BRICS vs US: Who Will Reign Supreme in the Global Economy Amid Donald Trump's 100% Tariff Threat

Donald Trump on Brics: The growing influence of the BRICS nations (Brazil, Russia, India, China, and South Africa) has become a point of contention for the United States. With additional members like Egypt, Ethiopia, Indonesia, Iran, and the UAE joining the bloc, BRICS is becoming a formidable alternative to Western-led groups such as the G7. The group has been exploring new ways to trade among themselves, including the idea of using local currencies instead of relying on the US dollar, which has long been the backbone of global finance.

This push for de-dollarisation has caused tensions, especially with US President Donald Trump, who issued a stern warning to BRICS members as soon as he assumed office. Trump cautioned that any move by BRICS to reduce reliance on the US dollar could result in severe consequences, including a 100% tariff on goods traded between BRICS nations and the United States. His rhetoric has sparked discussions about the future of global economic power and the ongoing battle between BRICS and the US.

BRICS Nations' Push for De-dollarisation

The idea of de-dollarisation has been gaining momentum within BRICS. As a group, BRICS represents nearly half of the world's population, making it a powerful collective force. The push for local currencies in trade among member nations is seen as an attempt to break free from the dominance of the US dollar. However, the prospect of de-dollarisation has met resistance from the US, with Donald Trump warning that any such move would not go unpunished.

In his statements, Donald Trump emphasised that the US would impose hefty tariffs, making it economically unfeasible for BRICS nations to carry out such a shift. His aggressive stance highlights the tensions surrounding the role of the US dollar in global trade. 

The US Reaction: 100% Tariffs and Economic Pressure

Donald Trump's threat to impose a 100% tariff on BRICS nations was not an empty one. He has previously voiced his opposition to the idea of the group moving away from the US dollar. In fact, he went so far as to claim that the BRICS nations were attempting to challenge US dominance in global finance. Donald Trump's rhetoric against the group's ambitions reflects a long-standing concern within the US about losing its grip on the global economy. Despite the obstacles, BRICS continues to focus on finding ways to circumvent US-dominated financial systems.

De-dollarisation: A Necessity or a Threat to Global Stability?

Recent global conflicts have caused significant disruptions in supply chains and put pressure on countries like India to comply with US sanctions against nations such as Russia, China, and Iran—each playing crucial roles in India's energy and strategic needs. This has underscored the importance of finding alternative ways to do business without being impacted by US sanctions or actions like Russia's removal from SWIFT (Society for Worldwide Interbank Financial Telecommunication), a system central to international financial transactions.

While Iran was removed from SWIFT in 2012, both Russia and Iran remain vital to India’s economic interests, particularly in oil trade and key strategic projects, such as the development of the Chabahar Port in Iran. This highlights the growing urgency for de-dollarisation as countries seek to protect their national interests and reduce dependence on US-controlled financial systems. However, such moves raise concerns about potential instability in the global economy, as the US dollar’s dominance remains deeply ingrained in international trade and finance.

The Future of BRICS vs US - A Complex Path to De-dollarisation

The US dollar dominates global trade and finance, even in countries where it's not the official currency. It is preferred for its stability and ability to serve all four key roles of money—exchange medium, unit of account, store of value, and deferred payments. As a result, a significant portion of global trade, including exports, imports, and debts, is priced and settled in dollars.

Efforts by BRICS nations to reduce dollar reliance face major challenges due to higher costs, limited liquidity, and the lack of exchange markets for non-dollar currencies. In 2022, the dollar was involved in 90% of global foreign exchange transactions. Donald Trump has previously warned BRICS nations against de-dollarisation, threatening 100% tariffs if they move away from the dollar. This deep-rooted dominance of the US dollar makes shifting away from it a long-term and difficult goal for BRICS.