Trump threatens 100% tariffs on BRICS

Context

The recently elected President of the U.S., Donald Trump, issued a strong warning against the BRICS alliance (comprising Brazil, Russia, India, China, South Africa, and others) that the country would increase its tariffs to 100% against these nations if they take actions to undermine the dollar’s position.

Relevance:
GS-03 (Economy, International Relations)

Highlights

  • Donald Trump announced a potential 100% tariff on goods from BRICS nations if they proceed to create a new currency or support alternatives to the U.S. dollar.
  • Dollar’s Current Dominance:
    • According to the International Monetary Fund (IMF), the U.S. dollar accounts for 58% of global foreign exchange reserves.
    • Major commodities like oil are predominantly traded in dollars, reinforcing its pivotal role in global markets.
  • BRICS Push for Alternatives:
    • The leaders of BRICS had decided to introduce a shared currency for trade and investment within their nations.
    • This move was to decrease reliance on the US dollar and other prominent currencies.
  • Global Economic Implications
    • If BRICS successfully develops a new currency or trade framework, it could reshape international trade dynamics.
    • However, experts argue that the U.S. dollar’s entrenched position ensures it remains the primary global reserve currency, at least for the foreseeable future.

About BRICS:

  • It is a grouping of the world’s largest emerging economies, consisting of approximately 3.5 billion people, representing 45% of the world’s population.
  • It aims to deepen economic cooperation between its member countries and to contrast with the Western sphere of power.
  • The countries that were a part of the BRICS until 2023 are Brazil, Russia, India, China, and South Africa.
  • South Africa was added in 2010, following the inaugural BRIC summit that took place in Yekaterinburg, Russia.
  • Additionally, Egypt, Iran, the UAE, Saudi Arabia, and Ethiopia were added in 2023, with effect from 1st January 2024.
  • The 15th summit was hosted by South Africa in 2023.
  • The 16th Summit was held in Kazan, Russia, in 2024.
  • It was formed on the sidelines of G8 (now G7) countries with only Brazil, Russia, India, and China (BRIC).

16th Summit: Major outcomes

  • The theme of the event was “Strengthening Multilateralism for Fair Global Development and Security.”
  • Introduction of BRICS Pay: It was designed to facilitate transactions and the interchange of financial information between central banks of partnered nations, serving as an alternative to the Western interbank system SWIFT.
  • BRICS nations endorsed the reform of the UN and Security Council. It also voiced for the full participation of the State of Palestine in the United Nations.
  • Thirteen nations were also added as partner countries of BRICS: Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Uzbekistan, and Vietnam.

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