This week, Trump issued his second tariff threat.
On Saturday, Trump claimed that he hopes the BRICS countries do not create a new currency and continue to use the dollar as a reserve currency, or they will face a 100% tariff.
1. The BRICS countries mainly refer to the five BRICS nations: Brazil, Russia, India, China, and South Africa. The abbreviation BRICS is formed from the initials of these countries' names in English. In recent years, BRICS countries have been discussing the issue of detaching from the dollar.
2. From the timing of the announcement, it was made after the US stock market closed and before the Asian market opened. It is expected that the foreign exchange market will experience severe fluctuations before opening next Monday. The mentioned figure is '100%' - at the beginning of this week, the global market reacted mildly to Trump's threat, which may be the reason for him raising the number. Overall, due to the large figure and lower trading volume on Thursday and Friday, the market is expected to experience severe fluctuations next Monday.
3. Trump's threat this time will not be realized on his first day in office because the 'BRICS currency' he mentioned faces numerous difficulties in coming to fruition.
· Achieving a unified currency requires a high level of economic integration similar to that of the Eurozone, but the economic structures, development levels, and monetary policy goals of the BRICS countries vary significantly, and there is currently a lack of this level of integration. For example, China and India's economic scale and growth models are increasing, while South Africa is relatively smaller and relies on mineral resource exports.
· Furthermore, issuing a common currency requires the BRICS countries to achieve fixed or unified exchange rates, while currently, the currencies of these countries have high volatility and are greatly influenced by the international market. Looking at the history of the euro, it took several years from conception to implementation, requiring a unified financial system, legal framework, and political support.
· A more feasible plan is to promote trade settlements in existing local currencies, gradually reducing dependence on the dollar - this is what Trump is concerned about. In 2022, the US led economic sanctions against Russia, initiating a global 'de-dollarization' movement, which is also the reason for the rise in gold - starting from $1,600 and once reaching $2,800. From this perspective, Trump may also have a demand to suppress gold in the future.
Therefore, Trump's threat does not have a real reason for implementation and is merely considered a 'threat,' which can be significant or minor. If the financial market takes his threat seriously, there will be panic selling on Monday. If ignored, everything will be fine. The key is the market's own mentality.
4. However, this does remind us that Trump has replaced the Federal Reserve as the primary factor influencing the global market. As we noted in the (2025 Global Outlook), Trump's words will impact market fluctuations swiftly, and this change may be faster and more intense than many expect.
It is expected that before the inauguration on January 20, Trump will frequently test the bottom line of the market.
