United States President Donald Trump on Monday (January 20) reiterated his promise to impose 100 percent import duty on BRICS (Brazil, Russia, India, China and South Africa) countries. Trump says that if BRICS countries take any step towards reducing the use of dollar in global trade, then 100 percent tariff will be imposed on them.
In December 2024, then-President-elect Trump posted on social media that we need a commitment from these countries. Those countries will neither create a new BRICS currency nor support any other currency to replace the powerful US dollar. Otherwise they will face 100 percent tariff.
Now the biggest question is why is US President Donald Trump giving such a warning? Is Trump afraid that the BRICS countries are coming up with a new currency to compete with the dollar? The fear of Trump is not without reason. Efforts have been made by BRICS countries to reduce the dollar. From China to Russia and India, many efforts have been made in this regard. Let us also tell you what is Trump’s real fear?
Is BRICS planning a new currency?
Countries around the world are actually looking to reduce their dependence on the US dollar as well as the US-led global financial system. This has been reconsidered after the US expelled Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which is important for international financial transactions.
Iran was withdrawn from SWIFT in 2012, a move that was seen as playing a role in bringing Tehran to the negotiating table in 2015. Earlier in 2018, after the Trump administration reimposed oil and financial sanctions on Iran, it was also removed from SWIFT.
At the 2023 BRICS summit in Johannesburg, Brazilian President Luiz Inácio Lula da Silva said that “a new [ब्रिक्स] Currency… will increase our payment options and reduce their weaknesses as well as problems. Then at the Kazan BRICS summit in October 2024, Russian President Vladimir Putin said that the dollar was being used as a weapon.
Does India also want to reduce dependence on dollar?
The answer is yes, after sanctions were imposed on Russia amid Ukraine War, efforts were made to reduce dependence on the US dollar and internationalize the Indian rupee. For this, the Reserve Bank of India (RBI) allowed invoicing and payment for international trade in Indian rupees in 2022.
At the Kazan BRICS summit, Prime Minister Narendra Modi had said that India “welcomes efforts to enhance financial integration among BRICS countries”, and “trade in local currencies and smooth cross-border payments will strengthen our economic cooperation”.
In November 2024, External Affairs Minister S Jaishankar had said in a meeting between India and Russia in Mumbai that in the current circumstances, mutual agreement on trade in national currencies is very important.
Is India targeting the dollar?
It’s not like that. India has not actively targeted the dollar like Russia, China and other BRICS countries. However, India has expressed “natural concern” on this issue. In October 2024, Jaishankar had clarified that although US policies often complicate trade with some countries, and India wants “solutions” to serve its trade interests, he has not “targeted” the dollar or Haven’t tried to go away from him.
The country’s Foreign Minister S Jaishankar had said in response to a question at the Carnegie Endowment for International Peace, an American think tank in Washington DC, that we have never actively targeted the dollar. This is not part of our economic, political or strategic policy. Some other people might have done the same. He said that we often have trading partners who lack dollars for transactions. Therefore, we have to decide whether to abandon dealings with them or find alternative solutions that work. There is no malicious intent towards the dollar.
What is RBI’s position on ‘de-dollarization’?
In December 2024, then RBI Governor Shaktikanta Das had said that India was not ‘de-dollarization’, and that recent measures such as allowing Vostro accounts and entering into local currency trade agreements were only aimed at de-risking Indian trade. Had to reduce. Das said, although the BRICS countries have discussed the possibility of a share currency, they have not reached any decision.
Increasing acceptance of yuan
India is moving cautiously. The main reason for India not supporting de-dollarization is the emergence of the Chinese Yuan as a challenge to the US dollar. India had opposed using the yuan to import Russian oil. Whereas the acceptance of Yuan is increasing in Russia. Following Western sanctions on Russia, which included freezing $300 billion in Russian foreign holdings, the yuan has become Russia’s most traded currency. According to the Russian government, more than 90 percent of trade agreements between the two countries are now in rubles.
Also, India is wary of excessive dependence on the dollar. RBI has increased the purchase of gold and has started bringing its gold kept abroad back to the country. However, this is partly due to the increased uncertainties after the war in Ukraine. This is also consistent with the purchase of gold by global central banks due to fear of secondary sanctions.
What are the experts saying?
Ajay Sahai, director general and CEO of the Federation of Indian Export Organizations, said in a report by The Indian Express that while supporting the local currency initiative, India will have to ensure that the framework does not disproportionately favor China. Sahay had said that China is very keen to play a major role in using the bloc against the US, although India, Brazil and South Africa can easily resolve differences through dialogue and working with the US.
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