US president-elect Donald Trump’s latest beef about BRICS countries trying to create their own common currency to curb the dominance of the dollar is a typical Trumpian response to what looks like a non-issue. Trump has threatened the BRICS countries with 100 per cent duties on goods sold to the US by these countries if they go ahead with the idea of a new currency or replace the dollar with an existing alternative. The idea of BRICS currency stems from the need to lower the dependency on the dollar for trade between member countries—nine in all, for now. Except Brazil and Russia, no other BRICS country is sounding too enthusiastic about a separate currency. The focus is more on doing business in local currencies.
Even the idea of limiting the dollar’s dominance looks far-fetched in the near and medium terms. With over 80 percent of global trade and more than 55 percent of the financial reserves of all countries denominated in dollars, any possibility of a new currency posing a challenge to it is a distant dream. The latest threat by Trump could just be aggressive posturing—an opening gambit for an adjustment to follow.
However, it would be naïve to take Trump’s threats lightly. His use of high import duties against large exporters to the US as a weapon to wrest more favourable trade deals is a real possibility. Trump 1.0 had not just threatened, but also acted on levying high import duties on goods exported to the US, including some from India. When India and several European countries had levied a digital services tax on large tech companies—most of them US-based—the previous Trump administration had started investigating their trade practices in order to impose higher import duties on them.
Trump has also sounded out that his government might raise duties by 10 percent on goods imported from all countries and by 60 percent on those from China. He has also identified India as a “tariff king” and vowed retaliatory action. Even if his latest warning against de-dollarisation is just strutting, India needs to be cautious on this front and a few others like regulatory actions against Google, Amazon and Meta.