In early 2025, the U.S. dollar experienced its steepest decline since 1989, dropping 8.4% year-to-date. This downturn is largely attributed to policy proposals from the Trump administration, notably the consideration of withdrawing the United States from the International Monetary Fund (IMF). Such a move is part of the conservative Project 2025 agenda and has raised concerns about destabilizing the dollar's status as the world's primary reserve currency.

Treasury Secretary Scott Bessent has advocated for reforming international institutions rather than withdrawing. However, an executive order from President Trump initiated a 180-day review of U.S. participation in these organizations. Experts warn that an IMF exit could disrupt global dollar holdings, diminish American economic influence, and elevate rival currencies like the euro and yuan.

Former Treasury official Ted Truman cautioned that such a withdrawal would "disrupt global dollar holdings, diminish American economic influence, and risk extensive financial turmoil." Similarly, Jay Shambaugh, U.S. Treasury Undersecretary for International Affairs, stated that withdrawing from the IMF and World Bank would be "a step backward" for U.S. economic security.

The dollar's decline has already impacted foreign investors and contributed to market losses. In response, China is accelerating efforts to internationalize the yuan amid disruptions in global trade and rising U.S. tariffs. During President Xi Jinping's recent tour of Southeast Asia, the People's Bank of China promoted yuan usage, with cross-border yuan payments hitting a record in March. China UnionPay expanded its payment network in Vietnam and Cambodia, and the yuan's international presence now spans over 30 countries.

Despite these developments, HSBC CEO Georges Elhedery reaffirmed the importance of the U.S. dollar as the dominant global trade currency, emphasizing that the dollar remains the primary currency for global trade. However, he acknowledged a modest increase in the use of China's renminbi for trade finance.

The U.S. dollar's significant decline in early 2025, coupled with policy proposals to withdraw from the IMF, has raised concerns about global financial stability and the future of the dollar as the world's primary reserve currency. The administration's actions and international responses, particularly from China, warrant close monitoring to assess the evolving economic landscape.