The hegemony of the US dollar is being challenged, and Trump has imposed economic sanctions.
US President Trump issued a shocking stern warning on December 1 on the social media platform Truth Social, demanding that BRICS countries commit not to create new currencies or support any currencies that might replace the dollar, or they will face comprehensive 100% tariff sanctions. Trump's tough rhetoric directly targets the economic ambitions of BRICS countries, and he clearly states that 'the idea that BRICS countries can get rid of the dollar while the US stands idly by is over,' emphasizing in an almost provocative tone that these countries 'will never replace the dollar in international trade.'
Trump's posts on social media are not just a warning but a direct challenge to the existing international financial order. He emphasizes that the US will demand that these countries 'commit not to create new BRICS currencies and not support any other currencies that could replace the strong dollar.' This negotiating strategy starkly demonstrates the US's 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 dollar still accounts for 59% of global foreign exchange reserves, followed by the euro at about 20%. Although the dollar's dominance has slightly weakened, the Trump administration is clearly unwilling to make concessions and is prepared to take a hardline approach to maintain the dollar's core position in the global financial system.
Source: Truth Social Trump issues a stern warning to BRICS countries.
The difficult challenge of de-dollarization for BRICS countries.
BRICS currently includes nine countries: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates. This international organization of emerging market countries officially discussed the issue of de-dollarization at its summit in 2023 and actively sought to establish alternative trade mechanisms. Russian President Putin has publicly accused Western countries of 'weaponizing' the dollar, claiming that US economic sanctions against Russia have eroded trust in the dollar and weakened 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 Endowment for International Peace, points out that Trump's warning highlights the incoming government's limited understanding of the global trade and capital system. Pettis believes that the US finds it difficult to achieve two seemingly contradictory goals simultaneously: reducing the trade deficit and consolidating the dollar's dominance. Notably, India and China, as members of BRICS, are also the largest trading partners of the US, with a total trade in goods and services with the US amounting to $191.8 billion (approximately NT$6.1 trillion) and $758.4 billion (approximately NT$24.3 trillion) in 2022, respectively.
International relations under the shadow of trade sanctions.
Trump's economic strategy is not limited to BRICS; he has recently threatened to impose a 25% tariff on goods imported from Mexico and Canada. This series of tough economic policies has drawn significant concern and worry from the international community. Canadian Prime Minister Justin Trudeau met with Trump last Friday in an attempt to ease the tensions in bilateral relations caused by tariff threats. The two leaders discussed important issues, including illegal immigration and the fentanyl crisis, highlighting the complex considerations in Trump's trade and international relations.
Despite Trump's claim that the chances of BRICS replacing the dollar in international trade are 'zero,' this group is actively seeking ways to reduce dependence on the dollar. Their strategies include developing local currency trade, establishing cross-border payment systems, and exploring alternative financial mechanisms. For example, China and India have begun to attempt purchasing Russian oil using local currencies, which is seen as a significant effort to bypass the dollar system.
Regardless of the final outcome, Trump's hardline stance has already foreshadowed the drastic changes that the future international economic landscape may face. The game between BRICS and the US is not only about currency and trade but also about the reshuffling of the global economic order. In this uncertain geopolitical environment, how countries adjust their strategies will become the focus of international attention.
'Don't even think about de-dollarization! Trump threatens: If BRICS countries dare to issue their own currency, I will impose a 100% tariff.' This article was first published in 'Crypto City'.