Robin J Brooks said the dollar’s 2025 decline after U.S. tariff announcements reflected weaker growth expectations, not a rapid loss of reserve status, separating market sentiment from long-term official holdings.
In a May 15, 2025, post, Brooks cited the International Monetary Fund’s quarterly survey of official foreign-exchange reserves. He said the latest observation, for Q4 2024, put the dollar’s share at about 60% and the euro’s at 20%. The figures showed reserve allocations before the market moves he was discussing.
Brooks argued that the euro remained far behind the dollar in official reserve holdings and would struggle to displace it quickly.
The dollar’s decline after the tariff announcements prompted debate over whether it reflected a short-term market move or a lasting change in its international role. Brooks noted that tariffs might ordinarily be expected to support the dollar if investors viewed them as a greater shock to other economies. He said currencies respond to several forces at once, however, and that the dollar’s fall did not by itself show a shift in reserve status.
He pointed to interest-rate differences that had moved against the dollar, which he interpreted as a sign that investors had become more pessimistic about U.S. growth than growth among the country’s trading partners. Brooks treated that as a near-term driver of the currency’s weakness.
Brooks also argued that reserve managers make decisions over longer periods, so recent market moves could take time to affect official holdings, if they do at all. The IMF survey figures he cited end in Q4 2024 and do not show how reserve managers allocated holdings after that period.
Brooks dismissed recurring speculation that China might sell U.S. Treasury holdings in response to tariffs. He said the prospect of a sale could prompt investors to reposition, pushing U.S. Treasury yields sharply higher and leaving China with losses on its holdings. Brooks argued that China, Japan and other major Treasury holders could not sell down their positions without incurring large losses.
