Trump’s statement was made on his social media platform, Truth Social, on Saturday, targeting the bloc’s ongoing efforts to challenge the dominance of the dollar.
“The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER,” Donald Trump wrote in a social media post early Sunday.
Setting the stage to counter any challenge to the dollar’s domination in global trade, US President-elect Donald Trump has threatened the BRICS grouping, which has India, Russia and China among its key members, with “100 per cent tariffs” if it moved to create a new currency or back any other option as the world’s reserve.
“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 per cent 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 US dollar in international trade, and any country that tries should wave goodbye to America,” Trump posted.
With the USD accounting for over 90 per cent of global transactions, Trump’s latest remarks come amid divergent views on the issue at the BRICS summit in October. At the time, Russian President Vladimir Putin had warned that the “dollar is being used as a weapon”. But Prime Minister Narendra Modi had cautioned that the grouping should not acquire the image of one that is trying to replace global institutions. Trump’s threat also comes at a time when US sanctions on Russia have resulted in Russian oil being redirected from Europe to Asia.
However, international trade experts warn that any such tariff move by the US would “ultimately hurt America the most”. According to them, several countries have been looking at other “mechanisms” after the US “weaponised the global financial infrastructure” by throwing Iran and Russia out of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which is the key to international transactions.
BRICS vision
Any proposed BRICS currency is an extension of existing alternatives to facilitate trade. The yen, euro and pound are also integral to global commerce — and the US has not objected to their use.
“It is the actions of the United States that have pushed many countries to seek alternatives to the US dollar. The US has a history of leveraging its influence over global financial systems, such as the SWIFT network, to impose unilateral sanctions… By blocking countries like Russia and Iran from accessing SWIFT, the US has effectively weaponised the global financial infrastructure, forcing other nations to find alternative payment mechanisms to continue legitimate trade,” former trade officer and head of the think tank, Global Trade Research Initiative, Ajay Srivastava, said.
Srivastava also said that imposing a 100 per cent tariff on BRICS countries could backfire economically. “Imports into the US would simply shift to third countries, potentially increasing costs for American consumers without bringing manufacturing jobs back home. The US has become less competitive in manufacturing labour-intensive goods due to higher production costs, and tariffs are unlikely to reverse this trend,” he said.
BRICS stands for Brazil, Russia, India, China and South Africa, the original five members. This year, the group admitted four new members — Egypt, Ethiopia, Iran and UAE — and now represents almost half the world’s population and almost one quarter of its economy.
Federation of Indian Export Organisations (FIEO) Director General & CEO Ajay Sahai said that India should engage diplomatically with the US to explain its position, emphasising that diversifying trade mechanisms is not anti-American but a move towards multipolarity and financial stability.
“We should accelerate the development and internationalisation of digital currency (CBDC) and financial platforms like UPI to take a leadership role in BRICS currency initiatives. Trump’s threat might amplify geopolitical tensions, but it is unlikely to deter BRICS nations from pursuing alternatives to the US dollar. For India, the best course is a balanced approach: supporting financial reforms within BRICS that align with its interests while maintaining strong ties with the US to safeguard its broader strategic and economic priorities,” Sahai said.
Meanwhile, the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) has pointed to a gradual decline in the dollar’s share of central bank and government foreign reserves. But the reduced role of the US dollar over the past two decades has not been matched by corresponding increases in the shares of the other “big four” currencies, the euro, yen and pound, according to the IMF.
“Rather, this has been accompanied by a rise in the share of what we refer to as non-traditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies,” the IMF said in July.
Significantly, the IMF also said that one non-traditional reserve currency gaining market share is the Chinese renminbi, whose gains match a quarter of the decline in the dollar’s share. “The Chinese government has been advancing policies on multiple fronts to promote renminbi internationalization, including the development of a cross-border payment system, the extension of swap lines, and piloting a central bank digital currency. It is thus interesting to note that renminbi internationalization, at least as measured by the currency’s reserve share, shows signs of stalling out,” IMF said about the key BRICS member.
“China is very keen to assume a dominant role to use the (BRICS) bloc against the US, though India, Brazil and South Africa are more keen to work with the US and settle the differences amicably through negotiations,” FIEO chief Sahai said.
In India, an effort to reduce reliance on the US dollar and internationalise the rupee saw the RBI allowing invoicing and payments for global trade in rupees in 2022 after sanctions were imposed on Russia amid the Ukraine war.
According to the BIS Triennial Central Bank Survey 2022, foreign exchange market turnover — daily averages — shows that the US dollar accounted for 88 per cent of the global forex turnover while the rupee accounted for 1.6 per cent. The survey stated that if rupee turnover rises to equal the share of non-US, non-Euro currencies in global forex turnover of 4 per cent, it will be regarded as an international currency.
But India’s trade with Russia in domestic currency remains low due to Indian banks’ fear of US sanctions and an unbalanced trade relationship between the two countries. While there has been a multifold rise in India-Russia trade after the Ukraine war, it has been firmly in favour of Russia.
According to official data, India’s exports to Russia stood at $4.2 billion in FY24, but increasing oil imports from Moscow have widened the import bill to $61 billion. As a result, Russia has a huge pile of rupee reserves that it has not been able to use to settle bilateral trade using domestic currency and is instead using it to invest in Indian stocks and bonds.
In October, External Affairs Minister S Jaishankar had said that while India is pursuing its trade interests, avoiding the use of the US dollar is not part of economic policy. Jaishankar said US policies often complicate trade with certain countries, and India is seeking “workarounds” without intending to move away from using the dollar, unlike some other nations.
However, the Union Minister did add that a multipolar world will eventually be reflected in “currencies and economic dealings”.
Source: TheIndianExpress
