Over the past two years, the BRICS economic alliance, comprising Brazil, Russia, India, China, and South Africa, has actively pursued efforts to reduce its reliance on the US dollar in global trade. While the previous Biden administration seemed to allow this movement to grow unchecked, the inauguration of President Donald Trump has brought a dramatic shift. His recent remarks and threats to impose a 100% tariff on BRICS business with the US have raised eyebrows, with some economists warning that this could inadvertently fuel the very de-dollarization efforts Trump seeks to undermine.
Before his recent swearing-in, Trump expressed his readiness to retaliate against countries seeking to diminish the prominence of the US dollar. “If BRICS nations want to do that, that’s okay,” he said. “But we’re going to put at least a 100% tariff on the business they do in the United States.” However, experts argue that these threats may backfire.
Economists believe Trump’s move could unintentionally solidify the very de-dollarization trend he aims to halt. According to Harvard economist Kenneth Rogoff, this type of financial aggression only reinforces the BRICS nations’ resolve to seek alternatives. “If you’re being threatened, I think that only reinforces the incentive to try and diversify,” Rogoff stated during the World Economic Forum in Davos.
Furthermore, Chicago University’s Raghuram Rajan echoed similar concerns, stating that Trump might be reacting prematurely to a shift that could take years to fully materialize. Despite the US dollar’s current dominance as the global reserve currency, Trump’s actions could encourage other nations to accelerate efforts to reduce their dependence on the dollar, potentially creating a self-fulfilling prophecy of de-dollarization.
Also Read: BRICS Common Currency Plan: Is It Over or Just Paused? Latest Developments and Official Statements
In conclusion, while Trump’s tariffs may seem like a strong response, they could paradoxically serve as a catalyst for the very changes he seeks to prevent. As economists continue to analyze these developments, the global shift away from the US dollar may only intensify.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.