Quora Answer: What Impact Does Donald John Trump’s Proposed Tariff Have on American Companies Exporting Products Outside the US?

The following is my answer to a Quora question: “What impact does Donald John Trump’s proposed tariff have on American companies exporting products outside the US?”

Tariffs raise the cost of imported raw materials and intermediate goods.  This raises production costs for American companies.  Their products become less competitive abroad.  Countries hit by US tariffs impose retaliatory tariffs of their own.  Demand for US exports falls as foreign buyers turn to cheaper suppliers.  Higher costs and lower demand cost jobs in export-reliant industries.  Manufacturing, agriculture, and energy remain the most exposed sectors.

The Legal Foundation Collapsed Mid-Policy

In February 2026, the US Supreme Court ruled in the Learning Resources case that using the International Emergency Economic Powers Act of 1977 to impose these tariffs was unconstitutional.  This was not a minor technical setback.  The Trump administration had built its entire tariff programme on IEEPA authority.  The ruling forced a scramble to replace that authority with tariffs issued under Section 232, Section 301, and Section 338 instead, a patchwork that has not fully replaced what the Court struck down.

The Tax Foundation estimates Trump tariffs raised the average American household’s tax burden by US$1,000 in 2025, before the Supreme Court ruling.  In 2026, that figure sits at an estimated US$820 per household, lower only because the replacement tariffs have not yet matched the scale of what was invalidated.  The Yale Budget Lab found the current effective tariff rate reached 16.9 to 17.5 per cent by January 2026, the highest level since 1932.  Short-run household income loss from these tariffs runs between US$1,292 and US$1,751, depending on how far consumers can substitute toward untaxed alternatives.

Long-run effects compound this further.  The Tax Foundation estimates US tariffs alone will reduce long-run GDP by 0.4 per cent, cut the capital stock by 0.3 per cent, and cost 338,000 full-time equivalent jobs.  Retaliatory tariffs from China and Canada add a further 0.1 per cent GDP reduction and 131,000 lost jobs on top of that.  The Yale Budget Lab separately projects payroll employment will finish 2026 roughly 1.3 million lower than it would have been without these tariffs, with unemployment 0.7 percentage points higher as a direct result.

The Council on Foreign Relations’ original 2025 estimate projected cumulative US real GDP losses of 0.54 per cent in 2025, 1.76 per cent in 2026, 1.86 per cent in 2027, and 1.53 per cent in 2028, totalling US$1.4 trillion in lost output by the end of 2028.  Current data through 2026 tracks in the same direction, even as the legal chaos from the Supreme Court ruling has made the mechanism messier than the original forecast anticipated.

The Diplomatic and Sectoral Fallout

The European Union committed to paying tariffs and related transfers to Washington totalling roughly US$2.4 trillion over several years, a sum close to Italy’s entire annual GDP.  Trump’s tariff threats extended to a proposed purchase of Greenland, backed by tariff pressure on eight European countries including Denmark, Norway, and Germany.  Brazil faces tariffs of up to 50 per cent, tied explicitly to the political prosecution of former President Jair Messias Bolsonaro, with JPMorgan estimating a potential 0.6 to 1.0 per cent hit to Brazilian GDP if the rate holds.  Pharmaceutical tariffs have been signalled to rise toward 200 per cent by late 2026, a threat still unresolved as of this writing.

The original prediction that these tariffs would raise costs, invite retaliation, and cost American jobs has held up against actual data through 2026, even as a Supreme Court ruling forced the entire legal architecture to be rebuilt mid-course.  American exporters face the same fundamental problem the original answer identified: higher input costs, foreign retaliation, and reduced competitiveness abroad.  What has changed is the scale of collateral damage: an effective tariff rate not seen since the Great Depression, a trillion-dollar-plus household tax burden, and a legal foundation the country’s own highest court has already ruled unconstitutional once this year.

The Loss of Markets and Supply Chains Outlasts the Tariffs Themselves

A tariff is temporary.  The decisions companies make in response to it are not.  A company that relocates suppliers, renegotiates contracts, and builds new logistics infrastructure has spent real money doing so.  The Thomson Reuters Institute noted in April 2026 that even after the Supreme Court struck down the IEEPA tariffs, companies that had already restructured could not simply unwind those changes.  A factory built in Vietnam does not close because a court in Washington ruled against the tariff that justified building it.  The capital is already spent.

Harvard Business School research found US imports from China have fallen back to levels last seen around 2001, the year China joined the World Trade Organisation.  Two and a half decades of trade growth reversed, not gradually, but through a sustained policy shock that gave companies every reason to relocate permanently rather than wait out a temporary tariff.

CEPR research found that once it became clear tariffs imposed under the first Trump administration would persist through the Biden administration, firms abandoned a wait-and-see approach and began incurring the sunk costs of relocating supply chains for good.  Persistence across two different administrations taught every company the same lesson: tariff policy in America is not a single administration’s temporary preference.  It can return under any future government, so the safest position is to build supply chains as if it always might.

A Real, On-the-Record Example of the Intent

In August 2019, Donald John Trump told American companies directly to “immediately start looking for an alternative” to China.  That was never framed as a temporary request.  It was a demand for permanent relocation, and companies that comply do not maintain a spare, mothballed Chinese supply chain in case the tariff eventually lifts.  They invest in the new one and let the old relationships lapse.

Trade between firms runs on more than price.  It runs on trust, contract history, and logistics networks built over years.  Rhodium Group notes Chinese manufacturers themselves have responded by shifting investment into Vietnam, Thailand, Indonesia, Malaysia, and Cambodia, rebuilding their own production base outside China to keep serving US demand indirectly.  Once a Vietnamese or Mexican supplier has proven reliable, scaled up, and absorbed the business a Chinese supplier lost, that supplier does not hand the business back the moment a tariff expires.  He has earned the relationship the hard way, and the original supplier now has to compete to win it back from scratch.

A tariff can be repealed by the next administration, or struck down by a court, as the IEEPA tariffs were in February 2026.  A supply chain rebuilt in Vietnam, a buyer relationship earned in Mexico, and a Chinese import share pushed back to 2001 levels do not reset on the same legal timeline.  Policy can reverse overnight.  The economic behaviour it triggers does not, because businesses spent real money acting on the assumption that it would not.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Should Japan’s Potential Sale of US Treasuries to Fund Its Currency Market Intervention Concern Us?

The following is my answer to a Quora question: “Should we be concerned about the potential sale of US Treasuries by Japan to help fund its intervention in the currency markets?”

Washington intervened alongside Tokyo in August 2026, after the yen fell to 163.73 against the dollar, its weakest level in nearly four decades.  The mechanism gave away the fear.  The New York Federal Reserve sold euros, not dollars, to buy yen.  Japan tapped the Federal Reserve’s own Foreign and International Monetary Authorities Repo Facility, created in March 2020, to borrow dollars against its Treasury holdings as collateral, rather than selling those Treasuries on the open market.  Both governments avoided a straightforward Treasury sale.  That avoidance is the tell.  Washington feared the scenario where Japan, the largest foreign holder of US debt at US$1.14 trillion, dumped bonds to fund its own defence.  This would drive American borrowing costs higher at the worst moment.  Borrowing against the asset instead of selling it is not a technicality.  It is the difference between adding fresh supply to a fragile market and avoiding that market altogether.

The Intervention Failed

The yen rallied briefly to 157.96, then drifted back toward where it started.  The reversal was unsurprising.  Both countries avoided a normal Treasury sale.  This is an admission that the market cannot absorb one.  Treasury Secretary Scott Kenneth Homer Bessent confirmed the diagnosis.  Asked why Washington acted, he told CNBC, “People have bad information.  I have asymmetric information.  So, I think the market should think: why would we have joined the Japanese in the intervention at this time?  Do we know something the market does not know?”  That is trading language, not stewardship language.  A Treasury Secretary describing his own information advantage over the market he is meant to steward is not projecting confidence.  He is describing a position, the way a hedge fund manager describes a trade, and the market read it that way once the rally faded within days.

Dollar Privilege is Cracking

The dollar’s share of global reserves fell from above 70 per cent in 2000 to 56.77 per cent by late 2025.  Central banks have bought over 1,000 tonnes of gold every year since 2022, more than double the pre-2022 pace.  China’s own Treasury holdings dropped to US$633.4 billion in June, the lowest since September 2008, redirected instead into German and Swiss bonds.  Washington’s 2022 decision to freeze roughly US$300 billion of Russia’s reserves is the anecdote every central banker weighing this decision now cites privately.  A reserve asset that can be frozen by political decision is not a pure reserve asset.  It is a loan to a government that can cancel repayment on political grounds, and that lesson did not stay confined to Moscow.  Every non-aligned reserve manager absorbed it at once, and gold purchases accelerated the same year the freeze happened, not years later.

US Debt Made This Worse

National debt sits above US$37 trillion.  Net interest costs hit US$963 billion over ten months of fiscal 2026, roughly US$3.18 billion a day.  A 30-year Treasury auction cleared at 5.216 per cent in August, the highest yield on that maturity since 2001, with demand weaker than dealers expected and the stop-out yield pricing above the level dealers had anticipated.  The Treasury Borrowing Advisory Committee has already flagged a US$1.45 trillion funding shortfall for fiscal 2027 to 2028 at current auction sizes.  A government this leveraged has no spare room to absorb a foreign ally’s bond sale gracefully.  This is why it chose euros over its own currency’s core asset to fund the rescue in the first place.  Every additional dollar borrowed to plug that shortfall competes with the market’s remaining appetite for the exact securities this intervention was meant to protect.

Japan’s own central bank raised rates to 1 per cent in June 2026, the highest level since 1995, on a split 7-1 vote.  It then held at 1 per cent in July, an 8-1 decision, even as it forecast core inflation would climb above its 2 per cent target within the year.  Prime Minister Sanae Takaichi has since appointed a new board member widely read as dovish, tilting the committee back toward caution just as the currency needed the opposite signal.

The caution is not pure timidity.  Japan carries a debt-to-GDP ratio near 230 per cent, the highest of any major economy on earth, and every rate increase raises the government’s own debt servicing cost, a policy trap that limits how fast the BOJ can move without triggering a fiscal problem of its own making.  That earns Japan some sympathy.  It does not change the outcome.  The Bank of Japan has managed the symptom slowly enough to need a joint intervention with Washington, and slow enough that the intervention became necessary rather than optional.

Yes, this should concern us.  Not because Japan sold Treasuries.  Because Japan and America both structured an intervention to avoid that sale, revealing a market too fragile to absorb it, propping up a currency whose central bank still will not move fast enough to fix the cause, constrained by a debt load large enough to make the correct policy politically dangerous to deliver.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Has the Federal Reserve Lost Its Ability to Stabilise the Economy without Constant Deficit Spending?

The following is my answer to a Quora question: “Has the Federal Reserve lost its ability to stabilise the economy without relying on constant deficit spending?”

You have conflated two things.  The question mixes two different jobs.  The Federal Reserve sets monetary policy.  Congress and the Treasury run deficit spending.  The real question is whether the Federal Reserve’s tools still work when fiscal policy has grown too large for monetary policy to offset.  The evidence says no.  The national debt sits near forty trillion dollars.  The Congressional Budget Office reported net interest costs hit US$963 billion over ten months of fiscal 2026.  That is US$3.18 billion a day.  The deficit reached US$1.8 trillion over the same period.  The full year forecast now sits at US$2.1 trillion, US$200 billion above February’s estimate.

A rate cut used to stimulate growth.  Today, it also lowers the government’s own borrowing cost on a debt this size, blurring the line between monetary policy and fiscal rescue.  The Federal Reserve cannot raise rates freely to fight inflation without also raising Washington’s own interest bill past what the budget can absorb.  That is not independence.  That is a central bank negotiating with its own government’s balance sheet before every decision.

Foreign holdings of US Treasuries fell to US$9.299 trillion in June 2026, down from US$9.371 trillion in May.  Japan, the UK, and China trimmed a combined US$61 billion.  China’s holdings dropped to US$633.4 billion, the lowest since September 2008.  Net foreign inflows collapsed from US$56.6 billion in May to US$6.8 billion in June.  An eighty-eight per cent drop in one month.  A thirty-year Treasury auction on 13^th August 2026 cleared at 5.216 per cent, the highest yield on that maturity since 2001.  Demand came in weaker than average.  The stop-out yield priced above what dealers expected.  The market is starting to ask a price the Federal Reserve cannot simply wave away with a policy statement.

The Yen Intervention Failed to Hide the Real Problem

The United States and Japan carried out their first joint yen intervention since 1998, after the yen fell to 163.73 per dollar, its weakest level in nearly four decades.  The New York Federal Reserve sold euros, not dollars, to buy yen.  Japan tapped the Federal Reserve’s own repo facility instead of selling Treasuries outright.  Both governments went out of their way to avoid touching the Treasury market directly.  That both central banks avoided a normal sale of their own reserve currency’s benchmark asset is an admission that the market cannot absorb it cleanly.  An intervention meant to project strength ended up broadcasting the opposite.

Borrowing Short Because Long Has Become Too Expensive

Treasury Secretary Scott Kenneth Homer Bessent leaned on short-term bills for roughly eighty-five per cent of debt issuance in recent years.  Cheaper today.  A rollover risk tomorrow, repeated every few months on a debt this size.  Janet Louise Yellen did this first.  Bessent criticised her for it at the time, then did more of it once he held the job himself.

The Treasury Borrowing Advisory Committee has already flagged a US$1.45 trillion funding shortfall for fiscal 2027 to 2028 at current auction sizes.  A government financing itself on short-term paper is not managing risk.  It is postponing a bill it cannot yet afford to pay in full.

None of these four signals sits in isolation.  Rising interest costs.  Falling foreign demand.  A failed show of strength on the yen.  A funding structure built on the cheapest, shortest-dated paper available.  Each one narrows the Federal Reserve’s room to manoeuvre further.  Monetary policy alone was never meant to carry a fiscal position this large.  It has been asked to anyway, and the strain is now visible in every auction result the market hands back.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: How Do You Think European Markets Compare to US Markets in Terms of More Robust Disclosure Rules?

The following is my answer to a Quora question: “How do you think European markets compare to US markets in terms of more robust disclosure rules?”

European markets do carry more robust, harmonised disclosure obligations than the United States in several material respects, though the gap is narrower than European regulators like to claim.  MiFID II, in force since 2018, imposes considerably more granular transaction reporting, cost disclosure, and product governance obligations across the European Union than anything comparable in American securities law, and it applies uniformly across all 27 member states rather than through the patchwork of state-level and federal rules American investors navigate.  The Sustainable Finance Disclosure Regulation adds a further layer specifically targeting environmental and governance claims, forcing asset managers to substantiate rather than merely assert.  The United States relies more heavily on Regulation Best Interest and disclosure-based rather than structurally prescriptive rules, trusting that sufficient paperwork, properly read, protects the investor.  Anyone who has actually read a Regulation Best Interest disclosure document knows precisely how much protection that trust actually provides.

Why America Keeps Dismantling Its Own Firewalls

The United States has a well-documented habit of building regulatory firewalls after a crisis, then dismantling them once memory of the crisis fades and the lobbying dollars start flowing again.  The Glass-Steagall Act of 1933 separated commercial banking from investment banking specifically to prevent the kind of speculative excess that had helped trigger the Great Depression.  It held for nearly seventy years.  Congress repealed its central provisions through the Gramm-Leach-Bliley Act, signed into law by President William Jefferson Clinton, on 12^th November 1999, following a lobbying campaign estimated at roughly US$300 million.  The repeal was, in no small part, a legislative ratification of something that had already happened on the ground: Citicorp and Travelers Group had merged into Citigroup the previous year, in a combination that was not technically legal under Glass-Steagall until Congress obligingly rewrote the law around it.

Less than a decade later, the United States suffered its worst financial crisis since the Great Depression it had built Glass-Steagall to prevent.  In fairness, the causal link deserves an honest caveat, because serious economists genuinely disagree on it.  The Cato Institute has argued the repeal was not the proximate cause, noting that Lehman Brothers, a standalone investment bank never subject to Glass-Steagall’s restrictions in the first place, collapsed regardless, and that the crisis was driven primarily by credit losses on subprime real estate lending rather than the specific commingling of commercial and investment banking activity.  That is a fair point on proximate cause.  It is not, however, an argument that the deregulatory instinct itself was harmless.  Gramm-Leach-Bliley’s repeal enabled precisely the kind of universal banking consolidation that made Bank of America’s acquisition of Merrill Lynch, and JPMorgan Chase’s acquisition of Bear Stearns, both executed under emergency conditions in 2008, structurally straightforward rather than legally impossible.  It concentrated risk into fewer, larger, more systemically important institutions, which is exactly the outcome a firewall built after the Great Depression existed to prevent.

The Mistakes That Caused the Global Financial Crisis

The proximate causes of the 2008 crisis were mistakes of underwriting and securitisation, not merely deregulation in the abstract.  Subprime mortgage lenders extended credit to borrowers with limited capacity to repay, on the assumption that rising home prices would always allow refinancing before default.  Wall Street packaged these loans into mortgage-backed securities and collateralised debt obligations, frequently earning AAA ratings from agencies paid by the very banks issuing the securities, a conflict of interest regulators tolerated for years.  Investment banks then leveraged their balance sheets aggressively against these instruments, in some cases exceeding 30:1, meaning a 3% to 4% decline in asset value was sufficient to wipe out the entire equity cushion.

Lehman Brothers filed for bankruptcy on 15^th September 2008, the largest bankruptcy filing in American history at the time, after regulators declined to arrange a rescue.  Its collapse froze interbank lending virtually overnight, because no bank could be certain which counterparty held how much exposure to Lehman-linked instruments, a direct consequence of the opacity Glass-Steagall’s separation had at least partially constrained.  The pattern repeated itself in a smaller, faster form fifteen years later: Silicon Valley Bank collapsed within 48 hours in March 2023, after concentrating its balance sheet in long-duration securities funded by short-duration, largely uninsured deposits that fled the moment depositors sensed weakness, amplified by mobile banking and social media at a speed the 2008 crisis never had to contend with.  American regulatory memory, it turns out, has a shelf life measured in years, not generations.

Why the European Union Moves Too Slowly to Match

Europe’s disadvantage is not weaker disclosure architecture.  It is decision-making speed, and the mechanism is structural rather than incidental.  The European Union’s Capital Markets Union, first proposed in 2014 and 2015 specifically to deepen and unify European financial markets, remains, a full decade later, what one 2025 analysis from the Official Monetary and Financial Institutions Forum bluntly described as “mired in disputes that pit national capitals against one another.”  Taxation rules, insolvency legislation, and the licensing of financial institutions remain national competencies rather than EU-wide ones, meaning any genuine progress requires consensus among 27 member states, each with its own domestic banking sector to protect and its own electorate to answer to.  The successes achieved to date have overwhelmingly been the ones requiring the least intra-union trust, consolidating existing reporting data rather than harmonising genuinely contested rules.

The MiFID II review itself illustrates the pace problem directly.  The European Commission proposed amendments in November 2021.  Member states did not agree on a negotiating mandate until December 2022.  The final, consolidated legislative texts were not published in the Official Journal of the European Union until March 2024, roughly two and a half years to update a piece of existing market transparency legislation, not build a new regulatory regime from scratch.  A crisis moving at the speed of March 2023’s Silicon Valley Bank collapse, resolved by American regulators within a single weekend, would still be sitting in a European Council working group awaiting unanimous member state sign-off.

The Verdict

Europe’s disclosure architecture is genuinely more robust and more uniform, and its 27-nation consensus requirement is precisely why that architecture, once built, tends to stay built rather than getting quietly repealed the moment the lobbyists find a sympathetic Congress.  America’s disclosure regime is thinner, but its single-legislature structure lets it respond to an acute crisis within days, precisely the speed Europe cannot match when 27 finance ministries must agree first.  The trade-off is symmetrical and uncomfortable for both sides.  America builds fast and dismantles just as fast, reliably rediscovering the same lessons roughly once a decade.  Europe builds slowly and durably, and pays for that durability every time a crisis moves faster than a Brussels consensus ever can.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: How Vulnerable are Mid-Sized Banks to Higher-for-Longer Interest Rates & Tightening Credit Conditions?

The following is my answer to a Quora question: “How vulnerable are mid-sized banks to higher-for-longer interest rates and tightening credit conditions?”

Mid-sized banks are not marginally exposed to higher-for-longer rates and tightening credit.  They are structurally overweight in the asset class most vulnerable to both.  The FDIC’s 2026 Risk Review found institutions with assets between US$1 billion and US$100 billion carry median commercial real estate loan concentrations hovering around 300% of Tier 1 capital and reserves.  Federal regulators flag any bank crossing that 300% threshold for heightened supervision.  Hundreds of community and regional banks sit at or above it, not as an outlier group, but as a defining characteristic of the sector.

The Maturity Wall Nobody Can Postpone Indefinitely

Approximately US$1.5 trillion to US$2 trillion in commercial real estate debt is maturing across the United States through 2026, according to multiple market estimates.  Every one of those loans must either refinance at today’s considerably higher rates or see the underlying property sold at a lower valuation than the one it was financed against.  Neither outcome is comfortable for the lender holding the paper.  In Manhattan alone, the delinquency rate for office building loans jumped over 1,000% between January 2023 and January 2024, an eye-watering statistic that tells you office valuations have not merely softened; they have structurally broken in a way remote work has made largely permanent.

This is not evenly distributed across the banking system.  US community and regional banks are almost five times more exposed to commercial real estate than the largest banks, with the heaviest concentration sitting specifically among banks holding US$1 billion to US$10 billion in assets.  Commercial real estate comprises roughly 13% of large banks’ balance sheets against 44% of regional banks’ balance sheets, according to Reuters reporting.  The Klaros Group, an investment and advisory firm, analysed approximately 4,000 banks and identified 282 carrying both elevated commercial real estate exposure and substantial unrealised losses from the rate surge, a combination that may force some of them into raising fresh capital or seeking a merger partner before the maturity wall arrives in full.

Jerome Hayden Powell, Chair of the Federal Reserve, has directly warned that commercial real estate risk will remain with banks for years, and has confirmed regulators are actively engaging smaller banks to ensure they can manage it.  He has also stated plainly that failures among small and mid-sized banks should be expected as office valuations continue falling.  When the Federal Reserve Chair uses the word “failures” rather than “headwinds,” that is not a hedge.  That is a warning delivered as clearly as a central banker is ever willing to deliver one in public.

The Anecdote That Should Still Alarm Every Regional Bank Treasurer

Silicon Valley Bank collapsed in March 2023 for a reason directly relevant here, even though its specific exposure was long-duration fixed income securities rather than commercial real estate.  The bank had concentrated its balance sheet in fixed-rate securities funded by short-duration, largely uninsured deposits.  When interest rates rose sharply, those securities lost substantial market value, and a depositor run, amplified within hours by social media and mobile banking, forced the bank to crystallise losses it could otherwise have waited out.  The mechanism generalises directly to commercial real estate exposure today: a concentrated, long-duration asset, financed by liabilities that can walk out the door far faster than the asset can be sold or refinanced.  Change the asset class from mortgage-backed securities to office loans, and the vulnerability is structurally identical.

To its credit, the industry has made genuine progress since 2023.  Unrealised losses on securities across the banking sector fell 36% to US$306 billion in 2025, a meaningful improvement from the 2022 peak.  Deposit bases have grown, led by uninsured deposits, and banks have actively built additional borrowing capacity.  None of that progress addresses the underlying credit risk sitting inside the loan book itself.  The total commercial real estate past-due and nonaccrual ratio ticked up to 1.45%; non-farm non-residential loans and multifamily lending are driving delinquencies specifically at the largest exposed banks, and agricultural credit quality is independently deteriorating after a third consecutive year of declining crop receipts, pushing farm bank delinquency rates to their highest level since 2021.  Liquidity has improved.  Credit quality has not, and credit quality is the metric that determines whether a bank survives the maturity wall or becomes the next FDIC case study.

The Verdict

Mid-sized banks are vulnerable in the specific, structural sense that matte
rs most: concentrated exposure to an asset class experiencing a genuine, multi-year repricing, financed by deposit bases that have proven, since March 2023, capable of evaporating within a single trading day.  Higher-for-longer rates did not create this vulnerability.  They simply removed the cheap refinancing option that had spent over a decade quietly disguising it.  The banks that survive the next eighteen months will be the ones that stress-tested their commercial real estate books honestly, rather than the ones that assumed extend-and-pretend could outlast the maturity wall itself.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: What Does China, Japan, Et Al Dumping US Treasury Bonds s Say about the Future of the US Currency & Economic Outlook?

The following is my answer to a Quora question: “China, Japan, et al. have recently been dumping a lot of US Treasury bonds.  What does this say about the future of the US currency and economic outlook?”

Foreign central banks sold US$138.4 billion in Treasuries in March 2026 alone.  Japan led the exit at US$47.7 billion; China followed at US$41 billion, with Luxembourg, Taiwan, Saudi Arabia, India, Canada, and the United Arab Emirates all selling too.  China’s holdings fell to US$652.3 billion, the lowest level since September 2008, an eighteen-year low.  Overall foreign holdings dropped from US$9.49 trillion in February to US$9.25 trillion in March.  Read the headlines, and this looks like the opening chapter of dollar collapse.  When we read the actual mechanism behind the numbers, the story is more mundane, considerably more revealing, and a great deal less flattering to the people currently shouting about it on financial television.

Why They Sold, & It was Not Ideology

This was not strategic de-dollarisation.  It was currency intervention, forced on central banks by the outbreak of the US-Iran conflict.  Crude oil prices surged as the war broke out, and the yen and other Asian currencies tumbled in response.  The Bank of Japan intervened in currency markets in late March and early April 2026, after the yen weakened past the politically sensitive 160 level against the dollar, a threshold Tokyo has treated as a red line since the currency last breached it in 2024.  Surging oil import costs widened Japan’s current account at exactly the wrong moment, and Japan, as one of the most energy-import-dependent economies among the major powers, had no realistic alternative but to sell dollar assets to fund yen support.  Frederic Neumann, chief Asia economist at HSBC, summarised the mechanism without ambiguity: exchange market intervention to support local currencies forced central banks to sell part of their dollar-denominated holdings.  That is defence, not defiance.

A Pattern with Precedent

This is not the first time global central banks have been forced into exactly this position, and the historical parallel is instructive.  During the 1997 Asian Financial Crisis, Thailand’s central bank spent down its foreign reserves defending the baht’s peg to the dollar before finally floating the currency on 2 July 1997, triggering a regional contagion that swept through Indonesia, South Korea, and Malaysia within months.  Central banks across the region learned then, at enormous cost, that defending a currency against a genuine shock requires burning through dollar reserves, not hoarding them for symbolic effect.  The 2013 “Taper Tantrum,” triggered when then Federal Reserve Chair Ben Shalom Bernanke merely signalled the possibility of reducing asset purchases, produced a similar scramble across emerging markets as capital fled and currencies buckled.  March 2026 is simply the latest entry in a well-established pattern: an external shock hits, a currency wobbles, and the central bank sells dollar assets to stabilise it.  Nobody called Thailand’s 1997 reserve drawdown “de-baht-isation.”  Calling March 2026’s intervention “de-dollarisation” applies the same logical error, dressed up for a modern audience.

The Bond Market Felt the Pain Regardless

None of this was painless for holders of Treasuries generally.  Treasuries came under significant pressure as the Middle East conflict stoked inflation fears, forcing investors to demand higher compensation for holding US government debt.  Foreign investors logged a US$142.1 billion valuation loss on long-term Treasury holdings in March alone, on top of the outright selling.  Yields climbing under geopolitical stress is a genuine market event.  It is simply not the same event as strategic abandonment of the dollar as a reserve asset, and conflating the two produces bad analysis and, for anyone trading on the panic, potentially expensive decisions.

The Number That Matters, & Nobody is Reporting It

Here is the detail that undercuts the entire panic narrative, and it rarely makes it past the headline.  Total foreign holdings of Treasuries rose from US$7.7 trillion in December 2021 to approximately US$9.2 trillion in December 2025, an increase of US$1.5 trillion over four years, encompassing multiple periods of supposed “de-dollarisation” panic along the way.  In March 2026 itself, the very month everyone is citing as evidence of flight from the dollar, net foreign private inflows into long-term US securities reached US$162.1 billion, comfortably outweighing the US$14.9 billion in net official-sector selling.  The overall net TIC inflow for the month, combining long-term securities, short-term instruments, and banking flows, came to a positive US$150.7 billion.  Central banks retreated for a month under duress from an oil shock.  Private capital, the money with no political intervention mandate attached to it, kept buying anyway, in considerably larger size.

The Expert Who Actually Checked the Data

Brad Setser, a senior fellow at the Council on Foreign Relations and one of the most rigorous trackers of Chinese reserve behaviour, has directly challenged the popular assumption that China is engaged in deliberate, strategic dollar diversification.  He notes that China has not disclosed the currency composition of its reserves since 2020, which makes confident claims about its intentions inherently speculative.  What evidence does exist suggests China’s currency composition has not shifted dramatically, partly because the dollar’s share of its reserves was already structurally low, around 55%, and further underweighting the dollar means sacrificing yield for no clear strategic gain.  He is similarly sceptical that the 2022 freezing of Russian reserves triggered a wholesale Chinese reserve rebalancing, noting the increased bid for gold from the People’s Bank of China has been, by China’s own disclosed data, marginal rather than transformative.  Setser’s broader point deserves repeating: official Treasury data structurally undercounts China’s actual footprint in US debt markets, because a considerable share of Chinese dollar exposure sits inside custodial accounts, swaps, and funding arrangements that never appear cleanly labelled “China” in the published figures.  The headline number understates China’s real exposure, even as commentators use that same understated figure to declare that China is fleeing the asset class entirely.

Where the Genuine De-Dollarisation Story Sits

The real structural story is slower, considerably less photogenic, and impossible to compress into a single dramatic month.  The dollar’s share of global reserves has fallen from a peak above 70% in 2000 and 2001 to 56.77% by the fourth quarter of 2025, according to IMF Currency Composition of Official Foreign Exchange Reserves data.  Central bank gold purchases have exceeded 1,000 tonnes annually since 2022, more than double the 400 to 500-tonne pre-2022 norm, according to World Gold Council figures. The reason traces back to a single, well-documented event.  In February 2022, the United States, coordinating with the European Union, United Kingdom, Canada, and Japan, froze approximately US$300 billion of Russia’s central bank reserves in response to the invasion of Ukraine.  Every non-aligned central bank on the planet absorbed the identical lesson simultaneously: dollar and euro reserves held inside someone else’s financial system can be rendered inaccessible by a political decision, with no court proceeding and no warning.  That is genuine, durable de-dollarisation, driven by a documented act of financial statecraft rather than a currency intervention triggered by an oil shock.  It has been building quietly for four years.  It has nothing to do with what Japan and China did to their Treasury holdings in March 2026.

The Verdict

Conflating a single, crisis-driven month of central bank selling with a structural loss of dollar privilege is lazy analysis dressed up as geopolitical insight.  The dollar’s genuine vulnerability is not one volatile month of intervention.  It is the decade-long, deliberate diversification into gold and an expanding tail of smaller currencies, driven by the entirely rational fear that Washington will weaponise the dollar system again the next time it decides a foreign government has misbehaved.  China and Japan did not sell Treasuries in March 2026 because they have lost faith in America.  They sold because an oil shock hit their currencies, leaving them no alternative, just as Thailand had none in 1997.  Private capital, watching the same events with none of the political obligation to intervene, bought the dip regardless.  If dollar privilege is ending, it will not end with a headline this dramatic.  It will end the way Setser’s own data suggests it is actually happening: quietly, gradually, and largely off the page that everyone else is reading.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Does De-Dollarisation Imply a Shift towards a Multipolar Currency System?

The following is my answer to a Quora question: “Does the concept of de-dollarisation imply a shift towards a multipolar currency system with multiple reserve currencies?”

Yes, though not in the way most commentary frames it.  The popular version of this story casts it as a two-horse race, the dollar losing ground directly to the Chinese renminbi.  The data says otherwise, and the actual mechanism is more interesting, and considerably more inconvenient for Beijing, than the popular version admits.

According to the International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves, the US dollar’s share of global reserves fell to 56.77% in the fourth quarter of 2025, down from 56.93% the prior quarter, out of total global reserves reaching US$13.14 trillion.  The euro held 20.25%, the Japanese yen 5.56%, sterling 4.64%, the Canadian dollar 2.49%, the Australian dollar 2.01%, and the Swiss franc a mere 0.19%.  The Chinese renminbi, the currency most commonly cited as the dollar’s heir apparent, held just 1.95%.

The residual “other currencies” category, covering reserve holdings not individually identified anywhere in the COFER framework, reached 6.13% in the fourth quarter of 2025, up from 5.61% the previous quarter, and more than double what it was in 2021.  Central banks are not consolidating their diversification into one clean alternative.  They are scattering it across an expanding tail of smaller currencies, likely including the Singapore dollar, the South Korean won, and various Nordic currencies, none individually significant enough to warrant its own COFER line item, but collectively now larger than the renminbi’s entire disclosed share.  That is the actual signature of multipolarity.  Not one challenger rising to meet the dollar.  Dozens of smaller holdings quietly growing in the shadows of a category literally labelled “other.”

Why the Renminbi is Not the Beneficiary Bulls Expect

The renminbi’s stagnation at under 2% of global reserves, despite a decade of Beijing actively promoting its internationalisation, is not an accident of insufficient marketing.  It is a direct consequence of China’s continued capital account controls, which prevent the renminbi from being freely convertible in the way a genuine reserve currency requires.  Central banks diversifying away from the dollar are choosing convertible, rule-of-law-anchored alternatives such as the Australian dollar, the Canadian dollar, and a widening basket of smaller currencies, because those currencies do not carry the political risk premium a capital-controlled renminbi does.  Beijing built the infrastructure, the Cross-Border Interbank Payment System among it, but infrastructure alone has not overcome the trust deficit inherent in a currency Beijing itself refuses to let float freely.

In February 2022, the United States, coordinating with the European Union, United Kingdom, Canada, and Japan, froze approximately US$300 billion of Russia’s central bank reserves in response to the invasion of Ukraine.  Every non-aligned central bank on the planet absorbed the same lesson simultaneously: concentration in any single reserve currency, or bloc of allied currencies, creates a single point of political failure.  The logical response to that lesson is not to swap one concentration risk, the dollar, for another, the renminbi.  It is to disperse holdings widely enough that no single government’s political decision can freeze a meaningful share of a nation’s reserves at once.  Central bank gold purchases, which more than doubled after 2022 to over 1,000 tonnes annually according to World Gold Council data, follow the identical logic.  Gold cannot be frozen by anyone’s central bank.  Neither, in practical terms, can a reserve position scattered across a dozen minor currencies nobody thought worth sanctioning.

The Verdict

De-dollarisation does imply a shift toward a multipolar system, but multipolar does not mean a tidy new order with two or three great reserve currencies sharing the stage.  It means fragmentation: a dollar still comfortably dominant at 56.77%, a euro holding steady around a fifth of global reserves, a yen and sterling occupying their traditional secondary tiers, a renminbi stubbornly stuck under 2% despite a decade of promotion, and an ever-growing tail of smaller currencies absorbing the overflow.  Anyone predicting a clean handover of reserve currency status from Washington to Beijing has misread the data entirely.  The world is not choosing a new hegemon.  It is quietly refusing to trust any single one of them completely, including the one everybody keeps expecting to win.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Is the US Over-Reliant on the Dollar’s Dominance as a Global Reserve Currency?

The following is my answer to a Quora question: “Is the US over-reliant on the dollar’s dominance as a global reserve currency?”

Yes, and the reliance is structural, not incidental.  The French economist and former finance minister Valéry Giscard d’Estaing coined the term “exorbitant privilege” in the 1960s to describe exactly this dynamic: a country that issues the world’s reserve currency can borrow in its own currency, run persistent deficits, and export its debt to foreign central banks who have no practical alternative but to hold it.  Robert Triffin, the Belgian-American economist, had already diagnosed the structural flaw a decade earlier.  To supply the world with the dollars it needs for reserves and trade, the United States must run persistent current account deficits.  That dependency becomes addiction once an entire government’s fiscal posture is built assuming the world will keep buying the debt regardless of how much of it gets issued.

The Consequences, in Numbers

The dollar still commands roughly 56.9% of global foreign exchange reserves as of the third quarter of 2025, according to IMF Currency Composition of Official Foreign Exchange Reserves data, down from a peak of 71% to 72% in 2000 and 2001.  That decline of roughly fifteen percentage points over two and a half decades is not catastrophic on its own.  It becomes significant when paired with what that privilege enabled domestically: a national debt trajectory Moody’s cited explicitly in its May 2025 downgrade of the United States from Aaa to Aa1, projecting federal debt reaching 134% of GDP by 2035, up from 98% in 2023.  Interest payments on that debt consumed 34% of federal tax revenue in the first quarter of 2025, up from just 9% in 2021.  A country that assumes infinite appetite for its debt eventually discovers the appetite was never infinite.  It was merely patient.

The De-Dollarisation Trend

The share of US dollars in official reserves fell from 57.79% in the first quarter of 2025 to 56.32% in the second quarter, and further to 56.92% in the third, according to IMF data, marking the lowest level since 1995.  China’s Cross-Border Interbank Payment System, the most credible alternative to SWIFT, recorded 750,540 transactions worth approximately $270 billion in March 2026 alone, connecting 194 direct participants and 1,597 indirect participants across 117 countries, with annual volume reaching 180 trillion yuan, roughly $25 trillion, in 2025.  The yuan still accounts for only 3% of global SWIFT payments against the dollar’s 48%, so this is not yet displacement.  It is infrastructure being built for a multipolar world that no longer assumes the dollar is the only viable pipe.

Gold tells the sharper story.  Central bank gold purchases averaged just 400 to 500 tonnes annually before 2022.  Since then, purchases have run at over 1,000 tonnes a year, reaching 1,037 tonnes in 2023 and roughly 1,045 to 1,050 tonnes in 2024 and 2025, according to World Gold Council data, more than double the pre-2022 norm.  The buyers are overwhelmingly central banks in China, Poland, India, Turkey, and Kazakhstan, nations simultaneously trimming dollar exposure while building reserves a foreign government cannot freeze.

Why the Weaponisation Backfired

In February 2022, the United States, coordinating with the European Union, United Kingdom, Canada, and Japan, froze approximately $300 billion of Russia’s central bank reserves in response to the invasion of Ukraine.  This was, until that moment, a theoretical risk that central banks discussed in seminar rooms rather than genuinely priced into their reserve strategy.  Overnight, it became demonstrated fact: dollar and euro reserves held in someone else’s financial system can be rendered inaccessible by a political decision, with no court proceeding and no advance warning.  Sanctions cut Russia off from key parts of global financial markets and froze nearly half of its $640 billion in gold and foreign exchange reserves, triggering its worst economic crisis since the 1991 collapse of the Soviet Union.

Every non-aligned central bank on the planet absorbed the same lesson simultaneously.  If Washington can freeze Moscow’s reserves over a war Washington did not fight, Washington can freeze anyone’s reserves over a policy dispute it decides matters enough.  Gold sits outside that entire risk category.  It cannot be frozen, sanctioned, or rendered inaccessible by a foreign government’s keystroke.  That is precisely why 2022 recorded the highest central bank gold purchases since 1950, and why the elevated pace has not eased since.

The Multipolar Shift This Produces

None of this means the dollar collapses next quarter, and pretending otherwise would be dishonest.  The dollar and euro together still account for over 77% of global reserves, and no single rival currency offers the liquidity, legal certainty, or capital market depth the dollar system provides.  What has changed is the assumption of permanence.  The weaponisation of the dollar was meant to demonstrate American financial power.  It has instead demonstrated the exact vulnerability every reserve currency eventually reveals: the moment holders discover the asset can be turned into a hostage, they begin, however slowly, to hold something else instead.  Washington did not lose the reserve currency status by mismanaging the economy alone.  It accelerated the loss by proving, in a single afternoon in February 2022, exactly why nobody should want to depend on it completely.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code