Trump's Tariff Threat to BRICS Over Dollar Alternative... Again.

De-dollarisation or not? Trump threatens tariffs again, this time of 150%, on BRICS for seeking alternatives to the Dollar.

This morning, President Trump once again alluded to the possibility of imposing tariffs on the BRICS countries, with a proposed increase from 100% to 150%, in light of the apparent lack of response from this group of nations to previous threats. It appears there may be some confusion about the BRICS' intentions, as they have not expressed a desire to create their own currency, nor using the Chinese Yuan, nor have they indicated any inclination to pursue a competitive exchange rate with the dollar. This is a topic that was previously explored by our contributor

Megas Alexandros

in an article that we believe offers valuable insights into the current situation.

Is Donald Trump clueless, or is just faking it?"

This is a question that nags economists and politicians around the world, who can no longer keep up with the contradictory nature that characterizes every measure of trade with other countries, undertaken or threatened by the American Tycoon, as soon as he set foot in the White House.

The tariffs, thrown by Trump like dice on the table where the world's trade game is played, are making all those rulers whose main task in government is to keep the money supply low. Which we know very well is aimed at increasing general indebtedness to keep the economy in that constant recessionary state to facilitate the looting of the country by the few. The reference to Europe and its austerity policies necessary for the growth of elite income at working people's expense is not coincidental.

If we look today at everything Trump has done or threatens to do, net of a thought-out strategy that only time will confirm or not, it is clear how his actions stand out as contradictory.

Take, for example, what he declared, even before he took office, vis-à-vis BRICS Plus, about supposed 100% tariffs on their exports in case they created their own currency or renounced using the dollar.

A few days ago, after Trump responding to reporters' questions from the White House reiterated this intention of his, Russia's Deputy Foreign Minister, Sergey Ryabkov, intervened directly on behalf of the “group” of countries targeted by the threat to clarify the issue and reassure the U.S. president:

“The group is ready to explain to Trump that it doesn’t encroach on the dollar, but simply draws conclusions from Washington's erroneous policy”.

The Russian Deputy Minister reiterated what President Vladimir Putin, too, had already made abundantly clear at the recent BRICS Plus meeting held in Kazan. There is no intention on the part of Russia, China, and their related countries to stop using the dollar as a means of payment, let alone the idea of creating a common currency.

Not only that, Ryabkov clearly pointed out to Trump, that the “group” is acting as a result of the wrong policy put in place by Washington. The reference, without a shadow of a doubt, is to the sanctions imposed on Russia by the West. An event that forced Putin's country and those who wanted to trade with him to organize alternative payment systems.

The best alternative, for those who know the subject, is national currencies. And that is what has happened!

If tomorrow, Trump and his government, return the ability to use the blocked dollar reserves to the sanctioned countries, it is clear that the latter will start using them again as they did before they were affected by the sanctions. The dollar as a means of payment and the world's reserve currency, is not a brake, as we have seen on the development of other countries' economies, contrary to what we have been told for years by those who support the “divinity” of the greenback.

Whether the world exchanges goods and services in dollars or other currencies, nothing changes in the fate of people that cannot be determined by the spending policies of their governments. The only effect we have is on the exchange rate value of the dollar against other currencies. If the world uses dollars, the dollar appreciates, it is the law of the market, net of any speculative maneuvers by those who have the strength to put them in place, of course, allowed by governments and central banks.

And here I cannot help but be reminded once again of the contradiction in this threatened measure by Trump against the BRICS, for the stated goal. Forcing the use of the dollar, as just demonstrated, goes in the direction of making the dollar appreciate, but a strong dollar at the same time, goes against what are Trump's intentions to rebalance the U.S. trade balance that is now in a heavy deficit. A strong currency creates big problems for those who want to export while easing imports.

If Trump really wanted to move his country back toward a mercantilist policy, he would have no other solution than to move toward a major devaluation of the dollar. To do that, it is not enough for Americans to stop buying goods and services from abroad, it is essential that the world stop buying dollars and financial assets in dollars. That is, for the dollar to stop being that world reserve currency that many, quite imaginatively and I would say somewhat conspiratorially, point to as a major cause of all the world's woes.

Understanding how contradictory it is to threaten the BRICS with tariffs if they do not use the dollar, we have to question why Trump keeps repeating this perspective if as shown it does not serve to reduce the U.S. trade deficit. It almost seems as if the Tycoon does this to ward off all those pressures coming from the power system inspired by neoliberal ideas that have long been pushing countries in the BRICS area to adopt a common currency. Which would make the Asian continent repeat the already disastrous experience in Europe with the Euro.

So, if we want to be optimistic and think of a hidden strategy, Trump's action, should it be aimed at avoiding this new economic and social disaster, would be a favor he is doing to that part of the world.

Going back to manufacturing in one's own country is never wrong on a strategic level, and I believe that during the Trump administration, this will happen to a greater or lesser extent. But to think that, the United States, which for decades has been the largest market for the world, might suddenly no longer be so, is pure fantasy and recklessness if it were a real goal of those who now lead the government in Washington. Just as it is equally unthinkable that the entire world would decide to stop using the dollar, which is the currency of what is still the largest country on the planet by economic size and consumption.

Of course, unlike two decades ago, today even Asia is beginning to have significant levels of consumption. Even China, a mercantilist country par excellence, has turned its economic policies around by directing them toward domestic consumption, with steadily increasing government deficits supporting demand within the country.

Those who have long since stopped consuming and growing financially on a widespread basis, on the other hand, are Europe, totally focused on keeping intact the financial rents of a small group of elected officials with “pages” in tow, destined for a “highlander”-model immortal path: “only one will remain!”

The European continent, which already has not consumed for decades, will cease to be useful to the world as soon as it also finds itself stopping production as a result of Trump's incoming tariffs. Perhaps at that time, we will realize the disaster created, but it will be too late.