Newly elected U.S. President Donald Trump has issued a strong warning to the BRICS group of nations, threatening to impose 100% tariffs on their exports if they reduce reliance on the U.S. dollar in global trade. This warning has raised concerns about the future of global trade and the role of the U.S. dollar in it.
BRICS is a group of nine countries: Brazil, Russia, India, China, South Africa, Ethiopia, Iran, Egypt, and the UAE. These nations represent a huge share of the world’s population, economy, and trade. Recently, some BRICS members have discussed reducing their dependence on the U.S. dollar by trading in local currencies, such as the Indian rupee or Chinese yuan, a process called “de-dollarization.”
Donald Trump criticized the de-dollarization efforts in a social media post, saying:
“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy. They can go find another ‘sucker!’ There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America.”
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Trump’s concern is that if countries stop using the dollar, it could weaken its value and reduce U.S. economic power.
Trump’s allies argue that his tariff threats are a negotiation tactic. They point to Canada as an example; after Trump threatened 25% tariffs on Canadian goods, Prime Minister Justin Trudeau flew to Florida for talks, a move that was seen as Trump leveraging his position.
But BRICS is not Canada. The coalition represents 40% of the global population, over 37% of global GDP, and 23% of global trade.
India, one of the largest BRICS economies has a different approach. Indian Foreign Minister S. Jaishankar addressed the topic, saying:
“We have never actively targeted the dollar. That’s not part of our economic, political, or strategic policy. Our focus is on globalizing the Indian rupee.”
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Former Reserve Bank of India (RBI) Governor D Subbarao shared his thoughts on Donald Trump’s 100% tariff threat, particularly directed at the BRICS nations over their discussions on de-dollarization. Speaking to PTI, Subbarao said:
“Donald Trump has threatened to slap 100% tariffs on imports from countries that try to move out of the dollar. His ire was particularly directed at the BRICS bloc, which has been actively talking about developing an alternative to the dollar. Trump is known to bark more than he bites… It’s not clear to what extent he will carry out his threat. What yardstick will America use to determine if a country has moved out of the dollar? And does American law permit imposing sanctions on countries merely because they are de-dollarising?”
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One analyst explained that this would depend on a decline in the dominance of the U.S. economy and the dollar, similar to how the British pound lost its global status as the British Empire declined.
For now, India is focused on promoting the rupee without targeting the dollar. However, growing discussions within BRICS about using local currencies for trade reflect a shift in the global economic landscape.
Some BRICS nations, like Russia and China, are pushing hard for de-dollarization but the transition is complicated. The U.S. dollar still dominates global trade with 58% of forex reserves held in dollars. Even if countries trade in local currencies, global commodity prices, such as those for oil or rice, are still mostly set in dollars.
Experts note that reducing the dollar’s dominance would require not just using local currencies but also shifting price-setting mechanisms to those currencies, which is a much bigger challenge.
If Trump follows through on his 100% tariff threat, it could hurt both BRICS nations and the U.S. economy. India is the world’s largest rice exporter, but the global price for rice is set in dollars. A tariff might impact India’s ability to export rice to the U.S. but looking at the rice’s broader global demand, India might redirect exports to other markets.
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