Could Trump's Threat to BRICS Salvage the Fate of US Dollar?
While a common BRICS currency is off the table, the trend of using national currencies in trade is an irreversible sign of a multipolar world order, Indian geoeconomics experts told Sputnik India.
SputnikThe United States (US) President-elect Donald Trump has threatened the BRICS countries with 100% tariffs if they move away from the US Dollar (USD).
“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,” Trump said, adding that there was "no chance" BRICS would replace USD in international trade.
This warning comes as major G20 economies, including BRICS nations like China, India, Russia, Brazil, the UAE and others, have ramped up the use of local currencies in trade settlements by putting respective institutional frameworks in place.
The BRICS Summit in Kazan welcomed the "use of local currencies in financial transactions between BRICS countries and their trading partners".
India has been pushing to expand local currencies in trade settlements with willing partners, with the Foreign Trade Policy (FTP) 2023-28 calling for
increased use of Indian Rupee (INR). In support of INR internationalisation, over 22 countries have opened Vostro accounts in Indian banks to facilitate local currency settlements.
Commenting on Trump's statement, Indian experts pointed to remarks by External Affairs Minister (EAM) S Jaishankar and Russian President Vladimir Putin, both of them rejecting any near-term plans to float a common BRICS currency.
"India’s position is very clear on this. We will trade in US Dollar for the nations which are accepting it as payments. We will trade in national currencies with nations which do not accept US dollar for payments. Our foreign reserves have always been a multi-currency basket along with a reserve of gold. The total value is just written in dollar terms," Dr Ankit Shah, a geoeconomics expert, told Sputnik India.
The US is no more in a position to get US Dollar in between bilateral trade between neighbours and partner countries, Shah asserted.
BRICS+ countries have never explicitly stated issues with trading in US dollars with US, he said. Instead, the focus of the Global South is on promoting non-dollar trade with neighbouring countries, regional partners, and within their own regions, the expert explained.
The idea of "common currency is out of question because none of the nations want another hegemon or a dominant power in a unipolar world," Shah underscored. "BRICS+ is preparing a multi-currency basket for international trade and they are not going to name the basket officially as the BRICS currency as of now because it will be a democratic basket with free entry and free exit by nations."
None of the four economies — the US, Russia, India, or China — were ready to shoulder the burden at the moment, Shah assumed.
Further, he questioned the logic of incoming Trump administration's threat to impose a 100% tariff on Chinese or other Asian imports, warning that the costs of such a move would be borne by the American consumer rather than BRICS countries. Both China and India are major exporters of goods and services to the US market, with each economy running a surplus with the US.
"Even at double the pricing, the Americans are not in a position to make an equivalent product in the US based on their currently bloated salary levels, minimum wage and labour laws," Shah reasoned.
Rather than trying to prop up the USD through threats, Trump should be more focussed on making the greenback "more attractive" to other countries, he suggested.
"To make USD attractive, the long-term goal for the Trump administration should be to end the sanctions game and build a multi-currency basket in the US foreign reserves. This would set the world for a fair play in international trade and a level-playing field ensuring the productivity of all economies in a balanced way," the analyst emphasised.
Trump may be smartly trying to "build a background" to lift sanctions from Russia, in line with his plan to end the Ukraine conflict, Shah assumed.
"Russia would eagerly join back the SWIFT network while building alternate payment mechanisms with the BRICS partners," he believes.
India wasn't in favour of
de-dollarisation per se, professor
Ashwani Mahajan, the co-convenor of Swadeshi Jagran Manch (SJM), an economic and culture organisation, explained in a conversation with Sputnik India.
"What we want is de-weaponisation of US dollar, trade and payments system and supply chains. Unfortunately, in the last two years, the Biden administration has sought to weaponise the USD through sanctions against Russia, which have created economic disruptions for many countries, including India," Mahajan stated.
It was due to West's sweeping anti-Russia sanctions that ever more countries were looking to trade in national currencies, the expert highlighted.
Mahajan stressed that a unified BRICS currency was not on the cards, as of now due to different sizes of economies in the grouping, however the "
trend of using local currencies in global trade, with mutual consent of countries involved, is
irreversible."
"The internationalisation of rupee is clearly in our economic advantage since it helps bolster economic security by minimising exchange costs and currency-related disruptions," Mahajan asserted, adding that India was also facing growing strain in recent years due to devaluation of INR vis-a-vis USD.
While decisions made by the Biden government have ultimately undermined the US dollar and weakened its status as the leading global reserve currency, the expert suggested that the Trump administration could undo some of the damage to the prestige of the USD.
"If Trump wants to make USD more attractive, he must take decisions to lift sanctions on Russia and reintegrate Russian banks into the SWIFT network," concluded Mahajan.