Trump Threatens Tariffs Over BRICS Currency

Trump’s “America First” slogan has been taken to the extreme under the guise of protecting the U.S. dollar and American hegemony. Now, Trump, known for its protectionist policies, claims he wants to impose a 100% tariff on all BRICS nations. 

The reason? Because they’re discussing building an alternative currency to reduce dependence on the U.S. dollar. Countries like China and Russia have long faced sanctions and tariffs, so they’ve been forced to find ways to remain competitive and relevant in world trade. Instead of using the U.S. dollar, BRICS nations would trade with each other in a newly issued BRICS currency or basket of currencies.

The geopolitical landscape is plagued by tensions between the U.S. and BRICS, and the financial system as we know it might never be the same. In this article, we’ll briefly discuss Trump’s recent threat and why the BRICS currency could dethrone the U.S. dollar as the world’s reserve currency. 

THE END OF DOLLAR DOMINANCE?

Even though the U.S. dollar was used in roughly half of the world’s trade in 2022, a new BRICS currency could bypass it. The BRICS nations are home to around 45% of the world’s population and 35% of global GDP, and they are rich in natural resources like oil, gas, minerals and forestry. 

Why is this data important? Because the BRICS currency would be used to trade all these commodities, potentially undermining the U.S. economy. Even Saudi Arabia and China have been increasingly trading oil using the Yuan (RMB). BRICS nations want to minimize reliance on the U.S. dollar to protect their interests and circumvent U.S. tariffs and sanctions. 

Putin himself said, “It is the weaponization of the dollar by the U.S. that has driven countries to seek alternatives in the first place.” In the meantime, factors like the astronomical public debt, skyrocketing inflation, and loss of confidence put the U.S. dollar in a tough spot.

TRUMP’S RESPONSE

To protect the U.S. dollar's dominance and counter the new BRICS currency, Trump is proposing 100% tariffs on these nations. This policy is meant to force these countries to “wave goodbye to America” and make them stop selling into the U.S. economy. 

It’s not surprising that Trump wants to protect the U.S. dollar’s reserve status vis a vis his “American First” mentality, but the stupidity of a statement like this is, quite frankly, wild. Trump has long been big on tariffs with the intent of moving manufacturing and industrial jobs back to the U.S. and pressuring countries into cooperating on other matters, but the downside is that U.S.-based businesses that depend on imports from BRICS nations would have to face higher costs and lower profit margins. In some cases, they may even be forced to shut down. 

ECONOMIC BLOWBACK

Think of any Asian restaurant in the U.S. that imports rice from China or India. They will have to raise prices because otherwise, they can’t remain profitable. Also, dropshipping and Amazon FBA businesses may face higher costs, as merchandise is often manufactured in China. These are just a few examples.

The 100% tariff policy will harm many companies that rely on imports from BRICS countries. These tariffs would also cause consumer price hikes in the U.S. for everyday goods, especially since China is a major exporter. If BRICS countries decide not to trade with the U.S., they might redirect their trade to markets like the EU and ASEAN (Association of Southeast Asian Nations), where tariffs could be much lower. 

GLOBAL TRADE LESSONS FROM SINGAPORE 

The economist Otto T. Mallery is credited with the quote, "When goods don’t cross borders, soldiers will," from his book Economic Union and Durable Peace (Harper and Brothers, 1943). This simple yet telling lesson made nations like Singapore go from poverty to prosperity. 

It went from being a British colonial trading port to becoming a reputed financial hub and one of the wealthiest countries in the world per capita. How was this possible? Singapore implemented policies of low taxes, free trade, and minimal tariffs, which helped individuals and companies do business with other countries and prosper. Trump, though, is betting on a protectionist approach, so much so that he wants to wage economic wars through tariffs. 

BROADER IMPLICATIONS

The creation of a BRICS currency could be a shift in global power dynamics. Once implemented, it could incentivize other countries to stay away from the U.S. dollar and reduce its relevance as a global reserve currency. The U.S. influence would be much less prominent, regardless of sanctions.

Countries outside the BRICS bloc might see this development as a precedent for finding stability and prosperity without U.S. systems. Emerging economies in Africa, Latin America, and Southeast Asia could partner with BRICS, while trade routes avoid the U.S. due to hefty tariffs. Trump intends to protect the U.S. dominance, but tariffs are more like the U.S. setting itself up for failure. 

While governments around the world fight over the dominance of a currency, you must prepare your Plan-B so as not to become hostage to a war that is not yours

CONCLUSION: TARIFFS COULD BACKFIRE

Once again, the proposed 100% tariffs prove that Trump is a protectionist. While standing up for his country is a legitimate goal, the implications of these tariffs would be disastrous, from inflating costs for American businesses and consumers to incentivizing countries to trade with BRICS. The dollar’s dominance has long given power to the U.S., but these tariffs could be a wake-up call for entire countries to find alternatives. While the “100% tariff” threat is likely a Trump negotiating tactic to get the BRICS countries to back off their de-dollarization trend, time will tell if he actually tries to bring such a disastrous policy forward. 

Rather than resorting to economic warfare, the U.S. could benefit from strategic partnerships and free trade. The BRICS bloc, tired of never-ending sanctions, has been forced to find ways around the U.S. financial systems. All of the BRICS countries have a say in the world economy, as they’re some of the most populous countries and have extensive natural resources. 

If you want to adapt to this shift in global finance, you must be prepared. Diversification across tangible assets and jurisdictions is one of the simplest yet most effective ways to protect yourself from what’s coming. By subscribing to our newsletter, you’ll get our free report, “19 Strategies to Protect and Grow Your Wealth Abroad,” with all the information you need to get started.