So when economists talk about "devaluation", they include floating currencies. What that means is that the investment demand for the currency declines, causing the currency to decline.
What are the mechanisms that would cause the investment demand to decline? It can be any of
- different tax treatment
- reduction in respect for property rights of foreign investors
- changes in interest rates
- political instability causing fears of the above
Other factors may also come into play. But at some point, some of these factors cause foreign investors to take a second look at whether they should reduce their purchase of dollar assets, and that reduction in investment demand causes a devaluation.
If the demand for foreign investment in the US falls below the demand for US investment abroad, then what happens is that the currency falls so that the trade balance swings away from deficit and into surplus. That is true irrespective of whether we need those foreign imports -- we will need to find domestic substitutes or do without. Therefore this devaluation creates hardships.
But none of the above necessarily means that the dollar stops being a reserve currency. It's enough that the rest of the world pairs back their positions, as the relevant factor is the flow, not the stock.
