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President-elect Donald J. Trump warned that he would implement tariffs on nations that try to replace the dollar in trade or weaken its position as the global reserve currency. This could potentially speed up the search for alternative currencies.
Written by Alan Rappeport
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During the summer, Republicans selected Donald J. Trump as their presidential candidate and their party’s platform included a promise to uphold the United States dollar as the global reserve currency.
After winning the election, President Trump has expressed his intention to fulfill this pledge. In recent days, he has stated that if the BRICS countries (Brazil, Russia, India, China, South Africa) attempt to establish a new currency to compete with the dollar, he would impose 100 percent tariffs on them and restrict their access to U.S. markets.
Mr. Trump stated on social media that there is no possibility of the BRICS replacing the U.S. Dollar in global trade, and any country attempting to do so should be prepared to face consequences from America.
The warning was given to protect the dollar’s top position, but experts believe it could actually have the opposite outcome. While it seems improbable that the BRICS nations would establish their own currency, the US’s aggressive use of tariffs and sanctions is leading other countries to explore alternatives to the dollar. If President Trump continues to make such threats, he may speed up this shift away from the dollar.
Eswar Prasad, the former head of the China division at the International Monetary Fund, stated that threatening retaliation over the possibility of a BRICS currency being created only confirms other countries’ fears about the U.S. using the dollar as a weapon for economic and geopolitical purposes. This could lead to an increase in efforts by other countries to reduce their reliance on the dollar for international payments and foreign exchange reserves.
For approximately 100 years, the dollar has been the most powerful currency globally and has been designated as the main reserve currency since the conclusion of World War II. It accounts for the largest portion of foreign exchange reserves stored in central banks worldwide and is commonly utilized in international trade and borrowing activities.
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