Asia Times
Trump’s BRICS ultimatum won’t deter de-dollarization
Trump hints at 100% tariffs on de-dollarizing BRICS members but his threats and policies will only turbocharge the trend
by William Pesek
December 10, 2024
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Donald Trump has signaled he aims to maintain dollar dominance. Image: X Screengrab
As Donald Trump gears up for another stint in the White House, the US President-elect is clearly concerned about what the BRICS nations may have in store for the US dollar.
And, not surprisingly, Trump is threatening big-time penalties for any hint of de-dollarization among Brazil, Russia, India, China, South Africa and the grouping’s new members, including Saudi Arabia and the United Arab Emirates.
“The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER,” Trump wrote in a recent post to his Truth Social network.
“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 US dollar or, they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy.”
Not exactly a welcome mat from the Trump 2.0 gang. Yet Trump’s threatened levies on the BRICS may just increase incentives for the “Global South” to find or create a dollar alternative.
“It’s unclear how 100% tariffs on a group of countries that make up 37% of global GDP would happen in practice, but it serves as a possible preview of tariff diplomacy under Trump 2.0,” said Michael Wan, senior currency analyst at MUFG Research.
It’s also unclear how sky-high tariffs aimed at the BRICS would do the world’s biggest economy any good. But as Deutsche Bank argues, Trump’s fixation with a strong dollar appears greater than ever.
“This seems to further indicate that dollar strength is an issue for the new administration, unlike Trump 1.0,” when the US took a less energetic approach, Deutsche analysts wrote.
With US government debt surpassing US$36 trillion and Trump telegraphing giant budget-busting tax cuts, developing nations have ample reason to worry about the dollar. Washington, after all, only has one AAA credit rating left — from Moody’s Investors Service.
Morgan Stanley, for one, is advising that it might be time to sell the dollar. Analyst David Adams has noted that “much of the good news for USD” is already priced, with most having “largely internalized the US outperformance narrative” based on Trump tax and trade policy pledges. Markets, though, may be “overestimating the speed, breadth and magnitude” of those shifts.
“We sense investor sentiment on the whole is very constructive on the greenback, suggesting asymmetric risks for a ‘pain trade,’ in the months ahead,” Adams noted.
Trump World has made it clear the US Federal Reserve’s independence, a key factor in global confidence in the greenback, is also on the table come January. The “Project 2025” scheme that his Republican party cooked up for Trump 2.0 includes prescriptions for curbing the Fed’s much-vaunted autonomy.
The Fed hardly escaped Trump 1.0 unscathed. During his first stint as president from 2017 to 2021, Trump put the moves on his hand-picked Fed Chairman Jerome Powell early and often.
Trump attacked the Powell-led Fed in speeches, press conferences and on social media. Trump even mulled firing Powell. That year, the Fed began adding liquidity to an economy that didn’t need extra help.
In October, Trump mocked Powell’s policymaking team anew. “I think it’s the greatest job in government,” Trump told Bloomberg. “You show up to the office once a month and you say, ‘let’s say flip a coin’ and everybody talks about you like you’re a god.”
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https://asiatimes.com/2024/12/trumps-brics-ultimatum-wont-deter-de-dollarization/