Donald Trump bullies BRICS, which is unlikely to call his bluff

Leaders of BRICS (Brazil, Russia, India, China, South Africa) are yet to comment on the threat issued by US President-elect Donald Trump on Saturday. The respective foreign ministries have ignored it and apparently do not think the threat is serious, or likely to be carried out.

Another reason they have not responded is because it will be several years, if not decades, before an alternative currency arrangement to the US dollar can be put in place. While economists and commentators in BRICS nations are amused by the threat, the President-elect's bullying tone has irked others.

In his warning to BRICS, Trump threatened to impose 100 per cent tariffs on any country that challenged the US dollar’s dominance in the global economy. BRICS nations have been discussing ways of moving away from the US dollar while trading with each other.

“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is over,” Trump posted on social media platform Truth Social, and specifically threatened to impose “100 per cent tariffs” on countries exploring alternative currency arrangements, warning they could face restricted access to the US market.

“The 'mighty U.S. dollar' is apparently so "mighty" that you need to threaten countries so they don't abandon it,” exclaimed several respondents, with some pointing out that 100 per cent tariffs on BRICS products would actually further undermine the dollar, reducing demand for the dollar owing to reduced trade, causing significant inflation in the US. “BRICS nations should call the bluff and let it happen. The results would be surprising…,” another respondent stated.

Apart from the nations which make up the acronym, BRICS is also allied to several other emerging economies in the Global South, which were included recently. BRICS summits continue discussing ways to reduce their reliance on the US dollar through potential currency alternatives or new trading mechanisms. The issue was raised at the BRICS summit in Kazan, Russia in October this year, where host Vladimir Putin said the US currency was being used as a weapon and it was necessary to look for alternatives.

The idea is still in the ‘discussion’ stage and experts point out that the common currency in the European Union, the euro, took 34 years to become a reality. BRICS, in comparison, comprises far more diverse developing nations with diverse economies, cultures and political systems.

However, even if BRICS fails to dethrone the US dollar, it is possible that it will be bypassed through payment systems that favour the clearing of transactions in local currencies. The last few years have seen some movement in that direction with China, Russia and India settling accounts in their local currencies.

CIPS (cross-border inter-bank payment system) was established by the People’s Bank of China as an alternative to SWIFT, a cooperative established in Belgium in the 1970s and now used by more than 200 countries and territories for international payments and transfers.

Launched in 2015, CIPS has grown to include more than 1,400 financial institutions from Asia, Europe and Africa. After being cut off from SWIFT following its 2022 invasion of Ukraine, Russia pivoted to CIPS to clear transactions with third countries.

With Trump beginning his second term as US President on 20 January 2025, other countries are in ‘wait-and-watch’ mode to see how he pushes policies, and if he carries out his threats on the economy and immigrants. His cowboy-ish bullying, however, has disconcerted several countries and many believe they need to call his bluff.