Trump’s Threat of 100% Tariff on BRICS : Is it good or bad for India?

Markets Discussions
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U.S. President Donald Trump’s warning to BRICS countries (Brazil, Russia, India, China, South Africa, and others) about a potential 100% tariff if they consider replacing the U.S. dollar in global trade and finance. This warning reflects the broader issue of the U.S. dollar’s dominance in global financial systems and the growing efforts by other nations to “de-dollarize.”

Key Points:

The Role of the Dollar:
• The U.S. dollar has been the world’s dominant reserve and trade currency since World War II.
• Countries hold dollars as foreign exchange reserves and use them for global trade, particularly for commodities like oil.
• High demand for the dollar benefits the U.S. by lowering borrowing costs and strengthening its financial power.

Declining Dominance:
• Over the years, the dollar’s share in global reserves has declined, though it remains dominant.
• Other currencies, such as the euro, yen, and Chinese renminbi, are slowly gaining ground.

U.S. Sanctions and Weaponization of the Dollar:
• The dollar’s centrality has allowed the U.S. to impose powerful financial sanctions, as seen in cases like Russia and Iran.
• Blocking countries from dollar-based systems (e.g., SWIFT) forces them to find alternative ways to trade and settle payments.

Efforts to De-Dollarize:
• BRICS countries have explored using their own currencies for trade to reduce dependence on the dollar.
• Structural challenges, like underdeveloped central banks and policies, have limited the success of such efforts.
• China’s renminbi has seen some growth in global reserves but remains far behind the dollar.

Economic Costs of a Strong Dollar:
• A strong dollar makes U.S. imports cheaper but harms exports, potentially leading to job losses in manufacturing.
• Countries like China often accumulate reserves in dollars to keep their exports competitive.

Trump’s Threat:
• Trump’s aggressive stance on tariffs signals concern over losing the dollar’s global dominance.
• It highlights the U.S.'s economic and geopolitical challenges in maintaining its financial influence.

If more countries move away from the dollar, the U.S.’s ability to control global financial systems and impose sanctions would weaken. However, replacing the dollar with another or new BRICS currency would require significant economic and structural adjustments in these nations.

How feasible do you think the de-dollarization efforts of BRICS are soon?

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De-dollarization is something that can’t happen in the next 100 years also. That is because the might of US military and the overall system is simply uncontested.

US owns the major chunk of IPs on the globe. They outsource these IPs as licenses to produce goods in other countries, so that it can be sold cheap in the US and also it helps build a rapport with the outsourcing countries.

As long as US leads in terms of innovation and owns all the IPs, plus they attract the best minds and wealthy, from all over the globe, USD is here to stay.

On the contrary of what people think, my analysis says that the only way from USD from here is up and it will strength its position further.

Growth of India and China, doesn’t have to necessarily do away with US. In fact, I think the world will become more interesting in the coming decades with powerful countries banding together as allies.

What BRICS and other countries are trying to do is Diversification but not entirely replacing USD because that can’t happen.

US also holds the world’s largest debt from each and every country. They have strategically intertwined all the countries with themselves. If they go down, everybody and everything goes down.

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