China and Russia dump dollar, signaling a possible financial alliance

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China and Russia have sought to reduce their reliance on the U.S. dollar, signaling a potential financial alliance according to experts.

According to data from Russia’s Central Bank and Federal Customs Service for Q1 2020, the dollar’s share of trade between Russia and China dropped more than 50%.

Only 46% of transactions used the greenback in 2020, while the euro reached an all-time high of 30% and national currencies broke records as well, making up 24% of transactions between the two countries.

A drop of this magnitude is unheard of in the history of the dollar, sounding alarms in Washington D.C. For decades, the U.S. dollar has remained the predominate transaction currency across the globe, from Beijing to Port Au Prince.

This has begun to change, however. In 2015, the dollar was used for 90% of bilateral transactions in Russia and China. Since then, the figure has dropped to roughly 51%.

The sudden change has multiple causal factors. One in particular being the U.S.’ ongoing trade war with China in the form of sanctions and tariffs, forcing Beijing away from the dollar. This trajectory is equally clear in Russia.