President-elect Donald Trump has issued a stark warning to the BRICS nations—Brazil, Russia, India, China, and South Africa—demanding a commitment to maintaining the US dollar as the primary currency for international trade. Trump threatened to impose 100% tariffs on nations moving to create an alternative BRICS currency or backing any other currency in place of the dollar.
A Campaign Pledge Turned Policy
“The idea that the BRICS Countries are trying to move away from the dollar while we stand by and watch is OVER,” Trump declared in a post on his Truth Social platform. He vowed to make it costly for countries to abandon the dollar and suggested tariffs as a tool to ensure compliance.
The warning reflects Trump’s longstanding commitment to defending the dollar’s dominance in global markets. During his campaign, he emphasized the importance of the dollar as the world’s reserve currency, arguing that any deviation would harm the US economy.
Economic Consequences and Strategy
Trump and his economic advisers have been exploring punitive measures for nations engaging in bilateral trade outside the dollar. These measures reportedly include export controls, accusations of currency manipulation, and increased trade levies.
While Trump insists on protecting the dollar’s supremacy, critics argue that his policies may have unintended consequences. Michael Pettis, a senior fellow at the Carnegie Endowment for International Peace, remarked that the US cannot simultaneously reduce its trade deficit and maintain the dollar’s dominance, as the two goals are inherently contradictory.
BRICS Push for De-Dollarization
The BRICS nations have previously discussed de-dollarization as a strategy to reduce reliance on the US-dominated global financial system. These discussions gained momentum following US-led economic sanctions on Russia in 2022, which highlighted vulnerabilities tied to the dollar’s dominance.
However, the practicality of replacing the dollar remains in question. The infrastructure supporting the dollar, including cross-border payment systems, gives it a decisive edge over emerging alternatives like the Chinese yuan. Evidence of this reliance surfaced during a 2023 BRICS summit in Russia, where attendees were advised to carry US dollars or euros due to limitations in local payment systems.
Global Markets on Edge
Trump’s renewed threats have already rattled global markets. The president-elect has proposed additional tariffs on China (10%) and Mexico and Canada (25%) to address issues ranging from illegal drugs to undocumented migration.
Countries are bracing for potential economic fallout. China, for example, might counter Trump’s tariffs by allowing its yuan to depreciate by 10-15%, according to analysts at JPMorgan Chase & Co. Emerging-market currencies could also see a 5% average depreciation in early 2025.
Diplomatic Tensions Rise
The tariff threats have sparked diplomatic efforts to ease tensions. Canadian Prime Minister Justin Trudeau met with Trump last week to address trade and border concerns, highlighting the complexities of navigating Trump’s aggressive economic policies.
What’s Next for Global Trade?
As Trump prepares to retake office in January, his approach to international trade and the dollar’s dominance is poised to reshape global economic dynamics. While his administration’s hardline stance aims to safeguard US interests, it risks alienating allies and intensifying geopolitical competition.
Trump’s demand for a commitment from BRICS nations underscores his determination to maintain the dollar’s supremacy. Whether this approach fosters cooperation or escalates economic confrontation remains to be seen.
