The whole concept of de-dollarization has been a highlight of 2024. Several countries came together to stress this initiative. The BRICS nations, which include Brazil, Russia, India, China, and South Africa, have lured more governments to be a part of this move. Amidst this growing interest in de-dollarization, Donald Trump stepped up to save the greenback. But the real question is if the president-elect can really make a difference.
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Donald Trump’s Threats Against De-Dollarization
The US president-elect had threatened to slap 100% tariffs on a group of nine countries if they develop a currency that is competitive with the US dollar. Trump ran on a platform to enact broad tariffs during the US election. He said,
“We require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy.”
Trump is all set to office later this month. So, what would it mean to impose tariffs against countries supporting de-dollarization? A domestic tax that is proportionate to the import’s value and imposed on products as they enter the nation is called a tariff. Therefore, a $50,000 automobile that is imported into the US and is subject to a 25% duty would cost $12,500.
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Is This Enough To Save The Greenback?
Trump’s measure would not help to stem the dollar’s decline. In addition, it is part of a larger tariff agenda that the president-elect appears ready to implement. Apart from being the preferred currency for international trade and finance, the US dollar continues to be the most significant medium of exchange. It also plays a prominent role as an efficient store of value. Central banks also hold foreign exchange reserves in order to guarantee a consistent supply of imports, protect against currency crises, and guard against macroeconomic instability.
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But de-dollarization is speeding up as the global economic center of gravity moves to the east. While the initiative is moving rather slowly, the US will have to do a lot more than imposing tariffs.