The challenge to dollar hegemony, Trump issues economic sanctions
U.S. President Trump issued a shocking and stern warning on December 1 on the social media platform Truth Social, demanding that BRICS countries pledge not to create new currencies or support any currency that might replace the dollar, or else face comprehensive 100% tariff sanctions. Trump's tough rhetoric directly targets the economic ambitions of BRICS countries, as he clearly stated, 'The idea that BRICS countries can shake off the dollar while the U.S. stands by has ended,' and emphasized in an almost provocative tone that these countries 'will never be able to replace the dollar in international trade.'
Trump’s posts on social media are not only a warning but also a direct challenge to the existing international financial order. He emphasized that the U.S. will demand these countries 'commit not to create new BRICS currency and will not support any other currency to replace the strong dollar.' This negotiation strategy starkly demonstrates the U.S. intent 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, which accounts for about 20%. Although the dollar's dominance has slightly weakened, the Trump administration is clearly unwilling to concede and is prepared to take tough measures to uphold the dollar's core position in the global financial system.
Image source: Truth Social Trump issues a stern warning to BRICS countries
The difficult challenge of BRICS countries in de-dollarization
The BRICS countries currently include nine nations: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates. This international organization composed of emerging market countries formally discussed the topic of de-dollarization at its summit in 2023 and actively sought to establish alternative trade mechanisms. Russian President Putin has even publicly accused Western nations of 'weaponizing' the dollar, claiming that U.S. economic sanctions against Russia have undermined 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 fellow at the Carnegie Endowment for International Peace, pointed out that Trump's warning highlights the incoming government's limited understanding of the global trade and capital system. Pettis believes that the U.S. finds it difficult to achieve two seemingly contradictory goals: reducing the trade deficit while consolidating the dollar's dominance. Notably, India and China, as members of BRICS, are also the largest trading partners of the U.S., with total trade in goods and services reaching $191.8 billion (approximately 6.1 trillion New Taiwan dollars) and $758.4 billion (approximately 24.3 trillion New Taiwan dollars), respectively, in 2022.
International relations under the shadow of trade sanctions
Trump's economic strategy is not limited to BRICS countries; recently, he has also threatened to impose a 25% tariff on goods imported from Mexico and Canada. This series of tough economic policies has raised significant concern and alarm in the international community. Canadian Prime Minister Justin Trudeau met with Trump last Friday in an attempt to alleviate the tension in bilateral relations caused by tariff threats. The two leaders discussed important issues, including illegal immigration and the fentanyl crisis, indicating the Trump administration's complex considerations regarding trade and international relations.
Although Trump claims that the chances of BRICS countries replacing the dollar in international trade are 'zero,' this group is actively seeking ways to reduce reliance 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 experiment with using local currencies to purchase Russian oil, which is seen as a significant attempt to circumvent the dollar system.
Regardless of the final outcome, Trump's tough stance has already signaled the potential for drastic changes in the future international economic landscape. The game between BRICS and the U.S. 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 currency, I will impose a 100% tariff’ This article was first published in ‘Crypto City’