Until recently, the relative decline of the United States was usually explained by the rise of others, above all China. Increasingly, however, America’s own choices – protectionism, fiscal drift, political dysfunction, and restrictions on talent – are weakening its power from within. The dollar and its military superiority remain formidable assets, making it unlikely that China or any rival will fully replace the United States soon. Yet, unless Washington reverses its internal weaknesses, America’s relative position will continue to erode. Multipolarity is already emerging; the central question is whether major powers can manage it peacefully and productively.

The currency: The dollar remains the United States’ most important economic advantage. It is used in 89 percent of foreign exchange transactions and still accounts for 57 percent of global reserves, even though that share is at its lowest level since 1994. China, Russia, and the other BRICS countries have tried to reduce their exposure to the dollar, and China has built its own cross-border payment system. Yet even major Chinese banks remain tied to the dollar-based financial system, while smaller banks have curtailed sanctioned business with Russia for fear of losing access to dollar markets. As the US economist Barry Eichengreen argues, the dollar’s future will depend less on foreign resentment than on US domestic discipline: whether Washington controls debt, avoids debt-ceiling crises, and restores confidence in its economic management.

That confidence is under pressure. The United States already spends more on debt interest than on either defense or Medicare, and interest payments are projected to rise by 76 percent over the next decade. High debt narrows the government’s room for maneuver in crises and could trigger a fiscal shock if investors demand higher returns on US Treasuries. Ray Dalio and others warn that such a crisis is already becoming plausible unless Congress reins in spending.

That burden and risk will grow heavier still if Washington launches a major military buildup to compete with China. A larger Navy, expanded missile defense, advanced cyber and space capabilities, and a stronger presence in the Indo-Pacific would require sustained spending for years. Financing such commitments on borrowed money would deepen the very fiscal vulnerability that could ultimately constrain America’s strategic reach.

Military superiority: Geography gives the United States unusual security: oceans to the east and west, and friendly neighbors to the north and south. Yet Washington remains committed to defending against almost every conceivable threat. From former President Ronald Reagan’s “Star Wars” initiative to President Donald Trump’s proposed “Golden Dome,” the United States has repeatedly sought an invulnerable shield against missile attacks. Republicans tend to increase defense budgets, while Democrats cut them by less than Republicans raise them. Trump’s proposed $1.5 trillion military budget – more than 50 percent above last year’s level – reflects the view that China is the “pacing” threat. Still, US military dominance has not ensured political success. America deterred major state-on-state wars after 1945, but it failed to translate superiority into victory in Vietnam, Iraq, or Afghanistan, and most likely in Iran.

American anxiety is not limited to China’s rise. Many voters also fear the loss of national identity; a sentiment Trump has mobilized by closing the door to immigrants – the very people who long helped “make America great.” By curbing immigration, especially among younger Latino and other working-age populations, the United States risks weakening one of its demographic advantages.

Waning Strengths

Widening inequality: The United States has become more unequal while pathways to mobility have narrowed. In the 1940s, most middle-class children did better than their parents; today only about half do. Elite universities like Harvard reinforce this divide through admissions preferences that favor children from the top 1 percent, while stagnating student proficiency limits opportunity for those outside affluent families. Wealthy parents can buy better schooling or tutoring; middle-class parents often cannot.

This loss of mobility feeds resentment. Many white working-class voters fear losing status and blame gains by others, especially Black and Hispanic Americans. A University of Chicago study of the insurrectionists who took part in the storming of the Capitol on January 6, 2021, found that belief in Black and Hispanic advancement over whites tripled the odds of joining the movement. Trump’s crusade against diversity, equity, and inclusion programs draws strength from this sense of displacement.

The parallels with the so-called “Gilded Age” (1876–1900) are striking. Then, as now, technological breakthroughs enriched a small elite, immigration was politically explosive, and populist anger against concentrated wealth and outsiders grew. The Progressive Era prevented wider upheaval through reform. Today, with artificial intelligence threatening to deepen inequality, some social scientists warn that America risks renewed civil conflict if reform again fails.

Polarization and political dysfunction: The US political system is deeply polarized, especially among political elites. The parties no longer merely disagree; they increasingly distrust and despise each other. This “affective polarization” is reinforced by distorted perceptions, negative campaigning, and media ecosystems that reward outrage. Ordinary voters are generally less ideologically extreme, but the institutions that represent them have become less capable of compromise.

As a result, structural reforms are delayed, diluted, or reversed by the next administration. The last comprehensive immigration reform is decades old. Bipartisan education reform has stalled despite declining performance. Even infrastructure investment, broadly supported by both parties, took a generation to pass. With major problems left unresolved, public trust has collapsed: Only 17 percent of Americans say they trust the government to do what is right.

This dysfunction also threatens one of America’s greatest assets: technological innovation. By cutting research funding, restricting talent flows, and politicizing universities, Washington risks weakening the ecosystem that has long kept the United States ahead.

Technology: US innovation still benefits from world-class universities, deep venture capital, federal R&D funding, and tech-savvy consumers. But this ecosystem is weakening as competition with China intensifies. The second Trump administration has cut scientific research and restricted visas for Chinese and other students; foreign student numbers have fallen by a fifth. That matters because immigrants and foreign researchers helped build Silicon Valley: Google, Uber, and many other companies were created by immigrants. The United States still leads in frontier AI and early-stage quantum technologies, but China is ahead in robotics, autonomous systems, batteries, and renewable energy deployment. US chip restrictions may slow China’s AI progress, but they have also spurred Chinese entrepreneurs and government funding. With China producing far more engineers than the United States, the technological balance is narrowing.

This next “China Shock” could fuel even more protectionism. While China expands its trade and investment networks abroad, America is increasingly closing itself off – encouraged by a president who proudly calls himself a “tariff man.”

A protected economy: The US retreat from the global economy predates Trump, but he has taken protectionism to new heights. America’s large internal market makes trade politically less central than it is for smaller economies, while voters increasingly demand protection from foreign competition. Yet protectionism raises costs, weakens competitiveness, and hurts low-income households most. Trump first targeted China and later much of the world with tariffs, but the damage extends beyond consumers and firms: It reduces US influence abroad. Around 70 percent of economies now trade more with China than with the United States, strengthening Beijing’s leverage far beyond its neighborhood.

This inward turn also reflects a deeper problem: America no longer has a coherent strategy for shaping the global order it once built.

A lack of strategic focus: After the Second World War, US leaders combined realism and idealism to build a multilateral order in which countries could rise while weaker states were protected. The system helped revive much of the world and, after the Cold War, underpinned globalization, poverty reduction, and the growth of global middle classes. But its gains were uneven. US firms and wealthy individuals benefited enormously, while many working- and middle-class Americans saw jobs disappear. Globalization also strengthened China, turning an economic success story into a strategic concern.

For too long, Washington resisted the idea that the world was becoming multipolar. US leaders continued to speak as if America remained in a category of its own, even as other powers gained economic, technological, and diplomatic weight. The US public may now be ahead of its elites: A Carnegie poll found that most respondents no longer see the United States as uniquely dominant, and nearly two thirds believe China already matches or exceeds US power and influence.

America’s greatest challenge, then, is not simply that others are rising. It is that the United States is making itself smaller – politically divided, fiscally constrained, demographically anxious, and strategically unsure – just as the world it once led is learning to move on without it.

Header image: White House east wing demolition – October 22nd, 2025. By Hassan Albadawi