Former RBI Governor Duvvuri Subbarao expressed uncertainty over the feasibility of President-elect Donald Trump’s warning to impose 100 percent tariffs on BRICS countries that attempt to move away from the US dollar. He noted that it remains unclear whether US laws would allow such drastic measures.
Subbarao added that internal differences within the BRICS bloc, which includes India, Russia, China and Brazil, complicate the creation of an alternative to the US dollar. A unified BRICS currency remains unlikely due to both political and economic challenges.
"Trump's threat to impose 100 percent tariffs on imports from countries abandoning the dollar, particularly targeting BRICS nations, seems more like rhetoric than an actual policy threat," Subbarao told PTI. "He's known for making bold statements without necessarily acting on them."
While Russia and China have pushed for alternatives to the US dollar, such as a common BRICS currency, India has yet to join these efforts. "It’s unclear how far Trump would go in carrying out this threat. What criteria would the US use to determine if a country has moved away from the dollar? And can American law justify sanctions on nations simply for de-dollarizing?" Subbarao questioned.
The BRICS group, established in 2009, is the only major international alliance excluding the United States. Besides the primary members — India, Russia, China, and Brazil — it includes South Africa, Iran, Egypt, Ethiopia, and the UAE.
The former governor explained that, while a common BRICS currency could protect the group from dollar dominance, the idea faces significant hurdles. "The project is unlikely to succeed due to both political and economic reasons," he said. "It's unrealistic to expect countries, especially India, to relinquish control over their monetary policy and subject themselves to a currency vulnerable to instability within the bloc."
Subbarao said that while the costs of moving away from the dollar are high for both China and India. China is better positioned due to its extensive trade relationships and Belt and Road Initiative (BRI) projects in emerging markets. Over the past decade, China has made significant strides in internationalising its currency, the RMB, with a large portion of its trade conducted in this currency.
In contrast, India’s relatively small share in global trade means it still heavily relies on hard currencies like the US dollar for investment and trade. He also warned that China’s economic dominance would likely make it the leading force in any BRICS currency initiative.
"Despite the talk of a new world order, it would be ironic if BRICS members, in their bid to escape dollar dominance, were to fall under the influence of an authoritarian regime with questionable institutional integrity and rule of law," Subbarao added.
Trump's stark warning
President-elect Donald Trump has issued a stark warning to the BRICS nations — Brazil, Russia, India, China, and South Africa — that any effort to sideline the US dollar in global trade will come at a steep cost. In a post on his Truth Social platform, Trump declared, “The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER.”
Trump’s message was clear: abandon plans to create an alternative currency or risk severe economic retaliation. “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 U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” he warned.