Trump’s Tariff Threat and the Rise of BRICS

Donald Trump has issued a new tariff threat, targeting a blockchain-based payment initiative led by the BRICS coalition. This group, which includes China, Russia, and eight other nations, aims to reduce dependence on the U.S. dollar in global financial transactions. Trump’s Saturday post promised 100% tariffs on any country attempting to move away from dollar-dominated systems.

“Any country that tries should wave goodbye to America,” Trump declared, sparking fears of a trade war that could span multiple continents.

The president-elect’s move is reportedly tied to BRICS Pay, a newly launched digital payment system intended to challenge the dominance of the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The initiative has triggered intense scrutiny, particularly as it aligns with the larger “de-dollarization” trend championed by BRICS nations.

A Kremlin spokesperson responded swiftly, warning that Trump’s tariffs would backfire and pointing to the dollar’s declining influence in global trade.

What BRICS Pay Aims to Achieve

BRICS Pay is described by its creators as a step toward building a “fair and decentralized financial system.” The system uses blockchain and QR code technologies to facilitate cross-border payments without relying on the dollar.

The initiative was formally launched in October and aims to provide an alternative to the Belgium-based SWIFT system, which currently processes 88% of foreign exchange transactions involving the dollar. The new platform envisions digital wallets for individuals and businesses to transact globally using their national currencies.

BRICS Pay is particularly significant for Russia, as it provides an alternative payment system after Western sanctions restricted its access to SWIFT following the invasion of Ukraine. Other BRICS members, like China, have long criticized the dollar’s dominance, calling it a source of instability in the global economy.

The BRICS coalition has recently expanded, now including Iran, Egypt, Ethiopia, and the UAE, with Saudi Arabia poised to join. The group, now known as BRICS+, represents over a third of the world’s landmass and nearly half its population.

The Dollar’s Role and Trump’s Objectives

One of Trump’s concerns is the possibility of BRICS creating a unified currency to challenge the dollar, though experts have downplayed this likelihood.

Analysts, including those at Capital Economics and the Atlantic Council, believe the dollar’s dominance as the primary global reserve currency is secure in the short-to-medium term. Kremlin representatives have also emphasized that BRICS is focused on encouraging the use of national currencies in trade rather than establishing a new unified currency.

However, BRICS Pay’s potential to accelerate de-dollarization remains a concern for Trump, who has vowed to prevent any moves that might weaken the dollar’s position.

“We require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty U.S. dollar, or they will face 100% tariffs,” Trump warned in his post.

Will Tariffs Spark Negotiations?

Trump’s strategy of using tariffs to pressure nations into negotiations has had mixed success in the past. Recently, his threats against Mexico and Canada resulted in talks on immigration and trade. Trump initiated discussions with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau shortly after announcing tariffs, avoiding further escalation.

However, applying this tactic to BRICS, a much larger and more diverse coalition, presents greater challenges. Experts, including Douglas Holtz-Eakin of the American Action Forum, have questioned how Trump plans to enforce these tariffs and what specific commitments he seeks from BRICS nations.

“What exactly constitutes a satisfactory ‘commitment’ remains unclear, as is the authority under which such tariffs would be levied,” Holtz-Eakin noted.

For now, Trump’s threats appear to be a signal aimed at preventing the advancement of BRICS Pay and other alternatives to the dollar. Whether this will lead to meaningful negotiations or escalate into a broader trade conflict remains uncertain.