The Dollar's Dominance Amid Trade Deficits

The continued use of the US dollar as the global currency is puzzling given the US's persistent trade deficits. Normally, a country running such deficits would face decreased demand for its currency, yet the world still prefers to trade in dollars. This situation arises because, despite the US importing more than it exports, countries continue to trust that US-generated dollar-denominated assets will eventually yield returns on their exports. The dollar remains central because it is still perceived as a stable form of payment, leading countries to accept it in exchange for their goods despite the deficit.