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.
