As it is the Yuan has been creeping in where the USD has been previously ubiquitous in nations abutting China. The Myanmar regime operated a severe internet censorship where I found it actually quicker and cheaper to send a telegram to Ireland than send an e-mail! The Chinese traders I met in Yangon were the only ones not afraid to talk openly about the regime, they knew their money had power that could bypass the controls.
In Shan state abutting China where the Yuan was common, government censorship was negligible, there was no internet firewall. I can only imagine the Yuan’s influence has only spread to the whole country and most likely is underreported. Same could be said of all states abutting China.
Go back two decades the GBP was pretty ubiquitous in the Asia too, whereas now in Hong Kong since brexit its risk margin is wider than for the Euro and USD. A century ago it was said you could get around the world with a note from the bank of England and never be doubted. It was another three decades and a world war before the USD usurped the GBP as the global currency.
Even when I go down to the local supermarket or post office where I am in England, foreign exchange is advertised as “Travel Money”, as if the Pound is the only real currency and all other currencies are as good as tokens for rides at Alton Towers. The British psyche still hasn’t shrunk to its nations actual place in the world, although I image the average UK pensioner living off their pension in Spain is in no doubt about its diminishing value as measured by GBP.
It does seem that Trump’s obstinacy towards traditional trade allies left a vacuum for China to fill since he pulled the USA out of the TPP. The idea that the nations involved would orientate to suit Trump voters is as delusional as Brexiters belief the EU revolved around the UK.
With the EU setting up a separate SWIFT payments system to allow EU companies who trade with Iran to avoid US sanctions, it’s only likely that the more protectionist the USA gets, the more channels to avoid the USA will be availed of. So the question is, will there be an “event”, or has the process already been in motion so long that USD hegemony will be more of a realisation long after the fact?
Could an “event” be the dumping of foreign holdings of USD if it’s no longer necessary for trade, which in turn might panic those holding USD as insurance, which in turn diminishes the USAs ability to borrow. The AUD/CNY trade has held pretty steady as Australia became more reliant on Chinese demand for its resources so the normalisation of the Yuan is well underway.
Edit to add: I can imagine the realisation of the loss of USD hegemony may have a backlash effect, but Trump is already a symptom of lost confidence and his tariffs only exacerbate the decline. The Iraq quagmire make its muscle feel impotent. Considering 40% of the world privately held firearms are in the USA, I think it far more likely the US army will be needed at home, just as British forces withdrawing from the far empire were put on UK streets.
Of course the situations aren’t directly comparable but when you have a president saying the recent synagogue massacre happened because there wasn’t guns to defend against it, you can only see there’s a bonfire of bullets building. It’s disturbing that no one is really shocked anymore. There was a similar belief in the run up to WWI, who could war happen if the great powers were equally armed?
So could a domestic event like a bloody mass city sized siege cause irreparable damage to the USD status as a solid safe currency if the nation backing is considered volatile? If there are other perceptibly more stable options available then people will diversify accordingly.