Trump Warns BRICS About Moving Away from US Dollar
Former US President Donald Trump has issued a warning to BRICS countries, saying they could face 100% tariffs if they move away from using the US dollar. However, it is unclear if such a move is legally feasible under US laws, according to former Reserve Bank of India (RBI) Governor Duvvuri Subbarao. He pointed out that the idea of BRICS adopting a common currency is far from reality due to political and economic hurdles within the group.
BRICS, which stands for Brazil, Russia, India, China, and South Africa, is a nine-member bloc that now also includes Iran, Egypt, Ethiopia, and the UAE. Some members, particularly Russia and China, have been exploring ways to reduce their reliance on the US dollar or create a shared BRICS currency. However, India has not actively supported this idea so far. Subbarao noted that internal disagreements make it challenging for the bloc to move forward with such plans.
Trump has specifically criticized BRICS for discussing alternatives to the dollar. “Donald Trump has threatened to slap 100% tariffs on imports from countries that try to move out of the dollar. His ire was particularly directed at the BRICS bloc. Trump is known to bark more than he bites,” Subbarao remarked. He also questioned whether the US could determine if a country has “moved out of the dollar” and if American laws allow sanctions for such actions.
Subbarao added that creating a common currency for BRICS would come with significant risks. For example, countries like India would have to sacrifice their monetary policy independence, which could make them vulnerable to financial instability within the bloc. He argued that this scenario is unlikely, especially for India.
On the matter of economic readiness, Subbarao explained that both India and China would face high costs if they moved away from the dollar. However, China is in a better position due to its larger role in global trade and its Belt and Road Initiative (BRI). Over the years, China has successfully increased the use of its currency, the RMB, in international transactions. Many Chinese trade deals and loans under the BRI are already settled in RMB. In contrast, India’s share in global trade is smaller, and it still relies heavily on investments in US dollars. According to Subbarao, India has “a long way to go” before the Indian Rupee can gain international acceptance.