What Trump ‘100pc tariffs’ threat against Brics means

Dar es Salaam. Recent remarks by US President-elect Donald Trump could potentially plunge global markets into turmoil and have far-reaching ramifications on developing countries, analysts said on Tuesday.

Mr Trump on Monday threatened to impose 100 percent tariffs on the nine Brics member countries if they create a currency to rival the US dollar.

“The idea that the Brics countries are trying to move away from the dollar while we stand by and watch is OVER. 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 percent tariffs, and should expect to say goodbye to selling into the wonderful U.S. economy,” Mr Trump wrote on his social media platform Truth Social.
Initially started by Brazil, Russia, India, China and South Africa, Brics has since expanded to include Iran, Egypt, Ethiopia and the United Arab Emirates.

In line with his “America First” policy, Mr Trump – who will take the oath of office on January 20, 2025 – is this time around targeting the nine countries with tariff threats.

According to Tanzanian analysts, much as entirely ditching the dollar is still a far-fetched dream, Mr Trump’s statement is a clear message that any decision that is contrary to his will could potentially disrupt international trade and hit developing countries hard.

Mr Oscar Mkude told The Citizen that global trade will be on the receiving end if Mr Trump makes good on his threat.

“Indeed, Brics has grown both in stature and influence and its expansion could challenge the US dollar, which has been the main currency for international trade since the Second World War,” he said.

Mr Mkude noted that the US recently raised interest rates to control inflation, which caused many other currencies to lose their value.

If Brics continues to grow and succeed, many countries without a strong voice in global trade might seek to join the grouping, he added.

“This could change the balance of power and challenge the US dollar’s dominance and this is what is worrying Trump.”

Institute of Management and Entrepreneurship Development chief executive Donath Olomi said if Mr Trump’s tariff threat if effected, it could harm global trade in the short term.

However, in the long run, it might benefit the world’s regions that currently lack influence in global trade by allowing them to challenge the US dollar.

Dr Ulomi noted that 100 percent tariffs on Brics products would hurt both the US and Brics nations because the US also depends on other countries, including China, for many if imports.

“However, if Trump carries out his threat, it could give Brics an advantage as countries look for alternatives to the US dollar,” he said.

“Trump’s tariff threat may hurt global trade in the short term, but it could have long-term effects on the balance of power in international trade, giving other countries an opportunity to challenge the long-standing dominance of the US dollar.”

“Virtually impossible”

Dar es Salaam University College of Education lecturer Abel Kinyondo said ditching the US dollar is “virtually impossible” because key Brics members, especially China, hold huge reserves of the American currency.

“This reduces the likelihood of Brics completely abandoning the dollar in the coming years, which means the dollar will therefore retain its power for the foreseeable future,” he said.

Available data shows that the US dollar currently accounts for approximately 58 percent of global foreign exchange reserves, highlighting its pivotal role in international trade.

A successful Brics currency could potentially erode this dominance, leading to significant shifts in global economic power.

However, the feasibility of such a currency remains uncertain due to the diverse economic landscapes and political interests of Brics members. For instance, with about $3.261 trillion, China has the largest foreign exchange reserves of any country.

Mr Trump’s pick for Treasury Secretary, Mr Scott Bessent, has been quoted by the Financial Times saying the President-elect’s threats to impose major tariff hikes were part of his negotiating strategy.

“My general view is that at the end of the day, he’s a free trader,” he said of Mr Trump before he was nominated for the role. “It’s escalate to de-escalate.”

The South African government has said there are no immediate plans to create a Brics currency, while Russia has warned that Mr Trump’s threats could backfire and accelerate the global trend of moving away from the dollar.