The multipolar challenge: implications for dollar dominance and the shifting tides of U.S. hegemony

The global political economy has long been characterized by the commanding presence of the US dollar—a linchpin that has steadfastly upheld US hegemony across decades. The dollar’s ascendancy, transcending mere economic value, has become emblematic of US strategic influence in both the economic and geopolitical landscapes. However, as we witness the dawn of a new era marked by a multipolar global order, there is growing speculation about the potential waning of the dollar’s omnipotence. This article is anchored around the following pivotal inquiries: In what ways is burgeoning multipolarity in the global political economy reshaping perceptions and realities of the US dollar’s dominance? How might a diminished dollar centrality impact the broader edifice of US hegemony and the equilibrium of the global economic order? Which rising powers are at the forefront of this tectonic shift, and what strategic levers are they employing to influence the trajectory? Using the method of Geopolitical Analysis Grid, this study endeavors to illuminate the multifaceted interconnections between a multipolar world and the potential reconfiguration of the dollar’s global standing. With this in mind, it also aims to elucidate the strategic implications for the US and chart the evolving dynamics that will define the future global economic landscape. The findings suggest that China emerges as the principal contender to US hegemony, spearheading initiatives aimed at de-dollarization. However, these endeavors seem more intent-driven rather than readily identifiable and deterministic outcomes, with the prevailing trajectory being towards asset diversification in a “post-hegemonic” context. Evident manifestations of such inclinations are China's policies on RMB internationalization, exemplified by the introduction of the CIPS, UnionPay, and the Digital Yuan. These strategies complement the growing prevalence of bilateral trade in alternative currencies, a growing intention to conduct oil trading in non-dollar currencies, currency swap agreements, and the prospective advent of a BRICS currency. Institutionally, this shift is anchored in frameworks such as the New Development Bank, the SCO, the AIIB, and the BRI. The mounting view of dollar dominance as a manipulative instrument of US foreign policy, coupled with the perceived waning of US hegemony and diminishing confidence in the US dollar, impels developing nations to hasten their currency diversification pursuits. This momentum is observed particularly within the framework of South-South cooperation, with China's proactive stance being a pivotal influence.