Chethana Janith, Jadetimes Staff
C. Janith is a Jadetimes news reporter covering science and geopolitics.
With the US president-elect Donald Trump threatening to impose 100 per cent tariffs on BRICS countries willing to create and join the BRICS currency framework, he is quite likely to end up accelerating the process of de-dollarization, putting an end to American financial hegemony. Only de-weaponizing the USD can halt this process.
The BRICS Currency vs. Trump
The US is very well known for weaponizing its currency to meet foreign policy goals. Now that this ‘weapon’ is threatened by alternative financial systems being led by US rivals, Uncle Sam is threatening retaliation. As American as one can be, Trump is toeing the same line of global US hegemony. “We require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy,” Trump wrote on his social media platform Truth Social.
Trump’s statement relies on a belief system according to which the threat of tariffs will hurt the countries sending their exports to the US. But, as a recent report in Bloomberg, one of the leading newspapers in the US, said, it is not BRICS threatening the US dollar; it is the US itself. Whether Trump realises this or not, however, is a different issue. Surely, there is evidence to show that higher tariffs are ultimately paid by the consumers, which in this case are the American people. Consider this, for example: the United Arab Emirates (UAE) is now a member of BRICS. If BRICS were to develop its currency and were the Trump administration to impose 100 per cent tariffs, this would include, going by the implications of Trump’s own statement, the oil the US imports from the UAE.
Consequently, this will drive up the prices of oil in the US. Similar tariffs imposed on commodities produced by other BRICS members and imported to the US will drive up the prices of those commodities to be ultimately bought and paid for by American consumers. Ultimately, such situations increase inflation and affect the overall economic health.
But Trump’s (mis)calculations will not only hurt the American economy ultimately, there is also every possibility that these steps would accelerate the process of de-dollarization.
Fast De-dollarization
BRICS is a club in the middle of fast expansion. At the heart of this expansion is the willingness of many countries to build a new, alternative world order. Apart from last year’s addition of new members to the BRICS, Indonesia, Turkey, Malaysia and Saudi Arabia are also looking to become members of this network. BRICS’ equation vis-à-vis Washington’s hegemony will continue to grow as more and more members, such as Saudi Arabia, which enjoys crucial leverage on the US, become its members. Their inclusion will not only strengthen the BRICS itself, but it would also weaken Washington’s ability to force its members into submission. Again, higher tariffs imposed on Saudi Arabia will proportionally diminish Washington’s influence that it otherwise may have on Riyadh, insofar as such a step would reinforce Washington’s image as a power increasingly using its currency as a weapon even against friendly countries.
What would this do to the US hegemony? Trump seems to think only in terms of an alternative currency. But there are possibilities too, which at this moment seem more feasible. It includes the use of national currency for settling payments. At the recent SCO conference, the Russian foreign minister confirmed that Moscow was in talks with India to convert the billions of rupees it has accumulated in Indian banks into a different currency - which is not necessarily the USD, so that it can use the money. The bottom line is that despite US sanctions, Russia and India continue to trade using an alternative currency. As long as the USD is no longer involved in such transitions, de-dollarization becomes the de facto outcome.
Even though India has assured the US that no BRICS currency as such is in the process of development, it does not mean New Delhi is going to either step away from BRICS and/or end/limit its trade with Russia. Contrary to Washington’s expectations, it is increasing manifold. In mid-December 2024, India’s private refiner Reliance secured a massive deal with Russia’s state oil firm Rosneft. The 10-year agreement, amounting to a whopping 0.5% of the entire global supply, is worth roughly $13 billion a year. In effect, it adds to the amount of trade being settled worldwide in a currency that is not the USD. (Russia and Iran have already switched their trade transactions almost entirely to national currencies.) This will, in other words, contribute to the gradual decline of the USD as the world’s leading currency.
In many ways, the process is inevitable. For instance, China’s Cross-Border Interbank Payment System (CIPS) added 62 direct participants in the 12 months to May 2024, an increase of 78%, bringing the total to 142 direct participants and 1,394 indirect participants worldwide.
To “Make America Great Again”
One key reason that this trend is accelerating is that having USD in reserves and/or relying on the USD to conduct trade simultaneously exposes the relevant parties to geopolitical arm-twisting by Washington. If the US president-elect’s cardinal aim is to “Make America Great Again” and thinks preserving the US dollar is necessary to do this, he needs to de-weaponize American currency. De-weaponizing the USD could de-accelerate de-dollarization. Weaponization will only accelerate this process, as it has done thus far. The very fact that Trump had to issue a threat to BRICS countries even before formally assuming power indicates the impact of this process. Will he, or any other American leader, do this remains to be seen? But what is clear on the horizon is the cost of not de-weaponizing the USD: the gradual disappearance of the USD with or without a formal BRICS currency.
