Trump Threatens BRICS with Tariffs Over Currency Alternatives

Why in the news?

US President-elect Donald Trump warned BRICS countries of 100% tariffs if they replace the US dollar, provoking India’s push for rupee internationalization, amid concerns over US financial dominance and the rise of alternative currencies.

Trump Threatens BRICS with Tariffs Over Currency Alternatives

Trump’s Threat to BRICS Nations:

  • Donald Trump warned BRICS countries (Brazil, Russia, India, China, South Africa) with 100% tariffs if they create a new currency or back an existing one to replace the US dollar as the global reserve currency.
  • The thread follows the US’s use of the dollar as a tool to impose sanctions, leading countries to seek alternatives to reduce reliance on the dollar.
  • Trump’s position has provoked responses from BRICS leaders, with Russian President Putin noting the dollar’s misuse as a “weapon.”

India’s Push for Rupee Internationalization

  • India, along with other BRICS nations, has explored reducing reliance on the US dollar. The Reserve Bank of India allowed trade settlements in rupees, particularly after sanctions were imposed on Russia amid the Ukraine conflict.
  • Prime Minister Modi and Foreign Minister S. Jaishankar have supported initiatives to strengthen local currencies and reduce vulnerabilities in international trade.
  • India aims for balanced trade relationships, including with Russia, where trade settlements are increasingly conducted in national currencies like the ruble.

Implications of Trump’s Tariff Threat

  • Experts argue that a 100% tariff could harm the US, as it would shift imports to third countries and increase costs for American consumers.
  • India’s response should involve diplomatic engagement with the US, highlighting that diversifying trade mechanisms is not anti-American but a move toward financial stability.
  • India is also accelerating efforts to internationalize financial platforms like UPI and promote Central Bank Digital Currencies (CBDC).

BRICS: Key Details

  • About: BRICS represents Brazil, Russia, India, China, and South Africa, with annual Leaders’ Summits. The 16th summit is in Russia (2024).
  • Formation: Informally formed in 2006 during the G8 Outreach Summit. South Africa joined in 2010, expanding BRIC to BRICS.
  • Significance:
  • Represents 45% of the global population (3.5 billion people).
  • Combined economies exceed USD 28.5 trillion, contributing 28% of global GDP.
  • Members, including Iran, Saudi Arabia, UAE, produce 44% of global crude oil.
  • Milestone: Established the New Development Bank (NDB) in 2014.

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times