BusinessNews

Trump’s Tariff Threats Against Brics Nations Set to Backfire

In a brazen attempt to enforce the dollar’s global dominance, US President-elect Donald Trump has issued a stern warning to the Brics nations – Brazil, Russia, India, China, and South Africa – over their proposed joint currency. “We require a commitment from these countries that they will neither create a new Brics currency nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs,” Trump declared on his Truth Social platform.

The ultimatum comes in response to discussions among Brics leaders in 2023 about collaborating on an alternative to the dollar, which has reigned supreme as the world’s reserve currency for 75 years. Brazilian President Luiz Inácio Lula da Silva has vocally advocated for a dollar alternative, while Russian President Vladimir Putin brandished a symbolic Brics banknote at the bloc’s summit in October. The proposed currency would presumably include the Brics’ newest members as well: Egypt, Ethiopia, Iran, and the United Arab Emirates.

Trump’s Tariff Threats Likely to Backfire

Despite Trump’s bluster, his increasingly extreme tariff threats are unlikely to result in a successful “deal” for the US. In fact, his clumsy efforts to strongarm the Brics and enforce the greenback’s global hegemony may actually accelerate the gradual shift away from the dollar that’s already underway.

The proposed Brics currency faces steep hurdles and is likely to fail regardless of Trump’s actions. For it to truly challenge the dollar, member countries would need to form a full-fledged monetary union, giving up their national currencies and establishing a unified central bank – a tall order given their vast economic differences:

  • Brics economies span four continents and lack the close integration of successful unions
  • Their business cycles show little correlation, with energy prices benefiting some and harming others
  • Historical border conflicts undermine the deep political commitment needed

Punitive Tariffs May Spur Shift From Dollar

While a Brics currency is a long shot, Trump’s 100% tariff threat risks backfiring by spurring central banks to diversify their reserves away from the dollar and toward alternatives like the yuan, smaller currencies, or even gold. His efforts to coerce dollar usage contradict his other aims like devaluing the currency to improve trade balances.

An international reserve currency that is prone to inflation and depreciation is hardly attractive.

– Jeffrey Frankel, Professor at Harvard University

The dollar’s dominant status has enabled the US to pursue “America First” policies and weaponize economic sanctions. But as resentment builds globally, Trump’s hardball tactics to preserve that privilege could prove counterproductive. By exposing the risks of relying on the dollar, he may inadvertently give fresh impetus to long-frustrated efforts by rivals to chip away at its hegemony.

US Needs Finesse, Not Force, to Uphold Dollar

The gradual decline of dollar dominance is already happening, hastened by America’s overuse of financial sanctions and debt monetization. To slow this trend, future US leaders will need a more sophisticated approach focused on restoring trust in the currency and economy. Actively driving trading partners into the arms of rivals through coercive tariffs will only erode the dollar’s standing further.

Trump’s 100% tariff gambit against the Brics is a reckless ploy that risks spectacular backfire. Rather than shoring up the dollar’s primacy, it may only convince the world that diversifying away from it is an economic and strategic imperative. Ironically, Trump’s attack on the proposed Brics currency may lend it more credence as a dollar alternative than it inherently merits.