A flight from U.S. financial assets prompted by President Trump’s trade war is subsiding as the White House appears increasingly keen to strike a new trade deal with top U.S. trading partner China.

But the damage to the U.S. dollar in its capacity as the world’s major reserve currency may already be done, which could end up boosting the administration's plan to boost domestic manufacturing production, bolster U.S. industry, and alter global trade flows.

Treasury Secretary Scott Bessent affirmed Wednesday the “strong dollar policy” that puts the U.S. currency at the center of global finance and has been a pillar of U.S. economic policy planning since the 1970s.

But he also said that it was “natural” for the use of the dollar in that capacity to come down over time.

“That the U.S. sits at the center of the global economy is enabled by the use of dollars, and it’s natural that the usage would come down over time,” Bessent said during an event at the Institute of International Finance.

Bessent referenced remarks made Tuesday by European Central Bank vice president Luis de Guindos, who said that the euro could become a second reserve currency “in some years.”

U.S. dollar index DXY has been falling for the duration of Trump’s presidency, with notable drops after the biggest tariff announcements on April 2 and April 9. While higher tariffs should theoretically make the dollar more valuable, the downturn signals that investors are turning away from dollars and the assets they undergird, like U.S. bonds.

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