Trump, Threats and Tariffs

“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.”

— Trump

During his election campaign, U.S. President Donald Trump frequently invoked the term "tariff," even referring to it as his "favourite word in the dictionary." He emphasized his intention to use them as a means of bolstering domestic manufacturing in the United States. In a press interaction, when questioned about defence spending in NATO countries such as France and Spain, Trump singled out Spain but mistakenly associated it with the BRICS grouping. He remarked, "Are they a BRICS country? Well, they are... Spain," and went on to assert, "As a BRICS country, yes. They will face a 100 per cent tariff if they continue to do what they thought." This statement revealed a misunderstanding, as Spain is not a BRICS nation but a member of the North Atlantic Treaty Organization (NATO).

This raises the question: what exactly are tariffs, and what did President Trump claim the BRICS countries aimed to achieve?

Tariffs and BRICS (& its goals)

A tariff is a tax or duty imposed by a government on goods imported into the country. Tariffs are typically used to protect domestic industries, generate revenue, or influence trade policies.

BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The term "BRIC" was coined in 2001 by economist Jim O’Neill, who predicted that these emerging economies would drive global growth by 2050. South Africa was added in 2010 to complete the grouping as BRICS.

The primary aim of BRICS is to foster economic cooperation among its members while offering an alternative to the Western-dominated global order. The alliance also serves as a platform for collaboration in areas such as trade, investment, and development. In 2024, BRICS expanded its membership to include Saudi Arabia, Iran, Ethiopia, the United Arab Emirates, and Egypt, reflecting its growing influence on the world stage.

What Did Trump Claim?

On Monday, January 20, U.S. President Donald Trump reiterated his intent to impose 100% import tariffs on BRICS nations if they took steps to reduce their reliance on the U.S. dollar in global trade.

Trump stated, “BRICS nations would face a 100 per cent tariff if they so much as even think about cutting the use of the dollar in global trade,” during a signing ceremony at the Oval Office, according to a report by ANI. In his inaugural speech delivered after taking the oath of office in the Capitol Rotunda, Trump announced plans to establish an "External Revenue Service" to collect tariffs, duties, and other revenues, emphasizing that his administration intended to “tariff and tax foreign countries to enrich our citizens.”

Earlier, in December 2024, while still President-elect, Trump had posted on social media that BRICS nations must commit to avoiding any plans to create a new BRICS currency or support any alternative currency to replace the U.S. dollar. He warned, “They will face 100 per cent tariffs and should expect to say goodbye to selling into the wonderful U.S. economy” if such measures were pursued.

Are BRICS Countries Planning to Replace the Dollar with a New Currency?

Yes, there have been discussions among BRICS nations about relying on alternative currencies. However, these efforts are not driven by a malicious intent to "de-dollarize" but rather to create more balanced and diversified financial options for global trade and transactions. The goal is to reduce vulnerabilities associated with overdependence on a single currency while fostering greater economic resilience among member nations. This approach reflects a pragmatic effort to achieve financial stability rather than an adversarial stance against the U.S. dollar.

A notable trigger was the U.S. decision to expel Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a critical platform for international financial transactions. Similarly, Iran was cut off from SWIFT in 2012, a move that played a role in pressuring Tehran to negotiate in 2015. After the U.S. reinstated oil and financial sanctions on Iran during Trump’s first administration in 2018, SWIFT once again suspended Iranian banks' access, underlining the vulnerabilities of overdependence on the U.S.-led system.  

At the 2023 BRICS summit in Johannesburg, Brazilian President Luiz Inácio Lula da Silva emphasized the importance of creating a new BRICS currency, stating it would “increase our payment options and reduce our vulnerabilities.” This sentiment was echoed by Russian President Vladimir Putin at the 2024 BRICS summit in Kazan, where he criticized the weaponization of the dollar, remarking, “The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this.”  

These developments underscore a growing push among nations to establish alternative financial systems and reduce their dependence on the U.S. dollar.

Where Does India Stand?

India has also demonstrated interest in reducing its dependence on the U.S. dollar while working toward the internationalization of the Indian rupee.

In 2022, following sanctions on Russia after it invaded Ukraine, the Reserve Bank of India (RBI) introduced a mechanism allowing invoicing and payments in Indian rupees. This marked a significant step toward fostering trade settlements in local currency.

At the 2024 BRICS summit in Kazan, Prime Minister Narendra Modi emphasized the importance of conducting trade in local currencies, highlighting how this approach could facilitate cross-border payments and strengthen economic cooperation among nations.

A similar sentiment was echoed at the 2024 India-Russia Intergovernmental Commission meeting, where India’s External Affairs Minister S. Jaishankar stated, “Mutual settlement of trade in national currencies is of great importance, especially in the current circumstances.”

However, it's important to note that India never attempted to actively target the dollar as clarified in December 2024 by the then RBI Governor Shaktikanta Das who said that the recent measures were not pursuing de-dollarisation but were intended to only de-risk Indian trade. Similarly, Jaishankar in response to a question at the Carnegie Endowment for International Peace, said, “We have never actively targeted the dollar. That’s not part of our economic, political, or strategic policy. Some others may have done so. What I will say is that we have a natural concern. We often have trade partners who lack dollars for transactions. So, we must decide whether to forgo dealings with them or find alternative settlements that work. There’s no malicious intent towards the dollar.”

Conclusion

India is proceeding with caution in navigating the complex dynamics of global trade and currency reliance. A key factor influencing India’s stance on de-dollarization is the growing prominence of the Chinese yuan as a competitor to the U.S. dollar. India has deliberately avoided using the yuan for Russian oil imports, even as the currency gains wider acceptance in Russia.

At the same time, India remains cautious about over-reliance on the dollar. The Reserve Bank of India (RBI) has increased gold purchases and begun repatriating its gold reserves held abroad, signaling a strategic move to safeguard financial stability. While India supports initiatives promoting trade in local currencies, it is essential to ensure that these frameworks do not disproportionately favor China, given the significant asymmetry in economic power among BRICS nations.

Additionally, India recognizes the importance of maintaining strong ties with the United States. According to official 2022–2023 data, the U.S. accounts for 18% of India’s exports, making it a critical trade partner. To this end, India should engage diplomatically with the U.S., emphasizing that its efforts to diversify trade mechanisms are not anti-American but a step toward financial multipolarity and stability.

This balanced approach reflects India’s commitment to securing its economic interests while fostering constructive international relationships.

Note: This article is a guest submission. The author is a final-year Political Science and Psychology student at Jai Hind College, Mumbai.