12/1/2024–|Last updated: 12/1/202402:13 PM (Mecca time)
US President-elect Donald Trump warned the BRICS countries that he would demand commitments from them not to move to create a new currency as an alternative to the US dollar in intra-trade transactions, repeating his threats to impose 100% tariffs on imports from members of this bloc.
Yesterday, Saturday, Trump said in a post on his social network, Truth Social, “The idea of the BRICS countries trying to move away from the dollar is over while we stand idly by and watch… We demand that these countries commit not to create a new currency for the BRICS, or support any other currency to replace the great American dollar, or else “They will face 100% tariffs and should expect to say goodbye to the wonderful American economy.”
High cost
During his election campaign, Trump pledged that he would make it costly to move away from the US dollar, threatening to use tariffs to ensure these countries’ compliance, and yesterday those threats took on new significance as the president-elect prepared to regain power in January, according to Bloomberg.
The US President and his economic advisors discussed ways to punish allies and adversaries alike who seek to engage in bilateral trade in currencies other than the dollar, and these measures include considering options such as export controls, currency manipulation fees, and fees on trade, according to Bloomberg, citing informed sources.
Trump has long emphasized that he wants the dollar to remain the global reserve currency, and he said – in a March interview with CNBC – that he would not allow countries to abandon the dollar because that would be “a blow to our country.”
Michael Pettis, a fellow at the Carnegie Endowment for International Peace, believes that the president-elect’s warning against BRICS members indicates “how confused the next administration is about global trade and the capital system.”
“The United States cannot reduce its trade deficit and increase the global dominance of the dollar because this imposes diametrically opposed conditions,” Pettis said on his account on the X social media platform.
Trump and his economic advisers have discussed ways to punish allies and adversaries alike who seek to engage in bilateral trade in currencies other than the dollar.
Reducing tensions
A report by the National Interest website said that the BRICS countries are working to reduce bilateral tensions among themselves, at a time when the countries of the Global South are moving away from dependence on Washington’s aid, which puts the latter in front of a major challenge in adapting to these rapid geopolitical transformations.
The report quoted Russian President Vladimir Putin as confirming that the BRICS group represents a refuge for countries affected by the punitive use of the dollar by Washington, but he explained that Russia alone cannot create an alternative financial system, which makes cooperation with countries of the Global South a major focus of its strategy.
According to the report, Putin considers that cross-border payment systems, based on local currencies, represent the ideal solution for the liberation of the BRICS countries from the financial system dominated by the United States, and that they are also a crucial tool for establishing channels that allow member states to carry out their financial transactions away from any American interference. .
The report stressed that the idea of adopting a unified currency for the BRICS countries is still far-fetched, given the large differences in national interests and financial policies of India, Russia, China, Brazil, and South Africa. The recent expansion of the group, which included countries such as Iran, the Emirates, Egypt, and Ethiopia, deepens these challenges. Which confirms that BRICS is not currently launching a unified currency.
He pointed out that, despite this, the pace of ending the dominance of the dollar does not show any signs of slowing down. Rather, the transformations have accelerated remarkably since the Russian-Ukrainian war. Moscow has resorted to adopting payments in rubles and gold as a means of alleviating the impact of Western sanctions and exiting international payment systems such as “SWIFT.” .
For its part, Beijing expanded payment swap lines with countries such as Argentina to enable direct trading in the yuan (the Chinese currency), while the Chinese digital currency “e-CNY” provided additional opportunities to displace the dollar from the global financial scene.
Global alignments
The National Interest website report indicated that the biggest challenge facing Washington is not only in losing the dominance of the dollar, but in reshaping the global alignments that reduce its influence. BRICS has become an international platform for addressing major crises, reshaping global trade, and supporting projects that go beyond American intervention.
Although some BRICS members are not individually hostile to Washington, the group as a whole is seeking to forge a new economic order that is more independent from the United States, the report shows.
The report considers that BRICS is not limited to its diplomatic role, but has become a platform for commercial progress, including the “Grain Stock Exchange” initiative proposed by the Russian Federation to strengthen agricultural supply chains and regulate grain prices away from external speculation.
He noted that BRICS is working to provide alternatives to traditional development financing dominated by the West. Before the 2024 summit, Russian Finance Minister Anton Siluanov criticized the International Monetary Fund and the World Bank, calling for the establishment of new institutions within BRICS. The group established the “New Development Bank” in 2015, which supported emerging markets by financing 96 projects worth $32.8 billion.
The report warned that the success of BRICS in developing cross-border payment systems and its continuation as a platform for dialogue may reduce the influence of the United States globally, and stressed the need for Washington to re-evaluate its policies, strengthen its relations with countries of the Global South, and ensure that the terms of International Monetary Fund loans do not push developing countries towards BRICS.
Dollar dominance
- The US dollar is considered the global reserve currency, as it constitutes about 58% of the International Monetary Fund’s reserves.
- The dollar constitutes the currency of 80% of cross-border trade, and it is also the currency of payments in the majority of countries in the world, in addition to national currencies issued by the central banks of those countries.
- Although the US currency enjoys an exceptional position in international trade and financial markets, its strength (its rise in value against other currencies) can lead to wide-ranging economic consequences, especially in light of the great disparity between global economies.
