US President-elect Donald Trump’s threat to levy 100 per cent duty on imports from Brics+ nations, if they chose to float an alternative global reserve currency to the US dollar, is premature and does not take into account ground realities.
The dollar is still the most widely used currency in the world. Eighty eight per cent of foreign exchange transactions take place in the dollar, 58 per cent of foreign currency reserves are held in the dollar, and 54 per cent of exports are paid in dollars. The Brics+ group’s share of global merchandise exports stood at 23.3 per cent in 2023, which is still less than the G7’s share of 28.9 per cent. Nearly 65 per cent global corporate funding happens in the dollar.
Though the attempt of Brics+ to launch a reserve currency as an alternative to the dollar is seen as the most serious threat to dollar hegemony after the launch of the Eurozone’s single currency in 1999, the dollar is unlikely to be dislodged from its prime position any time soon.
The internal disagreements in Brics+ bloc are also likely to pose a serious challenge to the de-dollarisation project as no one, especially India, would like to subscribe to a China-led finance order. At the most, these countries could diversify trade settlements and reserves by promoting local currency and gold to avoid a situation that Russia landed in after its war against Ukraine.
Even if Brics+ does launch its common reserve currency, Mr Trump cannot impose 100 per cent duty because Brics holds 37 per cent of global GDP. If Mr Trump makes good on his threat, it will upend the American economy by shooting up its prices of most of the products that US citizens use. A higher inflation as a consequence would to lead to a fall in the US dollar value, hastening the de-dollarisation of the world.
