Can Trump save dollar hegemony?

IF TRUMP WERE TO RETALIATE AGAINST THE BRICS WITH 100% TARIFFS, THE MOVE COULD BACKFIRE

- JEFFREY FRANKEL

N 2023, THE leaders of Brazil and the other BRICS countries at the time — China, India, Russia, and South Africa — discussed collaboration on a new shared currency. Brazilian President Luiz Inácio Lula da Silva has been a vocal proponent of an alternative to the US dollar, the dominant global currency for the past 75 years, and Russian President Vladimir Putin publicly promoted the idea during the BRICS summit in October by brandishing a symbolic BRICS banknote. The bloc's new members — Egypt, Ethiopia, Iran, and the United Arab Emirates — would presumably also be included in the new joint currency.

The proposed challenge to the dollar has already drawn the ire of US President-elect Donald Trump, who has threatened to impose punitive tariffs of 100% on countries that move away from the greenback. Two weeks ago, Trump warned BRICS countries against creating or supporting an alternative reserve currency. "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," he declared on Truth Social, his social media platform.

This ultimatum follows Trump's threats to impose a 25% tariff on Mexico and Canada if they fail to curb fentanyl smuggling into the United States, a 60% tariff on Chinese goods, and a 10-20% tariff on other trade partners. Despite Trump's bluster, these increasingly extreme threats will not result in one of his self-proclaimed successful "deals."