Donald Trump, the newly elected U.S. president, has once again shaken global markets with a bold declaration: a potential 100% tariff on BRICS nations moving away from the U.S. dollar.
The threat has amplified concerns about a looming multi-front trade war, with analysts scrambling to assess the fallout.
Trump wrote on X: “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.”
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, theyโฆ
โ Donald J. Trump (@realDonaldTrump) November 30, 2024
The BRICS blocโBrazil, Russia, India, China, and South Africaโhas long flirted with the idea of challenging the U.S. dollarโs dominance as the worldโs reserve currency. Some members, particularly China, have made notable progress, with the yuan gaining traction in international markets.
However, the yuanโs rise has mostly come at the expense of other alternative currencies, leaving the dollarโs supremacy largely unscathed.
A Rocky Road for De-Dollarization
Despite the rhetoric, analysts believe the dollar isnโt under immediate threat. โCompeting interests within the BRICS countries and their diminished influence in global banking and debt markets make de-dollarization an uphill battle,โ ING analysts explained. The BRICS blocโs ambitions, while notable, are hindered by internal divisions and limited coordination on economic policies.
China may be the loudest advocate for reducing reliance on the dollar, but its success depends on persuading not just BRICS nations, but also other global players, to adopt the yuan in trade and finance. So far, that shift has been incremental, rather than transformative.
Trumpโs Tariff Gambit: A Double-Edged Sword
Trumpโs threatened tariffs, however, introduce a new level of uncertainty. By targeting countries moving away from the dollar, his administration seems intent on cementing the greenbackโs dominance. Yet, this strategy could undermine one of Trumpโs other key economic promises: reducing the U.S. trade deficit.
Experts warn that actions to bolster the dollar might make American goods more expensive abroad, exacerbating trade imbalances rather than alleviating them. โItโs a high-risk strategy,โ one economist noted, โthat could end up backfiring on the U.S. economy.โ
A Tense Global Outlook
For now, the dollar remains firmly in its position as the backbone of international trade. But Trumpโs rhetoric is adding tension to already strained global relationships. As BRICS nations continue to explore alternatives, the stage is set for escalating economic friction that could ripple across markets.
Whether Trumpโs tough talk translates into action or remains a negotiating tactic, one thing is clear: the dynamics of global trade and currency competition are poised for dramatic shifts.
