Why is Trump threatening 100% tariffs on BRICS countries?

On November 30, President-elect Donald Trump threatened to impose 100% tariffs on a group of nine countries – the so-called BRICS – if they tried to replace the US dollar with another currency.

The BRICS countries include Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. Trump said he would implement the tariffs if countries decide to create a new currency to rival the dollar or support an alternative currency to replace the greenback as the world's reserve medium of exchange.

“We demand that these countries commit not to create a new BRICS currency, nor support another currency to replace the powerful US dollar, otherwise they will face 100% tariffs and should expect to say Goodbye to selling in the wonderful United States economy,” Trump said on Truth Social.

Trump's decision comes after he recently threatened to impose 25% tariffs on all products from Canada and Mexico entering the United States, as well as an additional 10% tax on products in from China, which he said would require countries to do more to stop the flow. illegal immigrants and illicit drugs in the United States

Why do BRICS countries want an alternative currency?

BRICS – named after their five founding members (Brazil, Russia, India, China and South Africa) – were created in 2009 to promote the interests of emerging economies and make them less dependent on the US dollar, by far the most important . currency commonly used in world trade.

The primacy of the dollar in international trade gives the United States a number of advantages, including lower borrowing costs for the federal government and enormous geopolitical influence around the world.

In October, Russian President Vladimir Putin called for a new international payments system at the BRICS summit, saying “the dollar is being used as a weapon,” the Associated Press reported. Meanwhile, in 2023, Brazilian President Luiz Inácio Lula da Silva proposed creating a new common currency in South America to reduce its dependence on the dollar in international trade.

Would a BRICS currency threaten the dollar?

Creating a new competing currency would be difficult given the dollar's widespread use for doing business around the world. Despite the existence of the euro and the growing importance of the Chinese renminbi, the dollar remains the world's primary reserve currency, accounting for around 58% of global foreign exchange reserves, according to the IMF. Additionally, essential commodities like oil and gold are still mostly bought and sold in dollars.

“Economically, this is not a major problem because the idea of ​​BRICS countries being able to establish an alternative as a reserve currency to the US dollar is not plausible in the short to medium term,” said Mark Weinstock, international trade expert and economics professor at Pace University.

In other words, BRICS countries would struggle to create a viable currency given the relative strength and stability of the U.S. economy and the confidence of global investors and their trading partners in U.S. government debt. And even if the group's members have some common interests, uniting behind a single currency would be politically difficult and technically complex.

“Fundamentally, if you are considering creating your own form of currency, that opportunity is proportional to the economic strength and integrity of the issuer. BRICS countries do not have the type of institutions that inspire global trust to convince people that it is a single currency a satisfactory alternative to the dollar,” Weinstock said.

Some BRICS members are already downplaying the desire to get a new currency off the ground. Following Trump's tariff threat last weekend, the South African government released a statement on social media on Monday saying there were no plans to create a BRICS currency.

“Recent misinformation has led to an erroneous narrative that BRICS is planning to create a new currency,” South Africa’s Department of International Relations and Cooperation said. “This is not the case. Discussions within BRICS focus on trade between member countries using their own national currencies.”

What would high tariffs on BRICS products mean for American consumers?

Although economists largely agree that a 100% tariff on goods imported into the United States from BRICS countries is a long-term solution, if adopted, the measure would not benefit not to American consumers, they say. Such levies would increase the cost of goods from BRICS member countries, potentially fueling inflation and leading to higher prices for consumers.

“Like any tariff, this would result in higher prices for consumers,” Weinstock said. “It’s always the impact of the tariff.”

Among the top products the United States gets from BRICS countries are coffee from Brazil, electronics and clothing from China, and minerals from South Africa, according to trade data.

Why do some economists criticize Trump for threatening BRICS?

Some experts have criticized Trump's threat to punish BRICS, saying it makes the United States appear weak.

“This is not a good idea, because it indirectly elevates non-threat status and suggests a lack of confidence in the dollar,” wrote Brad Setser, a senior fellow at the Council on Foreign Relations and former Treasury Department economist. . on X.

Trump's proposed tariffs could cause price hikes and retaliation 01:01

Trump's threat could actually accelerate other countries' abandonment of the dollar, according to Setser, who said an effort to effectively force countries to use the dollar “is actually a long-term threat to the global role of the dollar.

“It gives the impression that using the dollar is a favor to the United States,” he added.

The Associated Press contributed to this report.

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Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch who covers topics related to small business, the workplace, health care, consumer spending and personal finance. She regularly appears on CBS News 24/7 to discuss her reporting.

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