, tracking its 40 largest publicly traded companies). GDP is projected to grow by 0.8% in 2025, up from 0% in 2024.

Merz’s "Agenda 2030" aims to revitalise the economy through:

Tax cuts for individuals and businesses.
Deregulation to ease investment barriers.
Increased public and private investment.

However, Germany faces significant challenges, including high energy costs, bureaucratic inefficiencies, and growing global competition. The formation of a stable government capable of implementing effective policies will be crucial for long-term economic growth.

Immigration was a hot-button issue in this election, with:

CDU pledging stricter border controls and faster deportations.
SPD advocating for skilled migration to address labour shortages.
AfD calling for an end to asylum policies, a stance widely rejected but influential in shifting public discourse.

A CDU-led government is expected to cap asylum applications while prioritising economic migrants, balancing border security with workforce needs amid an aging population.

Germany’s political landscape has changed irreversibly. The two-party dominance of CDU and SPD is fading, making room for populist forces and policy-driven realignments. With economic, social, and geopolitical challenges ahead, Germany’s new government will need to prove it can unify an increasingly fractured nation.

Keep in touch with Genuine Impact!

Instagram | X/Twitter | LinkedIn

Created by Arya and Peggy