U.S. President Donald Trump on Thursday once again threatened countries with steep tariffs if they think about playing “games with the dollar,” the world’s reserve currency.
Responding to a reporter’s question about the prospect that BRICS, a growing counterweight to the West, might establish its own currency, Trump declared that “BRICS is dead” since he first threatened tariffs against the group earlier this year.
“If they want to play games with the dollar, they’re going to be hit with a 100% tariff,” he said, ahead of his meeting with Narendra Modi, prime minister of India, a founding member of BRICS.
Trump has floated steep tariffs on the BRICS group before. Last year, he threatened countries with a 100% tariff if they backed “any other currency to replace the mighty U.S. dollar.” He repeated that threat again in January, soon after taking office.
BRICS nations currently say they have no plans to pursue a common currency. In January, Russia said that talks on a common currency “have not taken place and are not taking place now.” Instead, spokesperson Dmitry Peskov said that BRICS nations were focused on joint investments.
Brazil, currently the BRICS president, won’t push for a common currency, Reuters reported on Thursday, citing unnamed government officials. Rather the group will try to lessen members’ dependence on the U.S. dollar by making international payments in other currencies easier.
What tariffs has Trump imposed?
Since taking office in January, Trump has imposed several new tariffs in a bid to reshape the global trading system.
On Thursday, Trump ordered a study of new tariffs on a country-by-country basis to rebalance U.S. trade. The study could evaluate not just a country’s import duties, but also its other economic policies, like subsidies, weak intellectual property protections, and even value-added taxes. Trump’s pick for U.S. Commerce Secretary, Howard Lutnick, said he plans for all studies to be completed by April 1.
Last week, Trump imposed an additional 10% tariff on goods from China. Then, after the weekend, Trump hiked tariffs on steel and aluminum imports to 25%.
What is BRICS?
Brazil, Russia, India, and China formally launched “BRIC” as an international organization in 2009, becoming “BRICS” a year later with the addition of South Africa.
The group has slowly built up its institutional capacity, including a development bank launched in 2014.
There’s been a marked interest in BRICS in recent years, and 2023 saw the addition of four new member countries: Egypt, Ethiopia, Iran, and the United Arab Emirates. Several more countries, including Southeast Asia’s Malaysia, Thailand, and Vietnam, are “partner countries,” a stepping stone on the way to full membership.
Indonesia, Southeast Asia’s largest economy, joined BRICS as a full member in January.
Analysts suggest that countries are now interested in BRICS as a “counterweight” to the U.S.-led economic system. Membership might also give countries like Malaysia better access to economies like China. (It also helps that BRICS does not place strict requirements on its members, making it a relatively easy geopolitical play.)
Yet the group also contains some stark geopolitical divisions, particularly between China and India. The U.S. is deepening ties with the South Asian country to balance against Beijing. On Thursday, Trump announced during a meeting with India Prime Minister Narendra Modi that India will soon get access to the F-35, currently available only to NATO allies, Israel, and Japan.
Why are countries interested in moving away from the dollar?
Countries have often chafed under the U.S. dollar’s premier status in world economic affairs. Just about every international transaction, even those involving two non-U.S. countries, is denominated in dollars. The European Union, Japan, and China have, at times, pushed for greater international use of their national currencies.
Grumbling intensified after Russia’s invasion of Ukraine in 2022. Washington used access to the dollar-based financial system to ensure global compliance with its sanctions program, even if national governments still wanted to do business with Russia. That led to more transactions being denominated in the Chinese renminbi or Indian rupee to facilitate trade.
Higher U.S. interest rates made matters worse. Traders flocked to the dollar to take advantage of better yields in the U.S., strengthening the dollar and putting pressure on economies that relied on dollar-denominated imports. Yet if central banks increased interest rates to lessen downward pressure on their national currencies, they risked dampening economic growth.
In 2023, Brazil President Luiz Inácio Lula da Silva called for a new common BRICS currency to replace the dollar. “Why can’t we do trade based on our own currencies?” Lula said during a visit to China.
Yet most economists dismiss the idea of any currency, let alone a BRICS currency, replacing the dollar anytime soon. One issue is that most countries will only accept dollars for trade; while the yuan might be useful for trade with China, no other country is interested in it.
A BRICS currency is “just ridiculous,” said economist Jim O’Neill, who coined the term “BRIC” in 2001, soon after Lula’s comments. “They’re going to create a BRICS central bank? How would you do that?”
