Don't even think about dollarization! Trump threatens: If BRICS countries dare to launch coins, I will impose 100% tariffs.

The challenge to the US dollar hegemony, Trump imposes economic sanctions

On December 1, the elected US President Trump issued a shocking warning on the social media platform Truth Social, demanding that the BRICS countries promise not to create new currencies or support any currency that may replace the US dollar, otherwise they will face comprehensive 100% tariff sanctions. Trump’s tough remarks directly pointed to the economic ambitions of the BRICS countries. He clearly stated that the idea that the BRICS countries are trying to get rid of the US dollar while the United States is sitting idly by has ended, and emphasized in an almost provocative tone that these countries cannot replace the US dollar in international trade.

Trump’s posts on social media are not only a warning, but also a direct challenge to the existing international financial order. He emphasizes that the United States will require these countries to “commit to not creating new BRICS national currencies or supporting any other currency to replace the powerful U.S. dollar.” This negotiation strategy blatantly demonstrates the United States’ determination to maintain its global financial hegemony. According to the latest data from the International Monetary Fund (IMF), as of the first quarter of 2024, the U.S. dollar still accounts for 59% of global forex reserves, followed by the euro, which accounts for about 20%. Despite the slight weakening of the dollar’s dominant position, the Trump administration is clearly unwilling to compromise and is prepared to take tough measures to maintain the core position of the U.S. dollar in the global financial system.

Image source: Truth Social Trump issues stern warning to BRICS countries

The difficult challenge of de-dollarization for BRICS countries

The BRICS countries currently include 9 countries including Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. The international group of emerging market countries formally discussed de-dollarization at the 2023 summit and actively sought to establish alternative trade mechanisms. Russian President Vladimir Putin has publicly accused Western countries of “weaponizing” the dollar, claiming that U.S. economic sanctions against Russia undermine trust in the dollar and weaken its global influence.

However, experts remain highly skeptical about whether BRICS countries can successfully create their own global trade currency. Michael Pettis, a senior researcher at the Carnegie International Peace Foundation, pointed out that Trump’s warning highlights the limited understanding of the incoming government about global trade and the capital system. Pettis believes that the United States is difficult to achieve two seemingly contradictory goals at the same time: reducing trade deficits and consolidating the dominance of the US dollar. It is worth noting that India and China, as members of the BRICS countries, are also the largest trading partners of the United States. In 2022, the total trade in goods and services with the United States reached $19.18 billion (about 6.1 trillion New Taiwan dollars) and $75.84 billion (about 24.3 trillion New Taiwan dollars) respectively.

International relations under the shadow of trade sanctions

Trump’s economic strategy is not limited to BRICS countries. Recently, he also threatened to impose a 25% tariff on goods imported from Mexico and Canada. This series of tough economic policies has caused high follow and concerns in the international community. Canadian Prime Minister Justin Trudeau met with Trump last Friday in an attempt to ease the bilateral tensions caused by the tariff threat. The two leaders discussed important issues including illegal immigration and the Fentanyl crisis, demonstrating the complex considerations of the Trump administration in trade and international relations.

Despite Trump’s claim that the BRICS countries have ‘zero chance’ of replacing the dollar in international trade, the group is actively seeking ways to reduce reliance on the dollar. Their strategies include developing local coin trade, establishing cross-border payment systems, and exploring alternative financial mechanisms. For example, China and India have begun to try using local currency to purchase Russian oil, which is seen as a significant attempt to bypass the dollar system.

Regardless of the final outcome, Trump’s tough stance has already foreshadowed the drastic changes that may be faced by the future international economic landscape. The game between the BRICS countries and the United States is not only about currency and trade, but also about the reshuffling of the global economic order. In this geopolitically uncertain environment, how countries adjust their own strategies will become the focus of international attention.

‘Don’t even think about de-dollarization! Trump threatens: If BRICS countries dare to launch coins, I will impose a 100% tariff.’ This article was first published in ‘encryption city’.