On January 21, 2025, President Donald Trump issued a stark warning to BRICS nations—Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the UAE—threatening to impose 100% tariffs on their exports to the United States if they attempt to replace the US dollar in global trade. Trump stated, "If the BRICS nations want to do that, that's okay, but we're going to put at least a 100 percent tariff on the business they do with the United States" [6a432f68]. This executive order follows Trump's earlier remarks on November 30, 2024, where he called for BRICS countries to refrain from creating an alternative currency to the dollar, emphasizing the importance of maintaining the dollar's dominance in global trade [fb585a5c].
Economists at the World Economic Forum in Davos, Switzerland, warned that Trump's threats may accelerate countries' moves away from the US dollar. Kenneth Rogoff from Harvard noted that such threats reinforce the incentive for nations to diversify their currency reserves [3873a827]. Raghuram Rajan from Chicago University expressed skepticism about the feasibility of a common BRICS currency, citing geopolitical tensions among member states [3873a827]. Meanwhile, Jin Keyu from Hong Kong University highlighted the yuan's growing role in trade invoicing, becoming the fourth most popular currency in interbank payments in 2024, with over 4% market share, supported by China's Cross-Border Interbank Payment System (CIPS) [3873a827].
The BRICS bloc has been exploring de-dollarization since the 2022 sanctions on Russia, with discussions at the October 2024 summit in Kazan, Russia, about a shared currency. The bloc's leaders have expressed varied reactions to Trump's threats, with Russian President Vladimir Putin advocating for alternatives to the dollar [abb3ce91]. In response to Trump’s warning, India’s External Affairs Minister S. Jaishankar reiterated India’s stance against de-dollarization, emphasizing that there is no proposal for a BRICS currency and that India does not support abandoning the dollar [6a432f68].
The ongoing competition between the G7 and BRICS alliance to challenge the US dollar's dominance is heating up, with recent developments highlighting the geopolitical tensions surrounding currency use. Central Banks of BRICS and other developing countries, including several African nations, are actively diversifying their reserves by buying more gold and reducing their holdings of the US dollar. Countries such as Zimbabwe, Madagascar, Nigeria, Tanzania, Uganda, and South Sudan have taken steps to increase their gold reserves to protect themselves from currency losses and the risks associated with the growing US government debt. The Central Bank of Uganda has unveiled a program to purchase gold from local artisanal miners, while the Tanzanian government plans to spend $400 million to purchase six tonnes of gold and limit the use of the US dollar within the country [a3049c1a].
In a recent analysis, economist Mohamed El-Erian warned that the US dollar is losing its dominance as foreign central banks are increasingly buying fewer Treasury securities and holding more gold. This de-dollarization trend is particularly driven by nations in the Global South, especially within the BRICS alliance. El-Erian noted that the price of gold has risen 40% in the past year, reflecting a growing preference for gold over the dollar among these countries. He highlighted that foreign ownership of US Treasury securities has fallen from 34% in 2015 to about 23-24% in 2024, with China’s holdings dropping from over $1.3 trillion in 2014 to less than $800 billion in 2024 [d0b69fd2].
Kremlin spokesman Dmitry Peskov warned that any US attempt to force countries to use the dollar would backfire, reflecting the growing sentiment among BRICS countries to explore alternatives to the dollar, especially in light of Western sanctions on Russia, which have accelerated discussions on a common currency within the bloc [ca02a00f].
Trump's warning came in light of ongoing discussions among BRICS countries about a potential single currency, which were highlighted during the BRICS summit in Johannesburg in August 2023 and again in Kazan, Russia, in November 2024. At the Kazan summit, Russian President Vladimir Putin posed with a mock-up BRICS bill, and the Kazan Declaration welcomed local currencies in trade. India has operationalized local currency settlements since 2022, reflecting a cautious approach to the ongoing discussions about de-dollarization within the BRICS framework [c32af08d].
Despite the discussions around a common BRICS currency, recent analysis suggests that BRICS states, which account for 24% of global GDP and 16% of global trade, are unlikely to significantly reduce their dependence on the US dollar, which currently constitutes 59% of global central bank reserves. The US dollar remains dominant in global transactions, accounting for 84% of them. Russian President Vladimir Putin has described the idea of a BRICS currency as a long-term prospect, indicating that immediate changes are not anticipated [6e1ad2be].
The push for diversification of world currency reserves has intensified since the 2008 financial crisis and escalated post-2022, particularly highlighted by the recent BRICS Summit in Kazan. The BRICS group has expanded to include Iran, Egypt, Ethiopia, and the UAE, with Turkey, Azerbaijan, and Malaysia applying for membership. Nearly 50 countries have expressed interest in joining BRICS, signaling a shift in global economic dynamics [31147a47].
Several African countries, including Nigeria, Uganda, Zimbabwe, Tanzania, South Sudan, and Madagascar, are increasing their gold reserves and purchasing gold domestically due to concerns over the stability of the US financial system and the weaponization of the US dollar. The move is driven by rising inflation, escalating debt levels, and geopolitical tensions. South Sudan, Uganda, Tanzania, Nigeria, and Madagascar have implemented strategies to boost their gold reserves, including launching domestic gold-buying programs and repatriating existing gold reserves. Economic analysts suggest that these strategies are a response to domestic economic issues and a precaution against potential future risks, such as a rise in gold prices or a decline in the value of the US dollar [abb3ce91].
Recent statistics reveal that the US dollar's global influence is declining, currently constituting 58% of global currency reserves and 54% of export invoicing. BRICS nations, particularly Russia and China, are strengthening alliances and moving towards de-dollarization, with Russia now favoring the renminbi over the dollar. Since 2001, China has become the second-largest economy, surpassing the US in purchasing power parity (PPP) in 2017. The US economy remains nominally larger, but trends suggest a potential shift in economic dominance. Sanctions against Russia have increased gold's importance as a stable reserve asset, prompting BRICS countries to boost their gold reserves. A total of 43 countries have expressed interest in joining BRICS, which could create the largest political and economic bloc, accounting for over 50% of global GDP and 71% of the world’s population [037a8ecb].
Furthermore, prominent figures like Ron Paul and Brazilian President Luiz Inacio Lula da Silva have voiced concerns regarding the US dollar's dominance since the Bretton Woods Agreement in 1944, suggesting that its era may be nearing an end. The BRICS bloc is proposing an alternative trading currency, potentially backed by gold, to stabilize global finance. South Africa's BRICS ambassador, Anil Sooklal, advocates for a multipolar financial world, while Saudi Finance Minister Mohammed al-Jadaan has expressed openness to non-dollar trading. Economists warn of inflation risks if dollars return to the US, highlighting the potential implications of a shift toward a BRICS currency [792c4964].
In light of these developments, the BRICS alliance is exploring alternative payment systems, including the potential for a gold-backed blockchain card, as discussed in their recent meetings. The BRICS Pay initiative aims to challenge the SWIFT network and reduce reliance on the US dollar, especially following the exclusion of Russian banks from SWIFT after the Ukraine invasion. Analysts like Ramesh Vaidyanathan predict that BRICS Pay could transform world trade, while others like Michael Diaz express skepticism about the effectiveness of BRICS de-dollarization efforts. With BRICS representing 45% of the global population and 35% of GDP, the potential for increased US tariffs and sanctions under the incoming Trump administration could further motivate BRICS to coordinate policies to diminish the dollar's dominance [f4a67100].