I recently contributed an article titled “Looming Challenge to Dollar Dominance,” and soon after its publication, the US President-elect Donald J. Trump issued a bold and threatening statement. He warned that if any or all members of BRICS pursued business in any currency other than the dollar, he would impose a 25% tariff on imports from those countries. This is an extremely loaded and alarming statement, seemingly made without thorough background research, consultation, or evaluation.
It appears that Trump may be either overestimating the power of the mighty US economy or underestimating the collective strength of the BRICS member countries. Alternatively, it is possible that, deep down, he had no real intention of implementing such a drastic measure, fully aware that in an interconnected global economy, exports are just as critical as imports to maintain economic stability. Such a move would risk destabilizing commodity prices, exacerbating inflation and igniting public discontent. History shows that economic mismanagement of this scale can lead to widespread protests, creating immense pressure on the government, and, in the worst-case scenario, result in its downfall.
He must be knowing that BRICS is one the most powerful block. The BRICS nations—Brazil, Russia, India, China and South Africa—represent approximately 3.7 billion people, nearly 46% of the global population. Together, they hold a combined GDP of $27.6 trillion as of 2023, accounting for 26.3% of the world’s economic output. In global trade, the BRICS countries contributed 20.2% of merchandise exports in 2022, with China leading as the largest exporter and collectively they play a significant role in global imports. In 2023, the BRICS nations—collectively exported approximately $578 billion worth of goods to the United States, with China accounting for the majority at around $427 billion. Conversely, the US exported goods valued at about $151 billion to these countries, with significant exports including pharmaceutical preparations, gem diamonds, crude oil and cotton apparel. If the US imposed a 25% tariff on imports from BRICS countries, it would significantly impact inflation, industrial costs and overall economic output. The higher tariffs would increase the cost of goods like electronics, machinery, textiles and agricultural products, driving up consumer prices and fueling inflation. US industries reliant on imports from BRICS countries would face higher production costs, reducing profitability and competitiveness in global markets. The ripple effect would likely slow economic growth as consumer spending diminishes and industrial output declines due to costlier inputs.
Conversely, if BRICS countries imposed reciprocal tariffs on US exports, it would reduce the competitiveness of US goods in key BRICS markets, leading to a decline in export volumes. This would particularly affect industries such as agriculture, pharmaceuticals and machinery, which rely heavily on BRICS consumers. The combined tariffs would disrupt global supply chains, increase costs for businesses and create logistical challenges. In the US, these changes could lead to job losses in export-driven sectors, further dampening economic activity and reducing GDP growth. BRICS countries would also face economic setbacks, as reduced access to the US market would hurt their export-driven industries, particularly in China and Brazil. Higher tariffs on US goods, such as advanced technology and pharmaceuticals, would raise costs for consumers and industries in BRICS nations. Additionally, these countries might experience slower GDP growth and job losses in export-oriented sectors.
This strategy represents a clear lose-lose situation where both the US and BRICS countries would suffer significant economic harm, with ripple effects lowering the quality of life for people in both regions. By resorting to tariffs, the US and BRICS nations would effectively exacerbate inflation, disrupt global supply chains and reduce industrial output, ultimately undermining their own economic strength. For the US, industries reliant on BRICS imports would face higher production costs, while reduced exports to BRICS markets would hurt key sectors like agriculture and technology. Similarly, BRICS nations would lose access to the lucrative US market, damaging their export-driven economies and slowing growth. The resulting global price wars, market distortions and overcapacity would not only strain businesses but also erode consumer purchasing power, worsening living standards across the board. If the US and BRICS countries imposed 25% tariffs on each other’s imports, both sides would face a surplus of goods, leading to aggressive dumping in other markets. This competition to offload surplus products would trigger price wars in global trade, compressing profit margins for US and BRICS exporters. Key industries, such as US agriculture and BRICS manufacturing, would experience reduced revenues, overcapacity and potential job losses. The economic strain would slow industrial output and GDP growth in both regions, while geopolitical tensions could escalate as global trade dynamics become more fragmented.
Other countries, particularly in Africa, Latin America, Southeast Asia and Europe, would benefit from lower prices and increased access to surplus goods, stimulating economic activity and lowering input costs for local industries. However, this influx of cheap goods might pressure local businesses unable to compete, risking closures and job losses in vulnerable sectors. Over time, the short-term benefits of affordable goods could give way to global economic imbalances and market volatility, highlighting the interconnected nature of trade and the long-term risks of protectionist policies.
Trump’s approach is also akin to conceding defeat, reflecting a lack of proactive and forward-thinking measures to enhance the US economy and address global economic concerns. Instead of imposing tariffs, which are regressive and self-defeating, the US should focus on strengthening its economic resilience, boosting industrial innovation and reinforcing the dollar’s position as the preferred currency for international transactions. Addressing the legitimate concerns of BRICS countries regarding the dominance of the dollar in global trade through dialogue and reforms could foster greater economic cooperation and stability.
Investing in infrastructure, renewable energy, advanced manufacturing and technology-driven solutions would not only bolster the US economy but also demonstrate leadership in addressing global economic challenges. Such an approach would encourage mutual prosperity rather than deepening divisions, making it a more effective and sustainable strategy than the imposition of tariffs. “One of my learned journalist colleagues, Agnes Zhao, while commenting on Trump’s statement, said, ‘Trump always says much; let us see what he will do.’”
—The writer is a former Press Secretary to the President of Pakistan.
