In recent years, there has been growing tension in the global economy between the United States of America (USA) and emerging economies. One of the focal points of this tension is the BRICS bloc (Brazil, Russia, India, China and the Republic of South Africa), which is seeking ways to reduce its dependence on the US dollar. The push for a new BRICS currency, which aims to challenge the dollar’s dominance, has sparked considerable controversy. In response, US President Donald Trump issued a severe warning to the BRICS countries, warning them of 100% tariffs if they continue with their plans to create a rival currency.[1]
Trump’s warning to the BRICS countries about their currency is part of a broader strategy to preserve the US dollar’s hegemony in global markets. The dollar has long been the world’s primary reserve currency, widely used in international trade and finance. From this position, the US enjoys great privileges, such as cheap borrowing and a strong influence over global financial institutions. However, the BRICS countries have increasingly criticized this dollar-centric system and some have called for a shift to a more diversified global currency.
Trump’s warning to impose 100% tariffs on the BRICS countries if they create a new currency reflects his desire to maintain such an economic leverage. By imposing such high tariffs, Trump hopes to discourage the bloc from plans to challenge the dominance of the dollar. Since tariffs of this magnitude would severely damage the economies of some BRICS countries, it is unlikely that they would pursue such a drastic policy without substantial justification.
While Trump’s tariffs appear to be a warning shot against the de-dollarization efforts of the BRICS bloc, it also highlights the growing friction between the US and countries seeking greater independence in international finance. In essence, Trump’s stance represents an effort to maintain American dominance over global economic systems by blocking alternative initiatives, such as the BRICS currency, that could reduce US power in international trade and finance.
Reactions from BRICS countries to Trump’s tariff warnings have been diverse, with some countries rejecting outright their intention to create a BRICS currency, while others have called for more dialogue on alternatives to the dollar.
South Africa, for example, has firmly rejected plans to create a new BRICS currency. South African officials have emphasized that the country’s focus is on increasing trade in local currencies rather than developing a common currency for the bloc. The idea of creating a BRICS currency has never been a priority for South Africa and the government has made it clear that they are not pursuing de-dollarization through a union-wide currency.[2]
India’s stance has also been cautious. Indian Foreign Minister Subrahmanyam Jaishankar stated that India has no plans to support a BRICS currency or any official proposal to replace the US dollar in global trade. India has repeatedly stressed the importance of maintaining global financial stability and has not taken any steps to abandon the US dollar in favor of a regional currency.[3]
Russia and Brazil, on the other hand, have shown more interest in reducing their dependence on the US dollar. Russia, in particular, has been actively pushing for the use of local currencies in its trade agreements with BRICS partners. Brazil, too, is open to the idea of moving away from the dollar, but is cautious about the feasibility of creating an official currency to replace it.
Despite these different reactions, there is no widespread consensus within the BRICS bloc on the creation of a new currency. Discussions among BRICS countries are still in the exploratory phase and the economic and political complexities of such a move cannot be ignored.
Trump’s warnings have important economic and political implications for both the BRICS countries and the US. Economically, imposing 100% tariffs on the BRICS countries would cause serious disruptions in global trade, particularly in emerging markets. The US is a key trading partner for many BRICS countries, and such tariffs could disrupt not only bilateral trade between the US and these countries, but also trade among BRICS countries themselves. The imposition of tariffs would also increase import and export costs, making goods from BRICS countries more expensive and less competitive in the global market. This would hurt both the US economy, which would face retaliation, and the economies of the BRICS countries, whose access to US markets would be reduced.
Politically, Trump’s stance could backfire by prompting a joint response from the BRICS countries. The economic and geopolitical influence of the US has been challenged in recent years, especially by China and Russia. The tariff warning could be a rallying point for the BRICS countries, encouraging them to step up efforts to reduce their dependence on the dollar and explore alternative trade and currency arrangements. Trump’s rhetoric could unintentionally strengthen the BRICS countries’ commitment to pursue a more multipolar world order and undermine the goal of preserving the dollar’s dominance. It may also encourage other countries, particularly developing countries, to seek alternatives to the US dollar. If the US uses tariffs and other forms of economic coercion to maintain its hegemony, other countries may see this as an opportunity to seek greater autonomy in their financial relations, further eroding the centrality of the dollar in the global system.
At the same time, there is widespread skepticism about the feasibility of a BRICS currency. Many economists and analysts believe that creating a new currency to rival the US dollar would face insurmountable challenges. For example, the BRICS countries are not economically integrated to the degree necessary to support a common currency. The bloc is made up of countries, each with different economic priorities and challenges. A common currency would require extensive coordination and economic harmonization, for which the readiness of the BRICS countries is not yet known.
The ongoing debate within the BRICS on reducing dependence on the dollar through alternative trade mechanisms remains a point of debate in global economic policy. While there are discussions on the use of local currencies in bilateral trade, such efforts are still in their infancy and face significant obstacles, such as the liquidity and stability of these currencies. The US dollar remains the world’s primary reserve currency despite growing calls for de-dollarization.
In conclusion, Trump’s threat to impose 100% tariffs on the BRICS countries has been a flashpoint in the growing tensions between the US and emerging economies. While some BRICS countries have rejected plans to create a new currency, the broader issue of reducing dependence on the dollar continues to gain traction in global economic debates. Trump’s stance may strengthen the resolve of BRICS and other emerging economies to move away from the dollar, but it also risks provoking a backlash that could harm US economic interests. As the future of global trade and monetary systems remains uncertain, the dollar’s dominance is increasingly being questioned by those seeking greater autonomy in international finance.
[1] “Trump’s threats won’t hold back Brics push to de-dollarise”, SCMP, https://www.scmp.com/opinion/world-opinion/article/3292754/trumps-threats-wont-hold-back-brics-push-de-dollarise, (Accessed: 02.01.2025).
[2] “South Africa Says No Plans to Develop a Common BRICS Currency”, Bloomberg, https://www.bloomberg.com/news/articles/2024-12-02/south-africa-rejects-trump-s-claims-over-brics-currency-plans, (Accessed: 02.01.2025).
[3] “No Proposal For BRICS Currency: S Jaishankar After Trump’s Tariff Warning”, NDTV, https://www.ndtv.com/world-news/no-proposal-for-brics-currency-s-jaishankar-after-trumps-tariff-warning-7195662, (Accessed: 02.01.2025).
