Trump warns BRICS nations against replacing US dollar

ISLAMABAD: Instead of threatening to impose 100 percent tariffs on member countries of BRICS backed by China and Russia for their bids to scale down reliance on the US dollar for international trade, President-elect of the USA Donald Trump needs to find out why countries are moving away from using the US dollar for trade.

The blatant use of economic sanctions in US dollars and increasing tariffs to punish the countries are the main reasons forcing the vital economies to assemble under the platform of BRICS and initiate trade in their own currencies keeping US dollars aside, Pakistan’s eminent economist Dr Ashfaque H Khan responds to the statement of Donald Trump on BRICS.

“Imposing 100 percent tariff is not a child’s play as such measures will further accelerate de-dollarization,” Dr Khan said.

Sakib Sherani, a seasoned economist of the country, says: “Since the Bretton Woods system was put in place after the Second World War, the US has sought to insert the dollar as the go-to currency for global trade. After the move away from the gold standard, the US has actively sought to protect the reserve currency status of the greenback and the exorbitant privilege that comes with it.”

Many commentators believe that some of the US conflicts in recent history, such as the military campaign to remove Col Muammar Gaddhafi in Libya, were the result of moves by countries involved to shift away from selling oil in US dollar, for example, or becoming part of an alternate global payment system.

The latest salvo fired against the BRICS nations is a continuation of the same. It is unlikely to stop the BRICS countries from exploring an alternate to the US dollar because the USA has weaponized its currency as well as the dollar-based global payments system. Threats by the US, combined with tariff measures and protectionism, will only encourage more countries towards finding an alternate system. This will accelerate the global geo-economic fragmentation already taking place.

“Countries like Pakistan stand to lose from such developments because any move to reverse globalization will hurt developing countries the most,” Sherani opined.

“The US has used its control over the dollar-based financial system to sanction countries like Russia (for its actions in Ukraine), Iran (over nuclear proliferation concerns) and North Korea (for its missile programs). As the US dollar is the dominant global currency for trade and finance, countries that rely on it can find their economies severely impacted by sanctions.”

Dr Abid Qaiyum Sulehri, head of SDPI (Sustainable Development Policy Institute), said that 100 percent hike in tariff on imports from BRICS countries will also cause an increase in sufferings of American consumers. He said that to stabilize a multipolar world and to avoid consequences of unipolar economic system, the world needs alternatives of the US dollar for trade.

Dr Sulehri argued that there are already more than one currencies in the IMF basket, so Trump’s attempt to discourage BRICS currency would be an absurd initiative.

The statement by Donald Trump says: “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 US dollar or, they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US Economy.”

BRICS (Brazil, Russia, India, China, and South Africa) was established to promote economic cooperation and development among emerging economies. The group aims to provide an alternative to Western-dominated financial systems, including institutions like the International Monetary Fund (IMF) and the World Bank, which have historically been seen as serving the interests of developed nations, particularly the United States and Europe.

BRICS countries formed the group in 2006 (with South Africa joining in 2010), recognizing the growing influence and potential of emerging economies in the global economic landscape. The primary motivations behind its creation include: BRICS countries sought to create a platform for their economic growth and development by focusing on cooperation in trade, investment, and infrastructure development; the group aimed to challenge the dominance of the West in global institutions and advocate for reforms in global governance systems, particularly those centered around the United Nations, World Trade Organization (WTO), and international financial institutions; and BRICS also aimed to increase the political clout of its member nations in global decision-making processes, positioning themselves as a counterbalance to Western influence.

China’s move to internationalize the yuan is partly a strategic response to US economic sanctions and the dominance of Western financial systems. The US has used its control over the global financial system, including the dollar-based SWIFT network, to impose sanctions on countries like Russia, Iran, and North Korea. By promoting the yuan, China seeks to protect itself and its trading partners from potential US sanctions, ensuring that it can continue to engage in global trade without interference.

China has already taken significant steps to internationalize the yuan. In 2016, the International Monetary Fund (IMF) included the yuan in its Special Drawing Rights (SDR) basket, which consists of a basket of reserve currencies. This was a milestone in recognizing the yuan as an international reserve currency. To solidify its role in global finance, China is working to increase the yuan’s usage in trade, investment, and central bank reserves around the world.

Trump’s threats against BRICS countries on the use of US dollar were likely a reaction to the perceived threat to US economic dominance, especially in global trade, finance and geopolitics. The US dollar plays a critical role in maintaining the US’s global influence — in terms of economic leverage, sanctions power and financial stability. Therefore, any efforts by countries like China, Russia, and India to move away from the dollar would have undermined US interests, prompting Trump’s response to prevent such shifts and preserve US economic power on the world stage. “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 US dollar or, they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy,” Trump wrote on his social media platform, Truth Social.

“They can go find another ‘sucker’. There is no chance that the BRICS will replace the US dollar in International Trade, and any country that tries should wave goodbye to America.”