By Qamar Bashir
I recently contributed an article titled "Looming Challenge to Dollar Dominance," and
soon after its publication, the U.S. 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 U.S.
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 U.S. 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 U.S. 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. U.S. 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 U.S. exports, it would
reduce the competitiveness of U.S. 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 U.S., 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 U.S.
market would hurt their export-driven industries, particularly in China and Brazil. Higher
tariffs on U.S. 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 U.S. 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 U.S. and BRICS nations
would effectively exacerbate inflation, disrupt global supply chains, and reduce industrial
output, ultimately undermining their own economic strength. For the U.S., 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 U.S. 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 U.S. 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 U.S. and BRICS exporters. Key industries, such as U.S.
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 U.S. economy and address global economic
concerns. Instead of imposing tariffs, which are regressive and self-defeating, the U.S.
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 U.S. 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.’
