As the global geopolitical and economic landscape is up in the air, US President-elect Donald Trump is the talk of the town for his bold threats to BRICS. He, in his social media post, warned BRICS nations to withdraw from their plan to challenge Dollar dominancy by reversing their project to form a new BRICS currency and alternative financial system or face 100% tariffs on their exports to the US market.

Due to its overblown nature, the statement has been a hot topic of discussion among experts over its plausibility and potential repercussions.  The question arises in the mind: is it a strategic move or a simple bluff? To understand this threat and its implications, one must understand the economic and political dynamics between the US and BRICS.

BRICS nations’ efforts to challenge Dollar dominance with a new currency threaten US economic supremacy, sparking Trump’s tariff threats.

BRICS is an intergovernmental organization that aims to enhance economic and political coordination among its members. Initially, BRICS consisted of five members namely Brazil, Russia, India, China, and South Africa, but now the organization has expanded by accepting joining requests of four other countries that are Iran, United Arab Emirates, Egypt, and Ethiopia. BRICS, a coalition of emerging economies, represents around half of the world’s population, accounts for approximately 37% of the world’s GDP, controls around 40% of oil exports and production, and shares around 28% of the world’s economic output.

Over the years, BRICS nations have sought to decrease their dependency on the US Dollar, which has dominated the global economy since the Second World War. In this regard, BRICS has established the New Development Bank (NDB), proposing to trade local currencies and create a group’s own currency. These efforts, if actualized, are a serious challenge to the Dollar’s hegemony and the entire US economic power. Therefore, the US is frustrated with BRICS’ new proposals and expansion.

Trump’s Tariff Threat: What’s Behind It

Trump’s 100% tariffs threat seems more rhetoric than practical. However, it appears this rhetoric has some political agenda behind it. It might be a simple attempt to align this rhetoric to Trump’s ‘America First’ agenda, built to attract a domestic base by portraying himself as a defender of Americans’ economic interests.

Likewise, Trump’s statement can be seen as a pressure tactic to reassert US dominancy in shifting global order where emerging economies are gaining more influence. By instilling a sense of urgency and contention, Trump seeks to jeopardize the group that threatens US interests while mobilizing all domestic and international actors to negotiate on terms favorable to the US.

Trump’s strategy is highly consistent with his approach of using aggressive statements to put himself in a position to be seen as a decisive and strong leader in the eyes of supporters and opponents. His recent statements regarding subsidizing Mexico and Canada are cases in point. In this regard, prominent economists largely agree that, given the integration of economies, imposing punitive tariffs on BRICS nations will have severe consequences not only for BRICS countries but also for the US itself and the entire global economy.

A tariff war with BRICS could disrupt global supply chains, inflate costs, and harm US businesses and consumers.

To understand the scenario, take the example of China’s exports to the US. In 2023, China’s exports to the US were recorded to be around USD 501.22 billion, ranging from electronics to consumer goods. Imposing up to 100% tariffs on such imports would substantially increase costs for American businesses and consumers, leading to inflationary pressure.

Likewise, Brazil is a major exporter of Agricultural products such as coffee, sugar, and orange juice to the US. According to a Trading Economies website report, Brazil’s exports to the US were around USD 37 billion in 2023. Similarly, India, another key BRICS member, exports 40% of its pharmaceutical products worth around USD 9 billion to the US.

Imposing heavy tariffs on these countries will increase prices for businesses and consumers and impact concerned sectors significantly. Therefore, Trump’s threat to BRICS nations can be seen through his negotiation style, which often involves making high demands to acquire concessions. However, the effectiveness of Trump’s tactic against BRICS nations with alternative markets and growing intra-group trade is questionable.

Response from BRICS Nations

Given Donald Trump’s threats, Russia has reacted to his statement by saying that it can backfire on the US. The Kremlin’s reaction stresses the potential risks of provoking BRICS. However, India has taken a back foot position on the new BRICS currency after Trump’s threat to BRICS. In a statement, the Governor of the Reserve Bank of India, Shaktikanta Das, stated that De-Dollarization is certainly not their objective.

The official response from other BRICS members is yet to come. However, in responding to previous threats by Trump on Chinese exports, the spokesperson of the Chinese embassy in Washington DC told BBC that no one is the winner in the trade war or tariffs war because China-US economic and trade cooperation is mutually beneficial in nature.

Global Economic Implications of US-BRICS Potential Tariffs War

The potential tariff war between the US and BRICS nations will likely spark a global economic jolt. This is because industries such as electronics and renewable rely heavily on Chinese rare earth metals, which can face severe disruptions. Brazil’s agricultural products exports to the US market could also affect its agrarian sectors.

Moreover, with India’s 40% pharmaceutical consumption in the US, the issue of disruption in the critical supply chain may erupt if tariffs are doubled. These illustrations suggest the widespread repercussions for multiple sectors, making the proposed tariffs a risky gamble for all stakeholders involved.

Trump’s rhetoric aligns with his “America First” strategy but is likely a bluff aimed at gaining leverage in global economic diplomacy.

Globally, the tariff war can also impact the global supply chain, given the integration of BRICS nations into the world economy and supply chain. Second, it can also spark inflation worldwide. The higher the cost of imports, the higher the prices for goods. This will lead to a reduction in consumers’ purchasing power parity and potentially slow down economic growth.

According to the Peterson Institute for International Economics report, the tariffs imposed by Trump in his first presidential term cost around USD 1277 for the average American household annually. If Trump doubles these tariffs, the potential cost can exceed USD 2600 per year. Lastly, this tariff war also has a geopolitical dimension that cannot be left unexplored.

Donald Trump’s new tariffs on the BRICS group will likely intensify further division between the Global South and North, with many developing nations aligning them with BRICS against US economic imperialism. This fragmentation can undermine global collective efforts to address transnational challenges such as Climate Change.

Why Trump’s Tariffs Threats are Bluff Only

Given the potential repercussions, it appears that Trump’s threats are mere bluff rather than a concrete strategy. The US economy, already facing diverse challenges such as inflation and debt, cannot afford the impacts of a new trade war with BRICS. Second, congressional approval is needed to impose such heavy tariffs, which seems unlikely given the bipartisan support needed to maintain stable trade relations.

Third, Trump had a history of such bluff during his first presidency. For instance, he threatened to withdraw the US from NATO, creating significant problems among allies. Ultimately, the threat was used as a bargaining tool to push members to raise their defense spending.

This suggests that Trump uses bold proclamations to achieve its strategic objective without necessarily following through on them. By threatening BRICS nations, Trump probably aims to portray himself as a defender of US interests without intending to follow them.

Trump’s threat to impose 100% tariffs on BRICS nations speaks of a confrontational approach to economic diplomacy. Nonetheless, the plausibility of such a move remains debatable due to its potential to detriment the US economy and provoke a united response from BRICS.

Constructive dialogue, not threats, can better address US concerns while preventing further polarization in the global economy.

While the threat may be an act to deter BRICS from challenging Dollar supremacy, it also risks accelerating BRICS efforts to make an alternative financial system. Rather than threatening, US interests can be better served by engaging in constructive dialogue and cooperation.

This includes measures such as supporting the expansion of the National Development Bank (NDB) to initiate collaborative projects, promoting bilateral trade agreements that respect collective interests, and actively engaging in global financial and institutional reforms to address legitimate grievances of developing states.

These efforts can prevent further polarization in the global economy. In today’s highly integrated global economy, unilateral actions and threats are gambles that no state can afford to bear their repercussions.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.