Tariffs, Stablecoins, and the Demand for Dollars

Anantha Divakaruni and Peter Zimmerman

No 25-21, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Several studies have shown that aggregate demand for US dollars fell following the announcement of tariffs by the US government on April 2, 2025. Using data on stablecoins as a proxy for dollar trading, we find that the decline in dollar demand is smaller for investors in countries that saw larger increases in tariffs. Our interpretation is that, as foreign investors anticipate that tariffs will make it more expensive to acquire US dollars in the future, they buy dollars today. This channel is stronger for more liquid stablecoins and for countries with tighter capital controls, consistent with the idea that, when actual dollars are hard to acquire, stablecoins may be regarded as a substitute. Our findings cast light on the effects of the tariffs on global foreign exchange markets, as well as on the degree to which stablecoins are considered a close substitute for dollars.

Keywords: dollars; stablecoins; tariffs; trade barriers (search for similar items in EconPapers)
JEL-codes: F31 G15 G23 (search for similar items in EconPapers)
Pages: 26
Date: 2025-08-28
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DOI: 10.26509/frbc-wp-202521

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