$40 Trillion Market Vanishing? Unpacking China’s Bold Move to Ditch USD Trade in a Global Power Play

Introduction: A Seismic Shift in Global Trade?

Imagine a world where the U.S. dollar, the backbone of international trade for decades, is no longer the go-to currency for one of the planet’s largest economies. Recent reports and posts on X have sparked heated discussions about China allegedly canceling trade in USD, a move that could disrupt a $40 trillion market and reshape global economic dynamics. But is this claim fact or hyperbole? In this deep dive, we’ll explore the origins of this narrative, analyze its implications, and separate reality from speculation in the escalating U.S.-China trade showdown. Buckle up—this could be a game-changer.

The Headline That Shook the Internet

The claim that China is abandoning USD trade emerged from a flurry of posts on X and online reports, notably a YouTube video titled “$40 Trillion Market GONE? China Cancels Trade in USD Amid Its Global Power Play Showdown,” shared by users like@LenaPetrovaOnX and@LightningPlus_on May 28, 2025. The narrative suggests China is rejecting U.S. demands to curb exports and instead pushing its yuan as a global trade currency, potentially undermining the dollar’s dominance. Another post by@EnzoCalamo on May 27, 2025, claimed China ordered banks to cancel USD trade, citing a $6.1 trillion economic shock. These posts, while attention-grabbing, lack verified primary sources, so let’s dig into what’s really happening.

Context: The U.S.-China Trade War Intensifies

The U.S.-China trade relationship has been a rollercoaster in 2025, marked by escalating tariffs and retaliatory measures. On April 2, 2025, President Donald Trump imposed 10% tariffs on nearly every U.S. trading partner, with China facing levies as high as 104% on its goods. China retaliated with 84% tariffs on U.S. imports, signaling a no-holds-barred approach. By May 12, 2025, both nations agreed to a 90-day tariff truce, slashing U.S. tariffs on Chinese goods from 145% to 30% and Chinese tariffs on U.S. goods from 125% to 10%. Yet, tensions flared again when Trump accused China of violating the truce, hinting at renewed tariff hikes.

Amid this tit-for-tat, China’s alleged move to cancel USD trade is framed as a strategic counterpunch. Posts on X suggest China is expanding its Cross-Border Interbank Payment System (CIPS) and promoting the yuan to reduce reliance on the dollar and the SWIFT system. This aligns with China’s long-term goal of internationalizing the yuan, but does it spell the end of a $40 trillion market?

Unpacking the $40 Trillion Claim

The “$40 trillion market” figure is murky. It likely refers to the estimated value of global trade conducted in USD, given the dollar’s status as the world’s reserve currency. In 2023, about 88% of international transactions via SWIFT were dollar-denominated, underpinning trillions in trade annually. However, no credible source confirms China has outright banned USD trade. Instead, posts on X and unverified reports suggest China is encouraging yuan-based transactions and restricting dollar use in specific contexts, like rare earth exports or bilateral trade with certain partners.

For perspective, U.S.-China trade was worth roughly $500 billion in 2024. Even if China shifted all bilateral trade to yuan, the immediate impact wouldn’t approach $40 trillion. The figure may be an exaggeration, possibly tied to the cumulative value of dollar-based global trade or speculative estimates of a dollar collapse. Critics, like investor Kyle Bass, argue that claims of China’s economic dominance often rely on manipulated data, casting doubt on such dramatic projections.

China’s Yuan Push: Strategy or Bluff?

China’s efforts to promote the yuan aren’t new. Since launching CIPS in 2015, China has expanded its use for cross-border trade, especially with BRICS nations (Brazil, Russia, India, South Africa). By 2025, CIPS processed over $1.2 trillion in transactions annually, though it’s still a fraction of SWIFT’s $150 trillion. China has also signed currency swap agreements with over 40 countries, encouraging yuan-based trade for commodities like oil and rare earths.

This push gained urgency in 2025 as U.S. tariffs threatened China’s export-driven economy. Vice Premier He Lifeng, Xi Jinping’s trade tsar, has championed manufacturing and trade surpluses, brushing off U.S. complaints about overcapacity. By promoting the yuan, China aims to insulate itself from dollar-based sanctions and reduce exposure to U.S. financial systems. However, the yuan’s global share remains under 3%, far from challenging the dollar’s 58% dominance in foreign exchange reserves.

Market Reactions: Panic or Opportunity?

The tariff war and rumors of a USD trade ban have rattled markets. The S&P 500 lost $5.8 trillion in value in the four days following Trump’s tariff announcements in April 2025, with tech stocks hit hardest due to reliance on Chinese supply chains. U.S. Treasury yields soared to 4.5% as investors sold bonds, signaling doubts about U.S. debt amid trade chaos. Gold, a safe-haven asset, dipped 2% as trade tensions briefly eased in late April, but remains up 25% in 2025 due to ongoing uncertainty.

China’s markets, however, showed resilience. The Shanghai SSE composite rose 1.1% and Shenzhen SE composite gained 2.2% on April 9, 2025, buoyed by government interventions. This suggests China is bracing for trade disruptions by boosting domestic consumption and diversifying export markets to Europe and Japan.

What’s at Stake for Global Trade?

If China were to significantly reduce USD trade, the ripple effects would be profound but not immediate. A weaker dollar could inflate U.S. import costs, raising consumer prices—running shoes from Vietnam, for example, could jump from $155 to $220 under new tariffs. American businesses like Hobby Lobby have already delayed Chinese shipments, citing tariff uncertainty. Globally, countries reliant on dollar-based trade with China, like Australia or Brazil, might face currency volatility.

For China, the risks are equally high. Its $1.93 trillion fiscal deficit in 2025 and heavy local government debt make it vulnerable to trade disruptions. A premature escalation could trigger a “brittle fracture” in its financial system, as economists warn. Yet, China’s hardline stance—vowing to “fight to the end”—suggests it’s betting on long-term strategic gains over short-term pain.

The Reality Check: Is the Dollar’s Reign Over?

The dollar’s status as the world’s reserve currency is rooted in U.S. economic stability, military power, and institutional trust. While China’s yuan push is a bold move, it faces hurdles: the yuan isn’t fully convertible, and global trust in China’s financial system lags. A U.S. court ruling on May 29, 2025, blocking Trump’s tariffs for exceeding presidential authority, further complicates the narrative. This suggests legal and political checks may temper U.S. tariff aggression, potentially easing pressure on China to ditch the dollar.

The “$40 trillion market gone” claim appears overstated, likely a mix of speculative fearmongering and real concerns about dedollarization trends. China’s actions are more about gradual diversification than an overnight USD ban. Still, the trade war’s escalation keeps markets on edge, with investors betting on Trump’s tendency to “chicken out” on tariffs, dubbed the “TACO” trade (Trump Always Chickens Out).

Conclusion: A High-Stakes Chess Game

China’s rumored cancellation of USD trade is less a fait accompli and more a strategic signal in a broader power play. The U.S.-China trade war, fueled by tariffs and retaliatory measures, is reshaping global markets, but the dollar’s dominance isn’t vanishing overnight. Both nations are locked in a high-stakes chess game, with businesses, consumers, and investors caught in the crossfire. As negotiations continue—Trump and Xi reportedly planned a call in May 2025—the world watches to see who blinks first.

Thought-Provoking Questions:

1. Could China’s push for the yuan realistically challenge the U.S. dollar’s global dominance within the next decade, or is it too entrenched?

2. How might American consumers and businesses adapt if tariffs and a shift away from USD trade drive up costs for everyday goods?

3. Is the “$40 trillion market gone” narrative a wake-up call for the U.S. to rethink its trade policies, or just exaggerated clickbait?

Sources: Reuters, The New York Times, CNN Business, The Guardian, JAPAN Forward, posts on X