In October 2025, a piece of news from the South China Morning Post shocked the international financial circle: China, Japan and South Korea were negotiating to establish a trilateral currency swap mechanism. Immediately afterwards, it was confirmed that the 14th China-Japan-South Korea Central Bank Governors Meeting would be held in Washington on October 15.
This seemingly vague "currency exchange", in fact, is the three countries in the shadow of the Trump administration's trade war, jointly built a financial "firewall".
It does not involve smoke, but it may quietly change the financial landscape of East Asia and even the world.
The current "grammar" of global trade is the dollar.
Whether South Korea's Samsung monitors are sold to China, or Japanese auto parts are sent to South Korea, the vast majority of transactions need to go through the dollar "transfer".
The system has been running for decades, but exposes itself to deadly risks in the context of the Trump administration’s outbreak of a trade war – the entire regional trade could become stagnant once dollar liquidity is tightened or used as a tool of sanctions.
Currency exchange agreements are essentially “emergency credit cards” between central banks.
When a country encounters international payments difficulties, and the currency exchange rate fluctuates sharply, it can exchange the other country's central bank for the other country's currency at the agreed exchange rate to stabilize the market, pay for imports, so as to avoid being forced to "sell off" assets or seek assistance from international institutions.
This process completely bypassed the dollar.
Financial cooperation between China, Japan and South Korea did not start from scratch.
China has signed a 200 billion yuan swap agreement with Japan, and a 400 billion yuan agreement with South Korea has been running for many years.
Japan and South Korea will resume exchange of $10 billion in currency by 2023.
However, there are essential differences between bilateral agreements and trilateral mechanisms.
Imagine a bilateral agreement like a direct flight between two cities, while the tripartite mechanisms form a network of air hubs.
When any of the three countries encounters monetary liquidity problems, they can be supported more flexibly and efficiently within this “Iron Triangle” framework.
This network greatly enhances the stability and shock resistance of the system.
It means that even if global dollar liquidity is suddenly tightened due to U.S. policies, China, Japan and South Korea can rely on each other's local currency liquidity to maintain basic stability in regional trade and finance.
The impact of this “iron triangle” on U.S. dollar hegemony was not by a positive declaration of war, but by the creation of a parallel, regional settlement system.
First, it directly reduces the dependence on US dollar settlement in trade.
If a South Korean enterprise exports goods to China, it will not have to bear the risk of fluctuations in the dollar exchange rate or pay for exchange costs if it can settle directly in currencies or yuan.
Secondly, it boosts the RMB, Japanese yen and Korean won to a broader international stage.
As the scale of settlements between the three countries expands, the share of these currencies in international reserves and trade will naturally rise, forming a dilution on the dollar’s position.
In the end, it cultivated an "alternative market" for the dollar.
With mature and reliable local currency financing channels in the Asian region, the single dependence on dollar assets will decrease, meaning that Asian countries will have greater speech and autonomy in the global financial system.
Of course, the road ahead to build the "bloodless revolution" of the "monetary iron triangle" is not smooth.
The biggest test comes from political mutual trust.
As a U.S. ally, South Korea’s domestic political direction may affect the stability of the agreement.
Historical experience has shown that the volatility of diplomatic relations has directly led to the interruption of the exchange of currencies between Japan and Korea.
The coordination of the technical level is equally complex.The three countries have different stages of economic development, and the degree of financial opening is different, and how to determine exchange rates, interest rates and conditions for the use of funds requires fine design and continuous communication.
However, the common external pressure brought by Trump's trade policies has strengthened the three countries 'willingness to cooperate as never before.
Or, the Trump administration’s trade policy is forcing China and Japan to strengthen cooperation.
When faced with common financial security threats, raising economic cooperation relations to a higher strategic level becomes a common tripartite rational choice.
Trump’s policy, in the “North-East Asian Monster Room,” gave birth to a new “monster” sufficient to challenge the roots of U.S. dollar hegemony.
Of course, when the three countries of China and Japan began to jointly dig the foundations of dollar hegemony, the United States, which has the privilege of global reserve currency, could not be indifferent.
The script of history has long been written: when there is a crack in the alliance system, or when challengers begin to form alliances, Washington's typical reaction is nothing more than "divide and rule".
It is foreseeable that the United States will use its huge geopolitical influence to counter it.
The means may be useless: or "archery" on the sensitive issue of the fishing island in China, re-aggravating historical contradictions;
Or through its strong domestic influence in Japan and Korea, to attack public opinion and even secret sanctions on officials and political forces who advocate cooperation, trying to “change horses”;
It is more likely to put pressure directly on Qingdao and the prime minister's residence in Seoul and Tokyo, calling for a backstop in financial cooperation.
However, unlike in the past, times have changed.
Today, pushing South Korea closer to China is not a temporary political preference, but a cold nation’s survival and economic interest calculation. Trump’s tariff bar is an undifferentiated attack, it makes South Korea clearly realize how dangerous it is to put all of its financial security on a repeatedly inconsistent ally.
China's huge market has become an indispensable "capstone" for the Japanese economy.
Any external force trying to break up this cooperation must face up to one reality: forcibly acting against economic laws will only deepen the rift between the United States and its allies and accelerate its centrifugal tendencies.
Therefore, even if the United States repeats its usual means of discord, it will be difficult to stop the general trend of this cooperation.
Because of the construction of the "iron triangle of currencies", the fundamental driving force is not China's unilateral will, but an inevitable choice based on the balance of interests when the three countries face common external risks.