Foreign countries buy USD through trade. Japan needs dollars for international trade so the US Treasury prints dollars and gives them to Japan and in return Japan gives the US Nintendo Switches or whatever. Those dollars go into the international trade system and some of those dollars will just circulate internationally indefinitely and won't ever make their way back to the US, hence the perpetual trade deficit. This is a great deal for the US because at the national level they effectively got those Nintendo Switches for free.

It’s not for free. It’s in return for being under the US security umbrella, which costs the US about $800 billion a year

Of course that umbrella could soon be gone, so it would be a moot point

The umbrella could already be gone. There are big question marks over how much the in-practice umbrella looks like the Ukraine war where the US State Department provokes something then Japan gets flattened in the crossfire. How much should they be paying for that?

People are coming out of the 90s mindset where the US was substantially more important than its competitors. It was easily worth paying for US protection then because it was obvious the US could back it up with muscle. Now the calculation is a lot less clear.

Of that 800 billion, where is the money spent? If it goes to US military/industrial complex, it is basically a creator of US jobs.

So it doesn't cost the US anything.

This is "broken window fallacy"[1] territory. In economic terms defense spending is mostly waste because a lot of it doesn't get used (hopefully) or gets used to blow other stuff up causing net damage. The fact that it creates jobs is better than nothing, but spending the same money on infrastructure would increase the future productivity of the country.

[1] https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window

The defense budget is a social support program that conservatives will agree to. Rather than just providing people a basic income and healthcare directly, they add the hoop of holding down a job to access it.

It also is meant to keep American industry active (to some degree) in case it is needed.

No one else can project conventional military force anywhere on the global like the US. China is getting there but not quite yet. India and Russia are still regional.

The Europeans couldn't deal with a few land pirates practically in their backyard.

If the US has convinced itself that able-bodied young men who are good at following orders are the people who need social support then it is quite a bit worse than mere waste. That is $800 billion spent keeping the US's best labour out of the labour force.

The US isn't sending sad cases over to Japan to cash welfare checks.

That’s not how that works. If Japan needs USD it goes to the forex market. That market represents a massive trade flow.

It doesn’t matter which currency you pick in that world apart from capital control. As long as it’s reasonably stable you flow through it with many billions of dollars a day with ease. The conversions are effectively free because the spreads are tiny.

Using the US dollar to trade between two countries that are not to US does nothing to the the currency. It just shifts a deficit.

People trade in USD because the US is the largest of large economies. Everyone trading in USD understands already that the US can manipulate its own currency. But they take a low-risk bet that it probably would have far less incentive or inclination to do so than an authoritarian state like China or a small economy like Argentina. Capital flows to the US because the dollar has been "safe"... it inflates, but predictably slower. The Chinese regime is more than capable of opening the illusion of free markets and making 50-year promises not to interfere with free trade and capital, tempting foreign investment, only to break those promises with an iron fist.

Regardless of the response from China, America is showing that it is irrationally willing to cede its incredible advantage for no decipherable reason beyond that some logarithmic curve of population idiocy has crossed the already absurd hockey stick of its own national wealth. It's a realtime lesson in the ancient rule dating back to the fertile crescent, that civilizations destroy themselves from within before they're conquered from without.

That doesn’t matter. In modern forex markets you can convert 50 million yen to USD. Do a trade with another country for EUR or whatever. Then convert it back to USD the same day.

These markets are extremely liquid and the longer term trends of the USD value are irrelevant because players can move in and out so quickly. They can even preemptively take short positions or buy options on futures markets to completely derisk an event while holding USD.

This is why “petrodollar is good” analysis in modern forex is completely off-base. At this point it’s become a great flag to indicate someone who doesn’t understand forex and trade at all.

Of all of the things valuable to the US, the petrodollar is about as far down as renaming the Gulf of Mexico the gulf of America.

Should be understood as buying dollars for goods.

Also us trade is not bilateral.

The usd that are exported from the US, is not used to buy gods from the US. They are used to buy gods from other countries.

I think you’re somewhat missing the point, which is that the collapse of the dollar as the reserve currency around the world will eventually lead to default of US debt, which has cascading consequences domestically and internationally. This is the direction the US is heading if it really continues to alienate its allies and try to “fix” its trade deficit.

However, the OP was wrong about the fact that China will become a hegemony, for reasons like you mention, and so what’s likely happening isn’t the change of hegemony, it’s the beginning of the end of the era of the American Empire and to a likely a multi polar world. It’s going to take another world war, in some form, to create enough of a vacuum to give us another superpower/hegemony like we have with the US currently.