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After threatening to impose 25% tariffs on key U.S. trading partners — Mexico, Canada, and China — over issues such as the influx of drugs, including fentanyl, and illegal immigration, Trump is now targeting the BRICS.
He’s pushing for 100% tariffs in response to their efforts to develop an alternative to the dollar and has demanded they scrap plans to create their own currencies. So much for free-market principles…
The big question is: where can all this lead?
To answer that, we first need to understand where these countries stand on creating a “dollar killer.” And it turns out, for now, it’s all talk — no real action has been taken, at least officially.
The delay is linked to the fact that to bring such a project to life, it is necessary to create a single, functioning operator and introduce changes in the legislation of each participating country.
Moreover, given the remarkable differences between the economies and financial systems of the BRICS nations, a single currency seems highly unrealistic. So, for now, there doesn’t seem to be much to worry about.
What, then, is the point of Trump’s threats?
First, to prevent anyone from challenging the dominance of the U.S. dollar, as reflected in the US Dollar Index, on the global financial stage. And second, to stop countries from using alternative currencies for trade settlements.
However, relying solely on a heavy-handed approach seems to be a questionable strategy. Making the dollar naturally attractive is just as important, not just something people cling to for fear of the consequences.
In this regard, to increase the dollar’s attractiveness, it would be prudent for the government to start addressing the vast U.S. national debt. The problem is that Trump’s plan to cut taxes won’t be easy…
Finally, if Trump succeeds and everyone goes back to using only the dollar, this could strengthen the currency when he pushed for a weaker dollar to help exporters during the campaign.
