De-Dollarization
Week of August 21-27, 2026
Published in conjunction with The Nation magazine, TRACKING THE CRISIS is a weekly round-up from The Democracy Collaborative tracking the administrative, legislative, and other actions of the Trump Administration as well as the many forms of legal and movement response from across a broad range of social, political, and economic actors. TDC is providing this service for collective informational purposes, as a tool for understanding the times during a period of disorientingly rapid flux and change in the U.S. political economy. This round-up is produced by humans, not by Artificial Intelligence. TDC should not be understood as endorsing or otherwise any of the specific content of the information round-up.
TRUMP TRACKER: Administration actions
Economic Outcast: Bessent’s attempt to isolate Iran through sanctions blows back amid China defiance, bond market chaos; Canada stands its ground as Trump escalates tariff war. On Monday, August 24, U.S. Treasury Secretary Scott Bessent announced Operation Economic Outcast, a new secondary sanctions program aimed to “totally isolate” Tehran by cutting off “economic lifelines” to its major trading partners. In a speech that cribbed quotes from George W. Bush and Winston Churchill, Bessent declared an “economic onslaught against Iran’s financial connections around the globe” and that “our objective is to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone.” Bessent announced secondary sanctions against 60 foreign entities suspected of economic ties to Iran, affecting five major sectors of economic exchange: technology, gold, aviation, shipping, and – for the first time – digital assets.
Bessent clarified that the sanctions would not begin immediately, but said Trump was “working the phones” to warn countries with ‘specific requests’ to cease interactions with Iran on timelines imposed by the United States, pressuring countries to “shut down activities we have identified” or risk being subject to sanctions. “Any entity that facilitates money laundering on behalf of Iran will be removed from the U.S. dollar system,” Bessent said, adding: “The clock just started ticking.”
Many economic analysts shrugged off Bessent’s sanctions threat, noting that they differed little from the sanctions the United States has imposed on Iran in the past. Given that the U.S. has basically run out of military options, the sanctions are seen as a demonstration to the public that Trump has not conceded the war and a way to buy time and avoid embarrassment until after the midterm elections. Iranian Parliament Speaker Ghalibaf openly mocked Trump and Bessent’s threat of an “Economic D-Day,” characterizing the move as less of a flex and more of a desperate Hail Mary given the U.S.’s failure to coerce Iran by other means: “Sir this ain’t Normandy, this is improv night and you forgot your own script.” Iran’s Economy Minister Ali Madanizadeh declared Monday that Iran had been preparing for new sanctions “for a long time” and that they were ready to face a new round of economic coercion.
Many experts also regarded Bessent’s new sanctions regime as mostly rhetorical and doubted its ultimate efficacy, given the sweeping scope of such an endeavor and Bessent’s reluctance to levy sanctions against the biggest Chinese banks and oil buyers. When asked by reporters about why sanctions were not being imposed immediately, Bessent replied, “Why would I want to blow up the global financial system?”
Bessent’s comment stood out to analysts as a tacit acknowledgement of the dangerous economic bind in which the United States now finds itself, even as he threatens to weaponize the United States’ still-formidable economic power against Iran (as well as China by implication). Although 30-year Treasury yields have eased slightly from last week’s 20-year high due to falling oil prices, the bond market has continued to punish the federal government for its $40-trillion-plus national debt, nearly $2 trillion of which is the deficit projected for this year, a large portion of which has been incurred by the Department of War’s spiraling costs of prosecuting the war on Iran. The higher rates then increase the cost of the United States’ own debt, powering a feedback loop that further destabilizes U.S. bonds.
Bessent’s buyback intervention last week eased rates for about 24 hours until Trump’s escalation towards Iran sent long-term yields back up to over 5.2%, around which it has been hovering since then. Bessent issued short-term T-bills to fund the buyback intervention, basically going into more debt to buy the debt no one else was willing to buy; Treasury officials disclosed on Monday that it will be also be tapping into its nearly $1 trillion general account to fund more buybacks over the next two months, which has also increased investor anxiety about the fundamental fiscal health of the U.S. economy. A new report released this week showed that the growth of the U.S. real economy was just 1.5% in the second quarter of 2026, attributed to the replacement of domestic production growth with imports of AI computer chips and other equipment for the AI buildout, which now accounts for up to 75% of U.S. GDP growth.
That the sanctions will inevitably put the U.S. on a collision course with China has also been jittering the bond market. China is Iran’s largest trade partner, buying approximately 80-90% of Iran’s oil, as well as the United States’ third-largest trading partner, with U.S. imports of Chinese goods totaling over $330 billion in 2025. The sheer difficulty of enforcing any sanctions against China thus poses a formidable barrier to Bessent’s goal of total economic isolation against Iran, a fact Bessent seemed to acknowledge himself, even as he insisted that “no one is above the reach of U.S. sanctions.”
China forcefully rejected Trump and Bessent’s sanctions on Tuesday, which included some individual Chinese firms and institutions. After Bessent warned that a “major financial institution” was to be targeted by sanctions in the coming days, Beijing responded with a reaffirmation of its relationship with Iran, and a warning that this relationship “should not be disrupted or undermined”; and that China will take “all necessary measures” to protect that relationship. Just weeks before Xi Jinping is scheduled for China’s first official state visit to Washington in over a decade, the economic salvo appears timed for maximum tension, but risks triggering a devastating blowback from China that could further deteriorate confidence in the United States’ economic situation. Beijing has already threatened to restrict rare earth exports to the United States, upon which its AI buildout depends; and as the second largest holder of U.S. Treasuries, a well-timed dump of U.S. government bonds could cripple the U.S. economy and send yields surging to a point where market dynamics alone would overwhelm the Fed or the Treasury’s capacity to control inflation or interest rates, and trigger a deflationary spiral and/or cascading meltdown in stocks, bonds, private credit and other domestic financial markets.
Iran’s rial dropped to a historic low of 2 million against the dollar, which has demonstrably weighed on daily life for Iranians; but the squeeze has not appeared to have the effect that Bessent had hoped when he mentioned the sanctions as a means of getting “regime change back on the table.” Iran threatened this week to retaliate against sanctions with pre-emptive military strikes against Gulf oil installations, further affecting the global energy supply (particularly for diesel and jet fuel), which have also been driving bond yields higher.
According to an interview with financial analyst Peter Alexander on CNBC, the overall effect of bond pressure from multiple fronts has the potential to accelerate the global de-dollarization trend even more as Bessent threatens to kick major foreign institutions and even entire national economies off of the dollar system. As the United States has increasingly used the dollar’s reserve currency status as both a speculative tool and a weapon against countries that defy U.S. demands, Treasury bonds have lost their prominence as a ‘safe haven’ asset for foreign exchange and investment.
As other major economies such as the EU and China have begun building and implementing their own reserve currency infrastructure, their bonds, as well as gold, have become attractive to central banks as a more stable long-term investment. Central bank holdings of gold surpassed Treasuries for the first time this week as acquisition of Treasury bonds has slowed in favor of more diversified foreign exchange assets, leading economists to revise their more gradualist interpretations of a petrodollar shift. China in particular has been building the yuan strategically towards becoming an alternative reserve currency, backed by their massive accumulation of gold as well as the maturing of its digital cross-border payment systems and currency swap lines with an ever-increasing amount of countries including key U.S allies, as well as accumulated cash dollar liquidity reserves that have been distributed and held in state-run commercial banks.
As the development of alternatives has taken the teeth out of Bessent’s capacity to maintain dollar dominance as a means to strongarm countries into economic compliance with U.S. hegemony, even U.S. allies have become emboldened in their exercise of sovereignty to defy the coercive hand of dollar-denominated global trade policy. Last week, Trump struck out again at Canada, announcing a 50% tariff on cross-border trade effective January 1, 2027 (presumably so as not to induce an economic shock for U.S. consumers ahead of midterm elections). But this week, Canadian officials took a page out of China (and Iran’s) playbook to take a stand against the United States, imposing a retaliatory tariff of 50% on U.S. imports effective immediately.
Mark Carney’s rhetoric took on a war footing as talks between the two countries collapsed on Friday, rejecting Trump’s “power play” as he cited “unfair” and “uneconomic” last-minute demands. In a rare show of open defiance against the United States, Carney vowed to match Trump’s punitive tariffs “dollar for dollar,” targeting steel, fish, and hundreds of other consumer goods. Doug Ford, premier of Ontario, said the United States “won’t get a grain of sand out of Ontario” as he speculated, “what would they do without [Ontario’s] high-grade nickel?” Canada also threatened to cut off electricity exports to the United States, which would affect millions of customers in the northern border states.
Historian and analyst Robert Pape, who coined the term “escalation trap” to describe the process of asymmetric warfare in the modern era, notes that since World War I, no campaign of “massive economic sieges” has ever been successfully turned into a decisive victory in an active conflict or has ever “broken a regime’s political will,” but instead tends to “trigger a predictable, catastrophic reaction.” He warns that Bessent’s endeavor “isn’t going to end the war,” but is instead “actively walking Washington into a devastating new phase of the escalation trap.”
Former State Department analyst Alan Eyre observes that “the problem with Operation Economic Outcast is it continues the trend of making the U.S. an economic outcast.” Financial commentator Peter Schiff, who has been sounding the alarm of a potential bond crash and “full-blown crisis” in U.S. financial markets over the past several weeks, opined that not only does Operation Economic Outcast seem doomed to fail, “the economic noose that actually tightens may end up being the one wrapped around our neck.”
A New Middle East? Mecca defense pact invites Iran to join; U.S. approaches Iran with new peace offer after Iran tightens grip on Hormuz. Two weeks after Sunni nations Turkiye, Pakistan, and Saudi Arabia formed the Mecca Defense Pact, a regional mutual-defense network modeled after NATO’s Article 5, Mehdi Rahimi, head of Iran’s parliamentary news agency, revealed to the newspaper Al Mayhadeen on Monday that Iran had been invited to join the fledgling alliance. Rahimi told the media outlet that the invitation is currently “under review” by Iranian state officials, though no official party from the pact’s original signatories nor the government of Iran have confirmed the report.
If the reports are confirmed, it would upend Western assumptions that the formation of the alliance was sectarian in nature and intended to deter Iranian attacks. More likely, some analysts say, is that the countries involved view the alliance as a strategic hedge not only against adversaries of each country, but also as a common bulwark against Israel, which has already begun to set its sights on Turkiye through the increase of belligerent rhetoric as well as last week’s attack on a Turkish airbase in Syria.
The announcement sent shockwaves through the region, alarming Israeli officials and triggering speculation amongst area analysts that the contours of a new Middle Eastern security architecture – one that does not include the United States – is beginning to take shape. Former CIA analyst Larry Johnson argues that rather than an “Islamic NATO,” the aim of the alliance is to build a “multilateral, regionally-led framework that replaces the American umbrella” over the Persian Gulf, with backing from Moscow and Beijing, and within which Iran sits as a “legitimate pillar rather than a quarantined enemy.” This would be consistent with statements made over the past several weeks by Iranian foreign minister Araghchi promoting the idea of pan-Muslim solidarity as the United States’ military presence and influence has been waning in the region due to the war.
On Tuesday, NBC News reported that Iranian drone and missile attacks on U.S. bases in the Gulf region have inflicted billions of dollars of damage to U.S. intelligence posts and surveillance hardware in the region. Retired four-star general Barry McCaffrey estimated that U.S. forces have “permanently lost access” to at least 15 bases, many of which had been back-line support hubs for forward military operations in the region. McCaffrey surmised that would leave the United States in a critically vulnerable position vis-a-vis the projection of military power in the Middle East, and that Iran was now “poised to control access to Gulf states.” This followed on reports that the Pentagon has been considering a “drastic” pullback of its military presence in the region, suggesting that an inflection point had been reached that would radically transform the balance of power in the Middle East.
As the conflict passed its six-month mark this week, Qatari and Pakistani officials continued to try to persuade the United States and Iran to return to the negotiating table. Still at stake is the Strait of Hormuz, which Iran declared would remain closed until the U.S. returns to the commitments made in the Islamabad MoU. Trump claimed that the United States had cleared the Strait of all mines, which sources representing U.S. allies refuted.
On Tuesday, the day after Bessent announced Operation Economic Outcast, Pakistani Field Marshal Asim Munir traveled to Tehran to meet with Khamenei’s new advisor Mohsen Rezaei, reportedly carrying a fresh offer of peace from the United States following a conversation with Trump. While neither Iranian nor U.S. officials confirmed the content of the offer, reports say the United States was willing to lift the maritime blockade and sanctions on Iran in return for reopening the Strait and using its influence to halt attacks by its allies in the region.
According to reports, Tehran informed Munir that it was not ready to accept the agreement, with Rezaei stressing Iran’s continued role in the management and security of the Strait, as well as the need for the United States to conform to the terms outlined in the MoU. Iranian President Pezeshkian reiterated over the weekend that the memorandum remains the “best path” out of a stalled war.
On Wednesday, the IRGC announced that an agreement had been reached with Oman to demarcate a commonly managed passage through the Strait and share revenues from fees. Qatari officials traveled to Tehran, reportedly to forge a “joint project” with Iran to clear mines from the new route. Rezaei announced that Iran is preparing a “list of conditions” to reopen the Strait of Hormuz as requested by mediators.
Supreme Court upholds Trump executive order on mail-in voting as states, lower courts continue defiance; Trump lays groundwork for national emergency. With the midterm elections two months away, the battle between the federal government and states for control of elections has intensified. On Friday, August 21, the USPS issued its final rule implementing Section 3 of Trump’s executive order signed in March, restricting the conveyance of mail-in ballots only to states that have handed over their voter data to the federal government.
The next day, plaintiffs in the case League of Women Voters of Massachusetts v. Trump filed a motion to uphold a preliminary injunction issued on August 11 blocking the USPS’ implementation of the rule for the November midterm elections. The rule issued on August 21 contained language allowing the USPS to implement the restrictions immediately, which would affect millions of voters nationwide in the midterm elections.
On Monday, the Supreme Court voted along ideological lines on a separate case filed by Democratic states, Trump v. California, to remove a preliminary injunction and allow Trump’s executive order to be implemented by the USPS. The decision was made on procedural grounds, finding that the Democratic attorneys general that had filed the lawsuit had been premature given that the USPS rule had not been issued at the time they filed their legal challenge. The Court did not consider the content of the order nor the merits of the arguments made in dispute, and thus left room for further challenges once the rule was issued.
On Tuesday, U.S. District Judge Indira Talwani ruled that the Trump Administration, in implementing the rule, violated a preliminary injunction she had issued in June in regards to the League v. Trump case that had barred the government from moving forward with implementing Section 3 of Trump’s order. Although she did not impose a remedy for the violation in the ruling, she noted that the Administration’s documented violation of the injunction now gave standing to plaintiffs who chose to file further legal challenges to the executive order.
On Wednesday, August 26, Talwani was ‘compelled’ to lift her previous injunction in accordance with the Supreme Court’s decision. On the same day, 24 Democratic-led states and the District of Columbia, the original plaintiffs in the Supreme Court case, filed a fresh lawsuit against the Trump Administration in Boston now that they had standing. They alleged that the implementation of the rule unconstitutionally exceeds the power of the federal government over elections, which under Article I, Section 4 of the Constitution explicitly confers authority over election procedures to the states.
Election officials have been warning that the Trump order threatened to throw state election procedures “into chaos” as they would have to scramble to reprint millions of mail-in ballots after changing them to conform to the new federal guidelines. New York Attorney General Letitia James argued that “at the last moment, the federal government is attempting to meddle in those preparations and potentially threaten countless Americans' right to vote," adding that "USPS has no authority to decide who can and cannot vote by mail."
The League of Women Voters, along with other voters’ rights groups, also filed a fresh lawsuit Wednesday, alleging that the new USPS rule gave the agency ‘election regulator’ type powers that it did not have under the Constitution. They also argued that implementing the rule would inflict confusion and chaos among state election officials having to change their procedures so close to election time, which they said “immediately risks disenfranchisement” of legitimate voters.
In California, state legislators are attempting to enforce states’ rights and authority over elections by passing a law directly contradicting the federal executive order. On Monday, State Assemblymember Stephanie Nguyen and thirteen other Democrats introduced the “Right to Vote” Amendment, a proposed change to the state’s Constitution that would codify the right of any eligible voter to participate in public elections regardless of their stated party affiliation. The bill, which would permanently consider state primary elections as open by default, complements two other bills introduced into the state Senate that would enforce further protections for the right to vote in California and take steps toward greater election integrity.
Voting experts have also expressed alarm this week regarding the White House’s release of several “intelligence memos” over the summer containing disputed accounts purporting to ‘document’ noncitizen voting. They fear that this will be used by the Trump Administration as a pretext to declare a national emergency that could potentially lead to the cancellation of the midterm elections. Trump declined to rule out the idea earlier this month in an interview with conservative podcaster Wayne Root.
MOVEMENT TRACKER
Civil rights coalition to lead ‘Defend the Vote’ march on Washington on anniversary of MLK’s ‘I Have a Dream’ speech. On Friday, August 28th, Rev. Al Sharpton’s National Advocacy Network and Martin Luther King III and Arndrea Waters King’s Drum Major Institute will lead a coalition of advocacy groups in the March on Washington: Defend the Vote. The event marks the 63rd anniversary of the historic 1963 March on Washington for Jobs and Freedom, where Dr. Martin Luther King, Jr. delivered his historic “I Have a Dream” speech, and will feature speeches from Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, alongside civil rights leaders from such organizations as the NAACP and the National Urban League, and Virginia Governor Abigail Spanberger. Sharpton and King III have declared the march to be a continuation of Coretta Scott King’s wishes, harkening to a 2000 March on Washington speech where she impelled the two men to carry on her late husband’s legacy of justice, unity, and progress. The website for the event states that the purpose of the mobilization lies in “defending the vote, protecting equal opportunity, [and] demanding dignity.” Participants will be gathering at the Lincoln Memorial at 8am, with speakers beginning at 9am with a march to follow.
Minneapolis “Spiderman” goes viral after confrontation with January 6 rioter and right-wing provocateur. A Minneapolis man went viral this week after a video showed him wearing a Spider-Man costume and leaping down from atop a vehicle to assault Jan. 6 rioter Jake Lang during a protest demonstration. Lang is shown in the video riding in the bed of a truck holding a sign reading “Jake Lang Loves Black People But Hates N*****s,” accompanied by another man holding a giant cross, being escorted through an angry crowd of counter-demonstrators by Minneapolis police. Both Lang and his co-conspirators were arrested, as was the man behind the mask, 33 year old William Nicholas Love. Lang and company face misdemeanor vehicular assault charges after the driver of their truck struck a police officer while fleeing the crowd of counter-demonstrators. Love has been hailed as a “hero” by many, and a Go Fund Me campaign to cover costs of medical care for injuries he sustained in the tussle and his subsequent arrest has raised over $50,000 at time of writing.
Tribal-environmental coalitions rack up wins on land-based struggles. Amidst the Trump administration’s moves dismantling the EPA, this year has seen a few notable environmental wins. A Guardian report from this week in collaboration with the Economic Hardship Project documents a hard-earned victory for Indigenous tribes and advocacy groups in the Black Hills of South Dakota, where a rapidly-mobilized coalition were able to block an already-underway mining project in a sacred and ecologically sensitive prairie known as Pe’ Sla, called by the Great Sioux Nation “the heart of everything that is.”
In Florida, environmental groups are maintaining legal pressure against the now-shuttered “Alligator Alcatraz” internment camp, as Friends of the Everglades and the Center for Biological Diversity filed an amended lawsuit earlier this month alleging that state and federal officials withheld crucial information from a federal appeals court in order to circumvent environmental regulations during the facility’s construction.
And in south Texas, planned construction of a border wall across Big Bend National Park remains on hold, as bipartisan backlash from area residents, lawmakers, and environmental groups has complemented multiple lawsuits seeking to block the project.
Latest Polls.
Approval rating. A new Reuters/Ipsos poll released this week showed Trump’s approval hitting a new record low of 33%, the lowest of his presidency over both terms. A poll conducted by YouGov/The Economist also hit the 33% mark, a record low for Trump’s presidency as well. Across all polls, his approval rating came in at just under 39%, slightly higher than his record low of 38% in May. Polls also showed that an average of 57.5% of the American electorate expressed disapproval of Trump. A poll conducted by Strength In Numbers/Verasight this week found that for the first time, Trump’s approval rating registered deep underwater on all 12 issues the poll tracks, including border security, which had been the one issue on which Trump had retained support. According to the poll, 49% of voters “strongly” disapproved of Trump’s performance. Trump lashed out at the numbers on Monday, calling it “fake news.”
Economy. Among a deeply divided electorate, the one thing voters of both parties can agree on is the dismal state of the economy. According to the Reuters/Ipsos poll, 64 percent of Americans disapproved of Trump’s handling of the economy, with approval hitting just 29 percent. An Economist/YouGov poll earlier this month found that just 27 percent of Americans believed the economy was good, with 71% finding it fair or poor. It also found that 39% of voters thought Democrats would do a “better” job on the economy, compared with 32% of Republicans. The Trump Administration once again tried to blame the poor state of the economy on Biden, but voters aren’t buying it; Reuters/Ipsos polls have consistently shown that the majority of Americans blame Trump for their economic woes. Newsweek showed this week that 37% of Americans, a clear plurality, cited rising prices as the number one issue facing the country today.
