In a bold post-election statement that has sent shockwaves through international markets, President-elect Donald Trump has pledged severe economic retaliation against BRICS nations if they advance plans for a common currency aimed at undermining the dominance of the US dollar. The warning, issued via social media on Monday, escalates long-simmering tensions in global trade talks, raising fears of a renewed trade war that could disrupt supply chains worldwide.
Trump‘s remarks come just weeks after his victory in the 2024 presidential election, where he campaigned heavily on protecting American economic interests. ‘If BRICS countries decide to create their own currency to challenge the dollar, they will face massive tariffs and other measures to safeguard US prosperity,’ Trump wrote on Truth Social. This vow revives memories of his first-term trade battles, particularly with China, and signals a aggressive stance toward emerging economic alliances.
The BRICS bloc—comprising Brazil, Russia, India, China, and South Africa, along with newer members like Egypt, Ethiopia, Iran, and the United Arab Emirates—has been exploring de-dollarization strategies for years. Recent summits have highlighted discussions on a unified payment system and potentially a shared currency to reduce reliance on the US dollar in international trade. Such moves are seen as a direct threat to the dollar’s status as the world’s reserve currency, which underpins US economic power.
Trump’s Tariff Threats Echo First-Term Trade Policies
President-elect Trump’s latest salvo against BRICS draws directly from his playbook during his 2017-2021 presidency, where he imposed tariffs on billions of dollars worth of imports from China and other trading partners. Those actions, aimed at addressing trade imbalances, led to a protracted trade war that affected global growth. According to the Peterson Institute for International Economics, the US-China trade war reduced US GDP by about 0.2% annually and cost American consumers an estimated $51 billion in higher prices by 2020.
Now, with BRICS representing over 40% of the global population and 26% of world GDP, the stakes are even higher. Trump’s warning specifies ‘severe economic retaliation,’ likely including steep tariffs on key exports from BRICS countries. For instance, China, the largest economy in the group, exports over $500 billion in goods to the US annually, including electronics, machinery, and consumer products. Imposing 25% or higher tariffs on these could inflate costs for American businesses and households, much like the washer and dryer price hikes seen in 2018.
Experts note that Trump’s approach is rooted in his ‘America First’ doctrine. ‘This is vintage Trump—using tariffs as a negotiating tool to force concessions,’ said Robert Lighthizer, Trump’s former US Trade Representative, in a recent interview with CNBC. Lighthizer, who architected the Phase One trade deal with China, emphasized that the threat could pressure BRICS to abandon radical currency reforms. However, critics argue it risks alienating allies and accelerating the very de-dollarization Trump seeks to prevent.
The statement has already impacted markets. The US dollar index dipped 0.5% on Tuesday morning, while BRICS-linked currencies like the Brazilian real and Indian rupee showed volatility. Stock futures for US exporters, such as Boeing and Caterpillar, fell amid concerns over retaliatory measures from BRICS nations.
BRICS’ Bold Move Toward a Dollar-Alternative Currency
The catalyst for Trump’s ire is BRICS’ accelerating push for financial independence from Western-dominated systems. Formed in 2009 as an economic counterweight to the G7, BRICS has evolved into a platform for challenging US financial hegemony. At the 2023 Johannesburg summit, leaders agreed to develop a BRICS payment system using local currencies, bypassing the SWIFT network that’s largely US-controlled.
Discussions of a common BRICS currency gained traction in 2024, with Russia and China leading the charge. Russian President Vladimir Putin has repeatedly called for ‘multipolarity’ in global finance, citing Western sanctions as justification. A potential BRICS currency could be backed by a basket of member nations’ reserves, including gold, oil, and other commodities. The New Development Bank, BRICS’ multilateral lender, has already issued loans in local currencies totaling $32 billion since 2015, reducing dollar dependency.
China, holding $3.2 trillion in foreign reserves (mostly US dollars), stands to benefit most. Beijing has been promoting the yuan in trade settlements; by mid-2024, 28% of China’s trade with ASEAN countries was yuan-denominated, up from 13% in 2020. India, meanwhile, has explored rupee-based oil payments with the UAE to sidestep dollar fluctuations. These steps, if unified under a BRICS currency, could erode the dollar’s 58% share of global foreign exchange reserves, per International Monetary Fund data.
Yet, challenges abound. Internal divisions—such as India’s border tensions with China and Brazil’s neutral stance on Russia-Ukraine—could hinder progress. Economists estimate a full BRICS currency launch might take years, requiring harmonized monetary policies across diverse economies. ‘It’s more symbolic than immediate threat, but Trump’s reaction shows how sensitive the dollar’s role is,’ noted Eswar Prasad, a Cornell University trade expert and former IMF official.
Global Trade War Fears Grip Investors and Policymakers
Trump’s vow has ignited widespread concern over a potential trade war that could fragment the global economy. BRICS nations account for 35% of global merchandise trade, making them indispensable to supply chains. A tariff escalation could disrupt everything from semiconductor production in India to agricultural exports from Brazil, with ripple effects on US inflation and growth.
The World Trade Organization warns that renewed protectionism could shave 2-3% off global GDP by 2026. In the US, tariffs on BRICS imports might add $200-300 annually to household expenses, according to a Moody’s Analytics report. For BRICS countries, retaliation could target US exports like soybeans ($14 billion to China pre-trade war) and aircraft, hitting farmers and manufacturers hard.
Historical precedents loom large. The 2018 US-China tariffs led to a 20% drop in bilateral trade volumes and prompted China to diversify suppliers, boosting ties with BRICS partners. Now, with expanded membership, BRICS could form a more resilient bloc. Iran and the UAE bring oil wealth, potentially stabilizing a commodity-backed currency, while Ethiopia adds African market access.
Market reactions underscore the tension. Oil prices surged 3% on speculation of supply disruptions, and the VIX ‘fear index’ climbed to 20, its highest in months. Tech stocks, reliant on Chinese components, dropped 1.5%, reflecting broader trade war anxieties.
International Reactions and Diplomatic Fallout
World leaders and economists have responded swiftly to Trump’s tariff threats. Chinese Foreign Ministry spokesperson Wang Wenbin called the remarks ‘unconstructive,’ urging dialogue over confrontation. ‘The US should respect the multipolar trend of the world economy,’ Wang stated during a Beijing press briefing.
Brazilian President Luiz Inácio Lula da Silva, a BRICS proponent, expressed regret over the escalation but affirmed the group’s commitment to sovereignty. ‘We seek cooperation, not conflict, but we won’t be dictated to,’ Lula said in a televised address. Indian Prime Minister Narendra Modi has remained cautious, balancing US ties with BRICS ambitions; his office issued a statement emphasizing ‘inclusive global growth.’
In Washington, incoming administration officials are divided. Senate Minority Leader Chuck Schumer criticized Trump’s approach as ‘reckless,’ warning it could isolate the US. Conversely, Republican hawks like Senator Lindsey Graham praised the stance, calling it ‘tough love for fair trade.’ Economists, including Nobel laureate Paul Krugman, argue in a New York Times op-ed that tariffs harm US workers more than they help, citing job losses in export-dependent sectors during the last trade war.
European allies, watching from the sidelines, fear collateral damage. The EU, which trades $1.5 trillion annually with BRICS, has called for de-escalation through WTO channels. German Chancellor Olaf Scholz noted, ‘Protectionism benefits no one in our interconnected world.’
As talks intensify ahead of the next BRICS summit in Kazan, Russia, in October 2024, diplomats are scrambling. US Treasury Secretary nominee Scott Bessent has hinted at bilateral negotiations to avert crisis, but Trump’s rhetoric suggests a hardline path.
Implications for Future Global Economic Order
Looking ahead, Trump’s threats could reshape international relations and finance. If BRICS presses forward with currency reforms, it might accelerate alternatives like China’s digital yuan or Russia’s SPFS payment system, further challenging dollar supremacy. The US, in response, could strengthen alliances like the Quad (US, Japan, India, Australia) to counter BRICS influence.
Trade war scenarios project varied outcomes. Optimists see it forcing compromises, perhaps a BRICS-US trade framework. Pessimists warn of stagnation: IMF models suggest a full-blown conflict could trigger a 1.5% global growth slowdown by 2025, exacerbating inflation and debt woes.
For businesses, preparation is key. Multinationals like Apple and Tesla, with heavy BRICS exposure, are diversifying supply chains to Vietnam and Mexico. Consumers may face higher prices on everything from smartphones to coffee, as tariffs cascade through markets.
Ultimately, this standoff tests the post-Cold War economic order. Trump’s BRICS challenge underscores a shift toward blocs, where currency and trade become geopolitical weapons. As inauguration day approaches in January 2025, the world watches whether rhetoric turns to action, potentially defining the next era of global trade.
