Summarize this content to 2000 words in 6 paragraphs President-elect Donald Trump on Nov. 30 threatened to slap a 100% tariff on a group of nine nations — the so-called BRICS — if they try to replace the U.S. 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’ll enact the tariffs if the countries either move to create a new rival currency to the dollar or back an alternative currency to replace the greenback as the world’s reserve medium of exchange. “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 U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” Trump said on Truth Social.
Trump’s move comes after he recently threatened to impose 25% tariffs on all products from Canada and Mexico entering the U.S., along with an additional 10% tax on goods from China, in what he says would force the countries to do more to halt the flow of unauthorized migrants and illicit drugs into the U.S.Why do BRICS countries want an alternative currency?The BRICS — named after the original five members (Brazil, Russia, India, China and South Africa) — was formed in 2009 to advance the interests of emerging economies and to make them less dependent on the U.S. dollar, which is by far the most commonly used currency in global commerce.
The primacy of the dollar in international trade gives the U.S. 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 a BRICS summit, saying “the dollar is being used as a weapon,” the Associated Press reported. In 2023, meanwhile, Brazilian President Luiz Inácio Lula da Silva proposed creating a new, common currency in South America to reduce its reliance on the dollar in international trade. Would a BRICS currency threaten the dollar?Creating a competing new currency would be difficult given how widely used the dollar is to conduct business around the world. Despite the existence of the euro and growing importance of China’s renminbi, the dollar remains the world’s main reserve currency, representing roughly 58% of the world’s foreign exchange reserves, according to the IMF. Also, critical commodities like oil and gold are still mostly bought and sold using dollars. “Economically, it’s not a major issue because the idea of the BRICS countries being able to put together an alternative as a reserve currency for the U.S. dollar is not plausible in the short or intermediate term,” said Mark Weinstock, a global trade expert and professor of economics at Pace University.
In other words, BRICS nations would struggle to create a viable currency given the relative strength and stability of the U.S. economy and the faith that global investors and trading partners have in U.S. government debt. And while the group’s members have some interests in common, unifying behind a single currency would be politically fraught and technically complex.”Fundamentally, if you are going to create own form of money, that desirability is commensurate with the economic strength and integrity of the issuer. BRICS countries don’t have type of institutions that inspire global confidence to convince people that it is a satisfactory alternative to the dollar,” Weinstock said. Some BRICS members are already downplaying the push to get a new currency off the ground. After Trump’s tariff threat last weekend, South Africa’s government on Monday issued a statement on social media saying there are no plans to create a BRICS currency.”Recent misreporting has led to the incorrect 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. The discussions within BRICS focus on trading among member countries using their own national currencies.”What would stiff tariffs on BRICS goods mean for U.S. consumers?While economists largely agree that a 100% tariff on goods imported to the U.S. from BRICS nations is a long shot, if it came to pass the move would not benefit U.S. consumers, they say. Such levies would drive up the cost of goods from BRICS member nations, potentially fueling inflation and leading to higher prices for consumers.”Like any tariffs, this would mean higher prices for consumers,” Weinstock said. “That’s always the impact of the tariff.” Among the leading products the U.S. gets from BRICS countries are coffee from Brazil, electronics and clothes from China, and minerals from South Africa, according to trade data.
Why are some economists criticizing Trump for threatening the BRICS?Some experts criticized Trump’s threat to punish the BRICS, saying it makes the U.S. look weak. “It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar,” Brad Setser, a senior fellow at the Council on Foreign Relations and former Treasury Department economist, wrote on X.
Trump’s proposed tariffs could spark higher prices, retaliation
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Trump’s threat could actually accelerate a move away from the dollar by other countries, according to Setser, who said that an effort to effectively coerce countries to use the dollar “is actually a long-run threat to the dollar’s global role.””It makes the use of the dollar appear to be a favor to the U.S.,” 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 covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.
