MAR-A-LAGO (The Thursday Times) — President-elect Donald Trump has issued a stark warning to the BRICS nations, threatening severe economic penalties if they proceed with creating a new currency to rival the US dollar. The incoming administration is preparing to adopt aggressive trade policies, including 100% tariffs on non-compliant nations, as part of Trump’s pledge to preserve the dollar’s dominance.
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…
— Donald J. Trump (@realDonaldTrump) November 30, 2024
A fight for the dollar’s dominance
Trump’s rhetoric underscores his intent to protect the US dollar as the global reserve currency, a cornerstone of America’s economic strength. In recent years, the BRICS bloc—comprising Brazil, Russia, India, China, and South Africa—has explored de-dollarisation, citing the dollar’s weaponisation in global sanctions.
While the BRICS nations argue that a new currency could reduce reliance on the dollar, Trump’s administration views such moves as an existential threat to American economic power. Measures under discussion include steep tariffs, export controls, and penalties targeting nations engaging in non-dollar trade.
Trump’s trade tactics
Tariffs remain Trump’s weapon of choice to deter de-dollarisation. The president-elect has repeatedly pledged to impose a 100% tariff on nations that back alternative currencies. This hardline approach builds on his campaign promise to make such efforts “costly” for those involved.
These threats echo Trump’s broader trade agenda, which includes higher tariffs on Chinese goods and new levies on Canada and Mexico. Economists warn that such policies risk destabilising global markets, as countries like China explore countermeasures, including currency depreciation, to mitigate the impact.
BRICS and de-dollarisation
The BRICS bloc has long championed reducing dependence on the dollar. At a 2023 summit, the group discussed plans for a new currency aimed at insulating members from US-led economic sanctions. Russia, in particular, has intensified calls for alternatives following sanctions imposed during the Ukraine conflict.
However, analysts note that de-dollarisation faces significant hurdles. The dollar’s entrenched role in global finance, supported by institutions like the SWIFT payment system, remains a formidable barrier. Even within BRICS, inconsistencies persist, with organisers of recent summits advising attendees to bring dollars due to the unreliability of alternative currencies.
Economic implications of Trump’s policies
Trump’s warnings against the BRICS nations highlight potential rifts in the global trade system. Critics argue that aggressive measures to enforce dollar dominance could backfire, isolating the US and accelerating efforts by other nations to establish financial alternatives.
Economists also note the contradiction in Trump’s policies. Preserving the dollar’s dominance often requires running trade deficits to ensure ample liquidity in global markets, a stance at odds with Trump’s push to reduce America’s trade imbalance.
Global responses to Trump’s tariffs may vary, with emerging economies expected to bear the brunt of his hardline approach. Experts suggest that countries targeted by these measures could diversify trade partnerships or adopt retaliatory policies, creating a ripple effect in global trade dynamics.