As Donald Trump returns to the White House in January 2025, his aggressive trade stance – the latest now being a 100 per cent tariff threat on Brics nations, including India, if they went ahead to develop their own currency to undermine the US dollar’s dominance – has already created ripples in the global economy. Trump’s 100 per cent tariff warning to Brics nations came after the bloc’s members met in Russia’s Kazan in October where they discussed boosting non-dollar transactions.
India, which shares a strong trade relationship with the US, is wary of Trump’s protectionist policies, which the President-elect argues are aimed at protecting America’s interests. India has been stressing the need to reduce dependence on the US dollar and its diverse export portfolio to the US includes critical sectors like pharmaceuticals, IT services and textiles. If Trump indeed goes ahead with his warning, it could result in higher costs for Indian exporters and their products less competitive in the US market.
At the same time, India has been cautious in its ambitious move to de-dollarise, given the fact that Washington recently became New Delhi’s leading trading partner, with bilateral trade crossing the USD 120 billion mark in FY24.
S JAISHANKAR GIVES THUMBS DOWN TO BRICS CURRENCY
That is why External Affairs Minister S Jaishankar had expressed strong reservations about adopting a Brics currency, saying it was highly likely that the alliance members would continue to be involved in global trading by using their own currencies. He asserted that it was necessary to be realistic about the extent of alignment among the members, South Africa-based Mail and Guardian reported.
“The whole idea is, many of them say, ‘Why do I need a third currency between us?’ which is completely understandable. Sometimes it’s a liquid issue. Sometimes it’s a cost issue and it’s an efficiency issue,” he said.
The External Affairs Minister had said that several aspects had to be considered before a common currency became a reality.
“From time to time, people have raised that there should be a Brics currency but remember for countries to have a common currency, you need an enormous alignment of the very fundamentals of fiscal policies, the monetary policies, economical policies or even have to check the political policies,” he said.
Brics comprises Brazil, Russia, India, China and South Africa, Egypt, Ethiopia, Iran and the UAE.
TRUMP’S THREAT AND INDIA’S RELIANCE ON US DOLLAR
On Saturday, Trump said if the Brics nations went ahead with developing its common currency to replace the US dollar, they “should say goodbye to America” and “should find another sucker”.
“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 US dollar or, they will face 100 per cent tariffs, and should expect to say goodbye to selling into the wonderful US economy,” he wrote on Truth Social.
“They can go find another sucker. There is no chance that the Brics will replace the US dollar in international trade and any country that tries should wave goodbye to America,” he said.
Trump’s statement assumes significance as the US dollar is by far the most-used currency in global business and has survived past challenges to its pre-eminence. Some Brics members and other developing nations say they are fed up with the US’s dominance of the global financial system.
India is one of the few countries within the Brics that is performing well economically on its own merit, and it sees no compelling reason to support a common currency that could potentially undermine its economic stability.
Along with concerns over Trump’s protectionist policies, India is wary of China’s increasing influence within the Brics and the potential for Beijing to use the bloc to further its own economic and geopolitical agenda.
The US dollar remains critical for trade in many emerging economies, and India’s own trade and financial transactions are heavily dependent on the dollar.
Another reason for India’s reluctance to bat for a Brics currency is that it does not want to risk its lucrative trade deals with Western powers by endorsing a currency that is seen as a challenge to the US dollar. This cautious approach reflects India’s desire to maintain a balanced foreign policy and avoid making such moves that could jeopardise its economic and strategic interests in the long run.