Donald Trump has reignited global economic tensions with a stark warning to BRICS nations: a 100% tariff if they undercut the US dollar in global trade. The former president, set to retake office in January, issued a direct message to BRICS—Brazil, Russia, India, China, and South Africa—demanding a commitment to avoid challenging the dominance of the dollar or face severe economic consequences.
“The idea that the BRICS countries are trying to move away from the Dollar while we stand by and watch is OVER,” Trump declared in a scathing online post. “They will face 100% tariffs and say goodbye to selling into the wonderful US economy.”
The President-elect suggested that the BRICS countries can go find another "sucker", but the group won't be able to replace the dollar in international trade with another currency.
China, a central player in BRICS, now faces a critical question: how to respond to another potential trade war with the United States. Six years after the first US-China trade war under Trump, Beijing has expanded its arsenal of economic tools, but its options come with significant risks.
China could strike at the heart of US financial stability by offloading its $734 billion stockpile of US Treasury bonds. Such a move would disrupt global markets and drive up US bond yields. However, it risks reducing the value of China's own foreign-exchange reserves and weakening its financial leverage.
China has already reduced its direct holdings of US debt by over a third since 2017, partly shifting investments to avoid potential freezes, as seen in Russia after the Ukraine invasion.
Another response could involve weakening the yuan, which would make Chinese exports more competitive. During the previous US-China trade conflict, the yuan’s devaluation offset about two-thirds of the tariff hikes. Analysts suggest a similar move could counter Trump’s proposed tariffs, though it risks triggering capital outflows and further straining foreign investor confidence.
China may also restrict exports of rare minerals, as it did with gallium and germanium earlier this year, targeting key industries like semiconductors and electric vehicles. This would temporarily disrupt US access to essential materials but could accelerate efforts to diversify supply chains away from China.
Beijing could wield its “unreliable entity list” or the “anti-foreign sanctions law” to target US businesses in China. Companies like Apple and Tesla, which generate significant revenue from the Chinese market, could face operational disruptions or consumer boycotts, escalating tensions further.
China has increasingly sought to strengthen ties with traditional US allies like Japan, India, Germany, and Australia, while solidifying its partnership with Russia. Aligning with these nations could help blunt the impact of any US-led economic offensive.
Trump’s tariff threats may deepen existing tensions, but Beijing’s retaliatory options are fraught with risks, from market disruptions to economic fallout at home. With both sides positioned to escalate, the global economy could face another turbulent chapter.