Relevance : GS 2(International Relations )
Context
- Event: U.S. President-elect Donald Trump threatens 100% tariffs on BRICS nations if they undermine the dollar.
- Stakeholders: BRICS includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the UAE.
Dollar Dominance
- The U.S. dollar accounts for 58% of global foreign exchange reserves.
- It remains the default currency for major commodities like oil.
BRICS Intentions
- BRICS nations aim to reduce dependency on the dollar.
- Proposals for a new BRICS currency are seen as a potential challenge to the U.S.-led financial system.
Trump’s Response
- Threat of 100% tariffs to deter BRICS from introducing an alternative currency.
- Consequences: Loss of access to the U.S. market for non-compliance.
Russia’s Position
- Accuses the U.S. of “weaponising” the dollar to impose unilateral sanctions.
- Advocates for an alternative system to SWIFT, enabling bypass of Western sanctions.
Implications
- Short-Term: The U.S. dollar’s dominance is secure.
- Long-Term:
- Growing GDP share of BRICS strengthens their influence.
- Adoption of non-dollar trade currencies may gradually erode the dollar’s global role.
