Trump’s Tariff Threat and Its Impact on BRICS Pay and the Dollar

Donald Trump’s recent threat to impose heavy tariffs on countries moving away from the U.S. dollar has put a spotlight on a new digital payment initiative from the BRICS coalition. This move could potentially shake up the dollar's dominance in international trade, leading to major economic implications.

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The New Player: BRICS Pay

In a social media post over the weekend, Trump said he would impose 100% tariffs on any nation that decides to move away from using the U.S. dollar. His warning seemed directed at the BRICS group, an economic alliance made up of Brazil, Russia, India, China, and South Africa, which has recently added countries like Iran, Egypt, Ethiopia, and the UAE. Combined, these countries now make up more than a third of the world’s land, nearly a quarter of global exports, and nearly half of the global population.

What’s causing concern is the introduction of BRICS Pay, a new payment system launched in October. BRICS Pay uses blockchain and QR code technology as an alternative to SWIFT, the current leading network for international financial messaging. SWIFT, which is based in Belgium, plays a huge role in global transactions and is largely dollar-based, with the U.S. currency involved in about 88% of all foreign exchange deals. If BRICS Pay takes off, it could diminish the dollar’s dominance.

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Why Trump Is Concerned

Douglas Holtz-Eakin, president of the American Action Forum, has said that Trump’s tariff threat is likely a reaction to BRICS Pay’s potential to challenge the dollar's global stronghold. If more countries start using this system, the influence of the U.S. dollar in trade could be reduced.

In his post, Trump warned that any nation supporting BRICS Pay or any currency aimed at replacing the dollar would face severe tariffs and lose access to the U.S. market. While talk of a new BRICS currency has come up, it’s not something experts expect soon. Analysts from the Atlantic Council have pointed out that while de-dollarization is happening, the U.S. dollar is still expected to lead in global trade for many years.

What This Means for Global Trade

Countries in the BRICS coalition have long been critical of the dollar’s dominance. China has called the dollar’s power a source of global economic instability. But is there any immediate risk to the dollar's position? A spokesperson from Russia, Dmitry Peskov, downplayed Trump’s warning and said that more countries are already trading in their own currencies, suggesting there’s no rush to create a new currency that could rival the dollar.

Trump’s Strategy: Will It Work?

This latest tariff threat is reminiscent of Trump’s past efforts, like the tariffs he imposed on Mexico and Canada, which led to successful negotiations and trade agreements. The real question is whether this strategy will work when it comes to BRICS. Holtz-Eakin pointed out that it’s unclear what Trump would consider an acceptable commitment from these countries and whether he has the legal power to enforce such tariffs.

The bigger question is whether Trump can use this threat to draw these nations into talks, as he did in the past, or if this will only add more tension to global relations. While Trump has shown that hard-nosed tactics can sometimes lead to deals, this situation is more complicated. Will this new tariff threat encourage negotiations, or will it create more friction? Only time will tell.

Also Read: Trump's Tariff Strategy Raises Global Trade and Economic Concerns