Prof Emanuele Bracco

U.S. dollar dominance persists despite geopolitical tensions and trade fragmentation because it functions as a coordination equilibrium. Network effects and strategic complementarities make switching currencies costly for users, reinforcing durability once dominance is established. This explains the dollar’s continued central role in global transactions, even without U.S. involvement, and the limited impact of protectionism, trade wars, or rising financial competition on its global position.

Economic sanctions reduce output but are rarely decisive. Their effects are modest, uneven, and slow, hitting poorer, less diversified economies hardest. Financial sanctions are more disruptive but costly for sanctioning countries and encourage long-run adaptation. Sanctions signal resolve and constrain options, but they rarely deliver rapid political change.

China’s export-led model is unusual: it dominates both low- and high-value manufacturing while prioritizing self-sufficiency over domestic consumption. This strategy reshapes global competition, challenges advanced and emerging economies, and heightens geopolitical tensions, increasing the risk of protectionism and realignment of global economic blocs amid trade conflicts.