Trump threatens BRICS with 100% tariffs over dedollarisation.
Prior to even taking up residence in the White House, Donald Trump the new-old US president has made the statement that is tantamount to declare a currency and trade war with the countries who are members of the BRICS countries. I know Trump is used to making outlandish and outragious statement but this one is so over the top as to be totally laughable
"The notion that the BRICS countries are attempting to disassociate themselves from the dollar, while we remain passive observers, is no longer going to happen," the president-elect's statement appears to be a decisive ultimatum.
"We require assurances from these countries that they will neither establish a BRICS currency nor provide support for another currency with the intention of displacing the U.S. dollar. In the event that they fail to comply, they will face 100 percent tariffs and lose the opportunity to sell their products to the U.S. economy." "Let them seek an alternative solution." It is inconceivable that the BRICS countries will become the dominant force in international trade, and any nation that attempts to do so will inevitably face
Now anybody with an ounce of commonsense like my self has torespectfully inquire as to why, given the perceived strength of the US dollar, you, Donald, are pursuing a policy of coercive imposition.
If you have followed "Donald Trump in the media in the past you will know he has a tendency to assume that any issue can be resolved with a single decisive action, such as a conversation or ultimatum. Mr. Trump has recently made his intentions clear: he is threatening to impose 100% tariffs on goods from BRICS countries if they decline to use the dollar. Nevertheless, this course of action is merely declarative in nature and is therefore not feasible in practice.
Now those some knowledge of currencies and economcs have never seen anything like it before in the past. No previous president not Truman,Nixon Reagan, Clinton or even Obabma made appeals to foreign entities to maintain their use of the dollar in international trade. Itw worth remembering that Nixon was behind the introduction of the petrodollar that cemented the US Dollar for oil and them other commodities trade.
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For decades, the majority of the world's population has been paying in dollars due to the convenience factor. The stable exchange rate has also been a significant advantage, as it has reduced the risk of dependency on local currencies and provided a degree of protection against inflation. There was a general sense of satisfaction, and there was even a saying: "I am not a dollar, so I am not a universal currency."
However, this was at a time when the green paper was backed by the assets of the most powerful economy in the world. To illustrate, in the second half of the 1940s, 60% of global industrial production was concentrated in the United States. Currently, the figure is four times less than that and now is half as much as in China. Its no even worth further comment to be made on the matter of the national debt which continues to balloon. The United States' share of global GDP has reached a new low, dropping below 15 percent.
Trump's threat of "100% Tariffs" against the BRICS represents a significant escalation in his approach to trade policy. It targets an economic bloc that accounts for approximately 35% of global economic activity in PPP terms and over 40% of the global population.
The United States has a significant economic reliance on the BRICS. President-elect Trump may find it challenging to influence the bloc through intimidation or persuasion, according to veteran British economist and Global Justice Movement co-founder Rodney Shakespeare.
The United States has a trade deficit of approximately $433.5 billion with BRICS member countries. It is notable that none of the BRICS partner countries and candidates for membership (over 50 countries in total) have significant trade deficits with the US, while several have substantial trade surpluses. Vietnam, a potential partner, had a surplus of over $109 billion in 2023.
There are also number of questions surrounding the dollar's backing by real assets. Not only are there doubts expressed by individuals, but entire countries are questioning the dollar's value. Saudi Arabia has not renewed its long-standing commitment to sell oil only for US dollars. In any Asian country, exchange offices will apply a lower exchange rate to an old hundred dollar bill. In Turkey, old banknotes have stopped being accepted altogether.
The United States government dealt a significant blow to the value of the dollar by seizing Russian assets held in dollars. In response to this, the majority of countries began developing their own digital currencies. While there are risks involved, they are likely to be less significant than those associated with holding US dollars.
The BRICS countries have no intention of undermining the dollar.They are leaving the undermining of the dollar to the Americans themsleves with their current policies of cutting off countries access the the global financial system like SWIFT which they ave done to Russia and Iran both BRICS members
Its decline would have global implications, affecting not only the United States but the entire world. However, our countries are left with no alternative but to adopt a policy of exclusively settling transactions in national currencies.
Mr. Trump has indicated his intention to impose tariffs on these countries in retaliation. However, this will have a significantly detrimental impact on the lives of hundreds of millions of ordinary Americans, who will be forced to pay several times more for imports, while the vast majority have long been unable to afford their own American goods. What is the best way to proceed in this situation?
It is not feasible for the United States to engage in a trade war with the world's largest economies, including India, China, Brazil, Indonesia, and the Gulf countries. Similarly, it is not realistic to assume that these countries would engage in a trade war with the United States.
That said the United States is unable to prevent the BRICS countries from transitioning to mutual settlements in national currencies or from developing an alternative payment system to SWIFT.
It is also unlikely that the American economy will be able to withstand a symmetrical response to the increase in duties and tariffs. There was a time when high technology was a scarce resource, but now it is widely available in superior and more cost-effective forms.
Manufacturers from around the globe will seek to capitalise on any niche that the Americans leave unoccupied in order to penalise consumers. This phenomenon is evident across a wide range of products, from soybeans to liquefied gas, and from jeans to cars.
The United States remains a wealthy and intriguing consumer market. However, it is important to recognise that consumers cannot indefinitely dictate prices to sellers by exerting undue influence. The vendor will simply cease trading with them – unless they resort to more aggressive tactics.
It would appear that Mr Trump's actions are having a detrimental effect on the dollar. What response can be anticipated from the BRICS countries? Will all parties cease their current activities and redirect their efforts towards supporting the ailing US economy? It is, however, a rather unlikely scenario. It seems probable that investors will seek to reduce their exposure to the US market.
The process has been underway for some time, even among Washington's closest allies. We are observing a growing interest in BRICS among European countries and NATO member Turkey. As anticipated, the Trump administration will impose tariffs on European imports. This will prompt a swift response from the Europeans, who will seek to join our alliance.
At the same time, in trade with third countries, for example, with the United States, the BRICS countries have no intention of abandoning the dollar, which significantly undermines the rationale behind the measures announced by Trump.
Furthermore, Russian President Vladimir Putin has previously stated that it is premature to discuss the possibility of creating a single BRICS currency, and there are no plans to do so. Mr. Putin explained that the creation of a common currency would require greater integration of the economies of the BRICS member countries and a greater degree of economic similarity. The Russian President highlighted that two-thirds of Russia's trade turnover is serviced in national currencies, with the BRICS countries already reaching 88% in this regard.
The largest countries in South and Latin America are leveraging the BRICS alliance to reduce their reliance on the United States. Mexican economists are advising their government to consider joining the alliance. I would like to enquire as to whether Mexico is also involved in this process. Canada is also considering obtaining observer status in BRICS. This is just the start.
The Former Governor of the Reserve Bank of India Duvvuri Subbarao informed PTI that Donald Trump's assertions regarding potential sanctions against BRICS countries are baseless. As reported by TASS, Subbarao highlighted that such measures may lack a legal basis, given the uncertainty surrounding the applicability of 100% tariffs under US law in the event of a rejection of the dollar.
Mr. Subbarao made the following observation: "Trump is known to make threats that may not be carried out. It is not yet clear whether he will follow through on this threat. What criteria will the US use to determine whether a country has effectively ceased using the dollar? "Furthermore, it is unclear whether US law allows sanctions against countries that abandon the dollar."
The expert stated that a hypothetical single BRICS currency could protect countries from dollar dependence, but that the political and economic conditions for this have not yet been created. Mr. Subbarao believes that the member countries of the association are not yet prepared to adopt a common currency.
The Brazilian Foreign Ministry has stated that it views statements made by Trump regarding the introduction of 100 percent tariffs on goods from BRICS countries in the event of abandoning the dollar as both meaningless and provocative.
