Geopolitical Tensions Fuel Currency Competition but Us Dollar and Euro Remain Hard to Displace

Sonali Chowdhry

DIW Weekly Report, 2025, vol. 15, issue 31/32/33, 191-198

Abstract: Geopolitical frictions and high levels of uncertainty in US policy are driving countries to reduce dependence on the US dollar and implement new policies to promote their own currencies for settling cross-border trade. This Weekly Report analyzes the reactions of firms to such measures, focusing on China’s efforts to promote the renminbi globally. Leveraging detailed French customs data, the findings show that China’s renminbi push spurred rapid growth in the currency’s use in firm-level exports to China, driven by large and experienced exporters in consumer goods sectors. Crucially, renminbi adoption remained confined to China, displacing neither the US dollar nor the euro as the preferred invoicing currencies in other markets. These results highlight the limits to currency promotion efforts. Any transition to a multi-polar currency system is therefore likely to be gradual, with sharp disparities across firms and industries.

Keywords: International trade; Invoicing currency; Geoeconomics (search for similar items in EconPapers)
JEL-codes: F14 F23 F33 (search for similar items in EconPapers)
Date: 2025
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DIW Weekly Report is currently edited by Tomaso Duso, Marcel Fratzscher, Peter Haan, Claudia Kemfert, Alexander Kritikos, Alexander Kriwoluzky, Stefan Liebig, Lukas Menkhoff, Karsten Neuhoff, Carsten Schröder, Katharina Wrohlich and Sabine Fiedler

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