In a move that has sent shockwaves through Washington and London, the Trump administration has abruptly scrapped its so-called ‘anti-weaponisation’ fund, a mechanism designed to protect the US dollar from being used as a geopolitical weapon. The decision, confirmed late last night by Treasury insiders, has sparked a furious backlash from Republican lawmakers who accuse the White House of handing a strategic advantage to Beijing and Moscow. Meanwhile, the UK Treasury has issued a carefully worded statement urging “fiscal responsibility” and warning that such erratic policy shifts could undermine confidence in the greenback.
The fund, established in 2020, was a cornerstone of Trump’s economic nationalism. It aimed to deter foreign governments from weaponising the dollar through sanctions or other financial measures by offering incentives to countries that maintained dollar-based reserves. Its abrupt cancellation, justified by the administration as a “cost-cutting exercise,” has left markets scrambling.
Conservative Republicans on the House Financial Services Committee were quick to condemn the move. “This is like removing the fire extinguisher while the house is burning,” said Representative Kevin Brady of Texas. “The Chinese yuan and digital yuan are waiting in the wings. This is sheer lunacy.” The sentiment was echoed by Senator Pat Toomey, who warned that the decision could accelerate de-dollarisation among emerging markets.
Across the Atlantic, the reaction was more measured but no less pointed. A senior UK Treasury official, speaking on condition of anonymity, expressed “deep concern” over the signal the move sends to global investors. “If the world’s reserve currency issuer starts dismantling its own defences, then what message does that send about fiscal discipline? We urge our American partners to think carefully about the long-term implications for market stability.”
For investors, the timing could hardly be worse. The pound has already been under pressure from sticky inflation and a slowing economy, with gilt yields spiking on fears of a fiscal loosening. Now, the uncertainty surrounding the dollar is adding another layer of volatility. “It’s a perfect storm,” noted one City trader. “You’ve got the UK grappling with its own debt issues, and now the anchor of the global financial system is looking shaky. Capital flight is a real risk.”
The abolition of the fund also comes at a time when the Treasury market is already nervous about the government’s borrowing plans. The Office for Budget Responsibility recently warned that UK public debt could reach 100% of GDP within a decade if spending is not brought under control. The scrapping of the US fund, which some analysts view as a form of fiscal stimulus, only reinforces the perception that governments on both sides of the Atlantic are willing to kick the can down the road.
But the real concern is broader. The ‘anti-weaponisation’ fund was not just a fiscal tool; it was a statement of intent. By axing it, the Trump administration appears to be signalling a retreat from the kind of market intervention that has characterised the modern financial order. For a country that has long benefited from the dollar’s reserve status, this is a dangerous gamble.
The Republicans are vowing to fight back, with legislation already being drafted to reinstate the fund. Yet in a deeply divided Washington, the outcome is far from certain. Meanwhile, the UK can only watch and hope that its own fiscal house remains in order. As one Whitehall official put it: “When the dollar sneezes, the rest of the world catches a cold. We need to make sure we have our umbrellas up.”
For now, markets are left to price in the uncertainty. The pound has dipped below $1.25, and gold is once again rallying. It is a reminder that in the game of global finance, confidence is everything. And right now, confidence is in short supply.
