President-elect Donald Trump has issued a warning to nine nations in the BRICS bloc, threatening 100% tariffs if they pursue plans to create a currency that could rival the US dollar. This move underscores Trump’s long-standing stance on using tariffs as an economic weapon.
The BRICS group, comprising China, Russia, Brazil, India, South Africa, along with Iran, Egypt, Ethiopia, and the UAE, has explored the idea of reducing reliance on the US dollar in global trade. However, internal disagreements have hindered progress.
In a social media post, Trump made it clear that any efforts to sideline the US dollar would prompt severe economic repercussions, emphasizing the imposition of 100% tariffs on countries participating in such initiatives. Trump’s message was positioned as a signal that the US would not tolerate actions undermining its currency’s global dominance.
During his presidential campaign, Trump emphasized the use of tariffs as a strategy to protect the US economy. His recent remarks suggest an escalation of this approach, targeting the BRICS bloc in particular. Some political analysts and allies view these statements as part of a broader negotiation tactic rather than definitive policy commitments.
Republican Senator Ted Cruz commented on the potential effectiveness of tariffs as leverage, citing previous instances where similar threats led to favorable outcomes. Trump’s strategy, according to Cruz, often revolves around escalating tensions to force concessions from trade partners.
In a recent example, Canadian Prime Minister Justin Trudeau made an unscheduled visit to Mar-a-Lago, reportedly to address concerns over a potential 25% tariff on Canadian goods. This incident highlights how the mere threat of tariffs can prompt diplomatic engagement.
Scott Bessent, Trump’s nominee for Treasury Secretary, echoed this sentiment, describing the strategy as a means to negotiate more advantageous trade terms. According to Bessent, while Trump publicly advocates for tariffs, his ultimate goal remains free trade, achieved through a process of “escalating to de-escalate.”
How Tariffs Impact Trade
Tariffs function as taxes imposed on imported goods, calculated based on their value. For instance, a 25% tariff on a $50,000 vehicle would result in a $12,500 fee. While Trump has championed tariffs as a tool to protect American jobs and generate revenue, economists argue that the costs are often passed on to consumers.
In practice, tariffs are paid by domestic importers rather than foreign exporters, effectively making them a tax on American businesses. Economic studies from Trump’s first term indicate that the financial burden of these tariffs was largely absorbed by US consumers, contradicting claims that foreign nations bear the cost.
Despite these critiques, many of the tariffs introduced during Trump’s first term remain in place under the current administration, suggesting that they continue to play a role in US economic policy.
