By COMPASS
The Trump-era tariffs and ensuing trade wars have reshaped debates over the international system. With the United States and China locked in economic rivalry, policymakers and analysts are weighing how the global order might evolve in the wake of aggressive tariff regimes. Will America reassert unchallenged hegemony, will the world split into blocs under a U.S.-led “dollar zone,” or are we headed toward a truly multipolar order? Recent developments in 2024–2025—from tariff hikes and alliance shifts to de-dollarization efforts—shed light on these three scenarios. This analysis examines each scenario in turn, drawing on the latest data and expert commentary to envision the geopolitical and economic landscape that could emerge.
Scenario 1: Restoration of U.S. Global Hegemony (Unlikely Unipolarity)
Overview: In this scenario, the United States would regain its post-Cold War status as the undisputed global hegemon. The U.S. dollar would once again be accepted as the de facto trade currency even by strategic rivals, and Washington’s rules would set the terms of world commerce and security. Achieving this, however, would require a dramatic reversal of China’s rise. The premise is that only a radical change in China’s trajectory—such as a devastating defeat in a conflict—could force Beijing to acquiesce to U.S.-led order and the dollar’s dominance. Barring such a shock, a return to unipolarity is widely viewed as improbable.
Requiring China’s Capitulation: The lynchpin of this scenario is China effectively yielding to U.S. primacy, which current Chinese leadership is unwilling to do. Chinese officials consistently reject American “hegemonism” and have called the decline of U.S. dominance part of “changes unseen in a century”. Nothing short of calamity would induce Beijing to accept a subordinate role—analysts often point to a hypothetical war over Taiwan. A catastrophic failure by China in an armed conflict, for example, could destabilize the Beijing regime and cripple its great-power ambitions. Indeed, U.S. wargame simulations have suggested that a Chinese invasion of Taiwan would likely fail (if the U.S. intervened), and such a failure “could destabilize Chinese Communist Party rule,” according to a report by the Center for Strategic and International Studies. Only in the wake of a disastrous defeat – with China’s military humbled and its economy reeling – might Beijing be compelled to accept U.S. global leadership and the U.S. dollar’s supremacy in trade.
Military and Economic Shifts: For now, the United States is working to deter such a conflict, not fight one. U.S. strategy in Asia has been defensive and alliance-focused: Washington has bolstered a coalition of Indo-Pacific allies (Japan, South Korea, Australia, the Philippines, India and others) precisely to prevent Chinese aggression from ever succeeding. The grim reality is that a war to forcibly restore American primacy would come at immense cost. Even if the U.S. and Taiwan prevailed militarily in a Taiwan Strait war, the toll on all sides would be enormous – multiple U.S. aircraft carriers sunk, trade shattered, thousands of lives lost. No responsible U.S. leader seeks such a Pyrrhic path to renewed hegemony. Absent war, U.S. dominance is constrained by China’s continued economic and military weight.
No responsible U.S. leader seeks such a Pyrrhic path to renewed hegemony. Absent war, U.S. dominance is constrained by China’s continued economic and military weight
Assessment: Thus, a restored Pax Americana remains the least likely outcome. Official U.S. policy statements today do not anticipate a return to unipolarity; instead, they emphasize competition with China and bolstering alliances to manage China’s rise. Short of Beijing’s collapse or a transformative crisis, China will not simply accept the U.S. dollar as the global currency on Washington’s terms. As President Xi Jinping’s government sees it, U.S. power is waning, not destined to be rejuvenated. The restoration of U.S. hegemony, then, lives mostly in the realm of contingency planning (or hawkish fantasy). Only a radical upheaval – for instance, Beijing’s defeat in war and the CCP’s humiliation – might create the conditions for this scenario, and even then the global order would emerge bloodied and unstable. For the foreseeable future, American strategists are preparing for rivalry, not unchallenged reign.
Scenario 2: A U.S.-Led “Dollar Zone” (Allied Bloc with Limited Lifespan)
Overview: The second scenario envisions the world splitting into economic blocs, with the United States consolidating a U.S.-led sphere—a “dollar zone” of allies and partners bound together by trade ties, shared institutions, and the American security umbrella. This dollar zone would be upheld through a mix of tariff threats and security guarantees: Washington would use its economic leverage (such as punitive tariffs or export controls) to discourage allies from deepening ties with rival powers, while rewarding loyalty with defense commitments and privileged access to U.S. markets. Such a bloc might include close U.S. trade partners and treaty allies (from NATO Europe to Japan, South Korea, Australia, Canada, and others reliant on U.S. trade or protection). In effect, it’s a partial decoupling from China and Russia, creating a fortified economic alliance of democracies and U.S.-aligned nations.
The second scenario envisions the world splitting into economic blocs, with the United States consolidating a U.S.-led sphere—a “dollar zone” of allies and partners bound together by trade ties, shared institutions, and the American security umbrella
Tariffs as Leverage: The Trump administration provided a playbook for this coercive approach. During the late 2010s, the U.S. showed willingness to pressure even friendly nations with tariffs to achieve strategic aims. In 2019, for example, President Trump threatened across-the-board tariffs on Mexico unless it helped stem migration – a threat that forced Mexico’s hand. Under U.S. pressure of looming tariffs, Mexico agreed to deploy its National Guard to curb migrant flows and expanded programs to keep asylum seekers on Mexican soil. “The threat of tariffs got #Mexico to agree to take unprecedented steps to control illegal migration,” noted U.S. Senator Marco Rubio at the time. Similar tactics were used on trade issues with Canada, the European Union, and South Korea. The lesson was clear: the U.S. could use its enormous import market as leverage, weaponizing tariffs as a bargaining chip to secure both economic and political concessions from partners.
The Biden administration continued to leverage tariffs—though in a more targeted fashion—to reinforce a pro-U.S. economic order. Notably, President Biden maintained most of the Trump-era tariffs on China and even expanded some in strategic sectors. In 2024, following a statutory review of China policy, U.S. Trade Representative Katherine Tai concluded that tariffs had “encouraged [China] to take steps” on unfair trade practices while having only a “small negative impact” on the U.S. economy. As a result, Washington moved not to lift tariffs but to increase them on critical Chinese goods: for example, raising the duty on Chinese electric vehicles to a steep 100%. This hard line signals to allies that the U.S. is prepared to decouple from China in key industries – and expects its friends to do the same or face being shut out of the American market. Treasury Secretary Janet Yellen has explicitly promoted “friendshoring,” “diversifying our supply chains across a wide range of trusted allies and partners,” to create an economically resilient bloc insulated from adversaries.
Security Guarantees and Alliances: The carrot complementing these sticks is America’s unmatched network of alliances. The U.S. is effectively saying to many countries: choose the Western camp, and we will protect you. In Europe, the NATO alliance (expanded in 2023 to include Finland, with Sweden on deck) underwrites the security of countries that have joined U.S.-led sanctions against Russia’s war in Ukraine. In the Indo-Pacific, the U.S. has forged tighter defense pacts – from the AUKUS agreement supplying Australia with nuclear submarines, to the U.S.-Japan-Korea Camp David summit in 2023 that fortified trilateral security cooperation. Washington has also expanded its military access in the Philippines and bolstered Taiwan’s defenses, implicitly guaranteeing allies it will back them against Chinese aggression. These security moves reinforce an “us versus them” dynamic: nations within the U.S. bloc enjoy American protection; those outside may face punitive measures. For U.S.-aligned states that depend on U.S. security or trade, the incentives to stick with Washington are strong. A South Korean or Polish official, for instance, will think twice before risking tariff punishment or a downgrade in U.S. defense support by drifting toward China’s orbit.
Allure and Limits: In the near term, a U.S.-led dollar zone could solidify. Countries with deep ties to the American economy (Mexico, Canada, Europe, Japan, etc.) and those fearing hostile neighbors (like many in East Asia relying on U.S. military might) are inclined to band tightly with Washington. America’s financial might – control of the world’s main reserve currency and banking networks – further buttresses this bloc. “It will not be easy for any country to devise a way to get around the dollar,” Secretary Yellen insisted, emphasizing that the U.S. financial system’s depth, rule of law, and openness are unique advantages. Those advantages make adherence to a dollar-centric system the path of least resistance for many economies.
However, the long-term viability of this model is uncertain. For one, U.S. allies do not want to be treated as “vassals.” French President Emmanuel Macron voiced Europe’s discomfort with blindly following Washington’s lead, warning that “the worst thing would be to think that we Europeans must become followers… and take our cue from the U.S. agenda” on issues like China and Taiwan. Europe’s talk of “strategic autonomy” signals that even close allies resent heavy-handed U.S. economic pressure. Moreover, an exclusive bloc risks alienating large swathes of the globe — pushing them to form counter-alliances (as in scenario 3). Economic fragmentation itself carries costs for everyone. The International Monetary Fund cautions that a severe bifurcation of the global economy could shave up to 7% off global GDP in the long run. Even “limited fragmentation” could trim growth and disrupt supply chains, while a full tech decoupling alongside trade blocs might deepen losses to 8–12% of global output. Such outcomes would hurt U.S. allies and adversaries alike. Additionally, sustaining a dollar zone requires U.S. political will over years or decades. If U.S. leadership falters (or if a more isolationist administration takes office), the bloc could fray. Ironically, the tariff-based approach that knits the bloc together also breeds mistrust; countries may chafe under American demands and look for ways to reduce their dependence on an unpredictable superpower.
Assessment: A U.S.-led dollar zone may indeed emerge as a medium-term reality, essentially a fortified economic coalition of liberal democracies and key partners aligned against China and Russia. The year 2025 finds strong signs of this: America is doubling down on trade restrictions against rivals and deepening alliance commitments. Yet this scenario is likely a transitional phase rather than a stable endpoint. Its inherent contradictions — coercion among allies, global inefficiencies, and the impetus it gives others to seek alternatives — suggest it cannot singularly define the remainder of the century. The U.S. dollar will remain dominant in this zone, but the more Washington wields tariffs and sanctions as weapons, the more it incentivizes neutral nations to diversify away (as even Yellen acknowledged, “the more sanctions the U.S. imposes, the more countries will seek” non-dollar systems. In sum, the dollar zone might buy time for the West to regroup and set rules, but it faces diminishing returns in an interconnected world that is already seeking exit options from U.S. economic hegemony.
A U.S.-led dollar zone may indeed emerge as a medium-term reality, essentially a fortified economic coalition of liberal democracies and key partners aligned against China and Russia
Scenario 3: A Fragmented Multipolar World (Regional Powers and Currencies)
Overview: The third scenario foresees the emergence of a truly multipolar world – a global order with multiple centers of power and no single hegemon. In this landscape, neither the U.S. nor China dominates outright. Instead, several regional great powers and blocs (China, the U.S., the EU, India, Russia, perhaps others like Brazil or a Middle Eastern coalition) each exert influence in their spheres. Correspondingly, no single currency reigns supreme; the U.S. dollar’s share in international reserves and trade continues to erode, giving way to a patchwork of currencies and payment systems. The result is a plurality of economic systems: for instance, a yuan zone in parts of Asia, greater euro or rupee use in other regions, and increased reliance on commodities or gold as financial backstops. This scenario is characterized by decentralization of power – politically, economically, and financially.
Drivers of Multipolarity: Several recent trends point toward this fragmented order. For one, de-dollarization efforts have accelerated among non-Western nations. In reaction to the U.S. weaponization of finance (such as freezing Russia’s dollar reserves in 2022), countries like China, Russia, Iran, and Brazil have grown more determined to transact in other currencies. At the 2023 BRICS summit, leaders openly discussed creating alternatives to the U.S.-led financial system, from new payment networks to a potential common currency. “We are looking into the possibility of expanding the use of national currencies [in trade],” declared Russia’s Vladimir Putin, as BRICS explored an alternative to the SWIFT payment network. Although experts note that a BRICS currency or SWIFT-replacement is easier said than done, the political will is clearly growing outside the West. Trade patterns are reinforcing this: China and India have already shown “it is possible to defy sanctions and buy Russian oil using local currencies,” an example likely to be emulated by others in similar situations.
Prominent voices in the Global South are championing a break from dollar dependence. In April 2023, Brazil’s President Luiz Inácio Lula da Silva, standing in Shanghai, lambasted the dollar-centric system and asked pointedly: “Why can’t we do trade based on our own currencies? Who was it that decided that the dollar was [the] currency after the gold standard?”. Lula urged BRICS nations to consider a common currency for trade, giving voice to a broader frustration with the dollar’s “exorbitant privilege.” Similar sentiments are shared by many emerging powers, from South Africa to Indonesia, who feel the post-1945 monetary order doesn’t reflect today’s balance of power. China, for its part, has steadily promoted the internationalization of the renminbi (RMB) – establishing swap lines with dozens of countries and encouraging oil exporters like Saudi Arabia to price energy sales in yuan. By early 2024, the dollar’s share of global foreign exchange reserves had slid to about 58–59% (down from over 70% two decades ago), as central banks diversified into “a wider range of currencies” and gold. While the dollar is still the single largest reserve currency, its trend is downward, and no other currency is rising to replace it one-for-one. Instead, as former IMF official Hung Tran notes, the biggest gains have been in aggregate for “lesser-used currencies” (Canadian and Australian dollars, RMB, etc.) and gold – underscoring a shift to multiple alternatives rather than a new hegemon.
Regional Power Centers: Geopolitically, the multipolar scenario is reinforced by the assertiveness of regional powers. China is clearly at the forefront – now wielding the world’s second-largest economy and a modernizing military, Beijing envisions itself as the lead power in Asia and across the developing world. Together with Russia, China has proclaimed since the 1990s an aim to foster a “multipolar world and the establishment of a new world order” not dominated by the West. Beijing’s diplomatic strategy (through the Belt and Road Initiative, bilateral trade deals, and institutions like the Asian Infrastructure Investment Bank) is building a China-centered network in Eurasia and Africa. India, too, is rising: set to be the world’s most populous nation and a top-five economy, India is carving an independent path – cooperating with the West (in the Quad and other forums) on some issues while tilting toward Russia for energy and maintaining leadership of the Global South bloc in forums like the G20. Russia, though weakened by sanctions and war, remains a nuclear superpower with influence over Central Asia and parts of the Middle East and Africa (often through Wagner proxies and energy diplomacy). Middle Eastern powers such as Saudi Arabia and Iran are increasingly coordinating policy (notably with China mediating a détente between them in 2023) and exploring oil sales in non-dollar currencies, threatening the traditional petrodollar arrangement. In Latin America, Brazil leads a move toward greater South-South cooperation, and has joined the BRICS in questioning U.S.-led finance. Even Europe could become a more independent pole: if transatlantic rifts widen (for instance, over how to end the war in Ukraine or deal with China), the EU might pursue a more autonomous course, trading with multiple partners and using the euro and other instruments in lieu of the dollar.
Characteristics of the Multipolar Order: In this world, no single ideology or model holds universal sway. Instead, pragmatism and pluralism rule. Countries would choose partners and currencies based on convenience and context, not loyalty to one hegemon. For example, a Southeast Asian nation might simultaneously partake in U.S.-led military exercises, sign onto China’s infrastructure projects, trade oil in yuan, and maintain some reserves in dollars and gold. Currencies would likely split roles: the U.S. dollar might still dominate in North America and remain important globally for a long time (given inertia and the huge size of U.S. financial markets), but the Chinese yuan could become the primary medium for Asia-to-Asia trade and investment, while the euro stays paramount in Europe’s neighborhood, and other currencies play niche roles. No single currency would have the unquestioned dominance the dollar enjoyed in the late 20th century. Instead, multiple currencies – plus perhaps digital payment systems or cryptocurrencies – would share the stage. We are already seeing the infrastructure for this: the development of China’s CIPS payment system as a partial SWIFT alternative, India’s UPI and rupee settlement mechanisms, Russia’s MIR card system, and various bilateral currency swap lines. “There is no moving away from the U.S. dollar unless you can create a parallel ecosystem,” as one Indian banker put it – and that parallel ecosystem is slowly being built.
In this world, no single ideology or model holds universal sway. Instead, pragmatism and pluralism rule
Politically, a multipolar world would entail a more fluid and transactional diplomacy. Alignments could shift issue by issue. Global governance might become more gridlocked in formal institutions (like the UN or WTO), as consensus is harder to come by, but we may also see new coalitions of the willing tackling specific problems (climate clubs, regional security pacts without U.S. involvement, etc.). Crucially, no single power could unilaterally set the rules, which means norms would emerge from negotiation or, sometimes, power standoffs. This can be both an opportunity (for more inclusive decision-making) and a peril (if no one provides global public goods). For instance, financial safety nets might regionalize – with Asian or BRICS development banks stepping in where the IMF once dominated.
Challenges and Risks: The multipolar scenario is not necessarily peaceful or stable. Historically, multipolar systems (e.g. the 19th-century balance of power) have been prone to miscalculation and shifting alliances leading to conflict. In the absence of a clear dominant stabilizer, local disputes (say, between regional powers) could escalate if no overarching authority mediates. Additionally, if currencies compete, there could be greater exchange rate volatility and fragmentation of capital markets. An IMF study notes that deeper fragmentation could increase financial volatility and even reduce countries’ growth potential as risk-sharing across borders diminishes. Countries like Brazil and India, while asserting autonomy, also risk instability if global investors demand higher risk premiums due to a less coherent financial system. The transition period could be bumpy: while nations experiment with non-dollar trade, they must navigate practical hurdles (currency convertibility, establishing trust in new systems, etc.). Analysts caution that de-dollarization remains difficult precisely because of the dollar’s incumbency advantages – liquidity, stability, and the lack of immediate alternatives. Indeed, even Lula’s own officials admit such changes are “difficult because we are unaccustomed to the idea… Everyone depends on just one currency” as of now. This underscores that the multipolar world will not emerge overnight in full form, but gradually, with partial steps and occasional reversals.
Assessment: Many experts see this fragmented multipolar order as the most plausible long-term outcome, as U.S. hegemony recedes but China does not fully overtake it. “Deepening geopolitical confrontations” are expected to continue “diminishing the dominant role of the dollar and the US in the international financial system,” one analysis concludes, projecting a continued incremental decline in U.S. primacy. Short of an unexpected partnership between Washington and Beijing (which appears unlikely amid strategic rivalry), the world is set to navigate a diffusion of power. Recent official statements reflect this reality: even U.S. Treasury Secretary Yellen acknowledged a “gradually increased share of other assets in [global] reserve holdings” is to be expected over time. In other words, diversification away from the dollar is already happening at the margins. For countries outside the West, the multipolar vision is attractive: it promises more agency and options. China explicitly pitches its rise as part of a new multipolar order in which no superpower can “contain” the others – an appealing message to many developing states.
Many experts see this fragmented multipolar order as the most plausible long-term outcome, as U.S. hegemony recedes but China does not fully overtake it
In a multipolar scenario, the U.S. and its allies remain powerful players but must compete in a crowded field. America would have to exercise deft diplomacy to build coalitions on specific issues (recognizing that on other issues those same partners might align with China or others). The U.S. dollar may still be the single largest currency in use for years to come, yet it would coexist with a mosaic of regional currencies and commodities in global trade. The year 2025 already shows such coexistence: the dollar’s share of global reserves is below 59%; over 40 countries have expressed interest in joining BRICS or aligning with its financial initiatives; and central banks are holding more gold (a neutral asset) than at any time in recent memory. All these indicators point toward a system where no one country or currency can dictate terms universally. Instead, influence will have to be earned through partnership and persuasion in each region.
Conclusion: Navigating an Uncertain Transition
Each of these scenarios—a restored U.S. hegemony, a U.S.-led bloc, or a multipolar patchwork—offers a distinct vision of the world order after the convulsions of the tariff wars. The most unlikely is a return to singular American dominance; the world has simply changed too much, and China’s rise (absent catastrophe) is irreversible. The dollar-zone bloc scenario is already partially in effect, but it appears to be an interim strategy by Washington to shore up its position rather than a sustainable end state. The multipolar world, increasingly emerging in practice, represents a diffuse but more representative order—though one still fraught with instability, contestation, and power vacuums.
In reality, the future is likely to blend elements of scenarios two and three: a period of bloc-style competition and partial decoupling followed by a more fluid, multipolar equilibrium. Policymakers are hedging accordingly—Washington doubles down on alliances and tariffs, Beijing consolidates regional influence, and middle powers assert strategic autonomy. But with this growing diffusion of power comes a parallel opportunity: those outside the traditional centers of influence may now have greater room to maneuver.
This includes the Muslim world.
As the dust of global realignment settles, a crucial question arises: how can the Muslim world—stretching from Morocco to Malaysia—position itself not as a passive arena for great power competition, but as an integrated actor with agency, leverage, and strategic vision? With critical assets such as energy resources, geostrategic maritime corridors, a youthful demographic, and an emerging financial ecosystem, the Islamic world has the potential to coalesce around shared economic and political interests. But seizing this moment will require more than rhetoric; it will demand institutional coordination, sovereign policy innovation, and the articulation of a strategic posture that navigates between emerging blocs while asserting its own terms of engagement.
In short, while this piece has outlined the structural shifts of the global order, the next question is how key civilizational and regional actors—particularly the Muslim world—can adapt to, shape, and ultimately thrive in the coming order. That will be the focus of the next analysis.
The global order after the tariff wars remains unwritten. What emerges will be shaped not only by Washington or Beijing, but by those who recognize this transitional period as a rare moment to recast their place in the world.
The Centre for Muslim Political Analysis, Strategy, and Solutions (or COMPASS) is a thinktank which focuses on developing long term thinking, strategy and policy to support the progress of the Muslim world.