Trump warns global economies against replacing the US dollar

On Saturday, President-elect Trump warned China, Russia, and other BRICS member nations that he expects each country to agree to not try to replace the US dollar as the leading international currency, or face major retaliatory US tariffs.

Background: BRICS is a 15-year-old group of emerging economies named after its initial members: Brazil, Russia, India, China, and South Africa. Earlier this year, the group officially added Iran, Egypt, Ethiopia, and the UAE – and four other countries are currently in the application process (Saudi Arabia, Turkey, Azerbaijan, and Malaysia).

• The bloc isn’t a formal multilateral organization, like the UN or OPEC. Instead, it was founded as an informal club to provide a platform for its members to challenge the current world order dominated by the US and its Western allies.

BRICS’ focus has turned to “de-dollarization”

The US dollar is by far the most-used currency in global business. It represents ~58% of the world’s foreign exchange reserves, and serves as the currency of choice for transactions involving major commodities like oil and gold.

• However, many BRICS members and other developing nations say they’re fed up with America’s dominance of the global financial system and intend to trade those commodities in non-dollar currencies, a process known as de-dollarizing.
• But despite their growing economic influence, experts say replacing the dollar is an uphill climb. In an analysis by the Atlantic Council, the dollar’s status as the top global reserve currency was found to be “secure in the near and medium term.”

Tariffs aim to keep it that way: In a social media post, the president-elect said his incoming administration will “require a commitment from [BRICS] Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs.”

Zoom out: Trump’s latest tariff threat came several days after he pledged 25% tariffs on all imports from Mexico and Canada, as well as an additional 10% tariff on goods from China, in an effort to force the countries to do more to halt the flow of illegal immigration and drugs into the US.

📊 Flash poll: Which of the following best describes your opinion on Trump’s recent tariff proposals?

• I support both tariff plans
• I support tariffs on BRICS nations, but not Canada/Mexico/China
• I support tariffs on Canada/Mexico/China, but not BRICS nations
• I don’t support either tariff plan
• Other