Since the almighty greenback is the Global Reserve Currency (GRC), it is widely for a variety of purposes, including:
Settlement of Trade
Invoices, bills, etc are settled in dollars
Foreign exchange reserves for central banks
(think BoJ using USTs to prop up the dying Yen)
Lending for International Debt and Loans
IMF, World Bank, and others lend to sovereigns in dollars
Foreign currency exchange (Forex)
Most currency pairs are quoted against the dollar (e.g., EUR/USD, USD/JPY), making it central to global FX markets.
Outright Dollarization
Some countries use the U.S. dollar as their official currency (e.g., Ecuador, El Salvador) or alongside their local currency.
Remittances & Cross-Border Transfers
Dollars are widely used for sending money across borders, particularly in developing countries.
Safe-Haven Asset Feature
During crises, investors buy dollars for safety, causing global capital flows into U.S. assets like Treasuries.
Eurodollar Market (perhaps most important of all!)
U.S. dollars dominate SWIFT transactions, international bank reserves, and offshore banking systems- the offshore system is called the Eurodollar market.
USDs are lent into existence by foreign banks and used to finance global commerce. (Banks in Pakistan lending eurodollars to oil refiners in Iran for trade, for example)
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All of this creates persistent and ubiquitous DEMAND for USDs. It turns out that demand must be met with SUPPLY, or the global monetary system begins grinding to a halt- this is what Belgian economist Robert Triffin warned Congress about 65 years ago. The U.S. has the fateful choice of whether or not to meet demand, and if they do not, global deflation soon follows.
Many attribute the blowout of the trade deficit to currency manipulation by third world countries, unfair trade practices, or exploitative labor practices- all of which are true, and definitely contribute to the deficit, but they don’t explain the whole picture. In fact, as the global monetary system becomes more and more unmoored to the fundamentals of hard money, it increasingly relies on liquidity, which in essence means dollar liquidity because the global economy runs on dollars.
Therefore, the offshoring of the U.S. industrial base (as much manufacturing output loss as a major war!) was not only done to juice US corporate profits, but it was done as a byproduct of the necessity to export dollars to the world. Fat C-suite bonuses are just a cherry on top.
In short, this means if the U.S. wants to keep the global monetary system humming it needs to keep a trade imbalance, and grow that imbalance over time if the world continues to grow faster than we do. Obviously as you can see above, this trend has been accelerating as the third world (especially Asia) joined the eurodollar market in earnest in the 1990s and 2000s.