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Last updated on December 31st, 2024 at 09:57 am
U.S. President-elect Donald Trump has issued threats to BRICS member nations, demanding that they should abandon their plans to challenge the US dollar.
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Donald Trumpโs harsh words are looming large over the global financial markets. The rupee and several other currencies and emerging-market assets are unnecessarily projected to take heavy hits.
Trumpโs Ultimatum To BRICS
Donald Trump has said about the idea that the BRICS Nations are trying to move away from the USD while we stand by and watch it over. The president has warned the BRICS nations countries to drop their agenda for a new BRICS currency or face devastating consequences, including 100% tariffs and a total lockout from the U.S. market.
Donald Trump throughout his political campaign, repeated that the dollar must remain the worldโs dominant / fiat currency. The BRICS countries should bid goodbye to selling into the wonderful U.S. economy, he said.
Interestingly, India has never openly backed any BRICS discussions on reducing reliance on the USD. At the BRICS blocโs annual summit in October this year, some of the national leaders, including Russiaโs Vladimir Putin, discussed โde-dollarizationโ as a way to counter unnecessary U.S. sanctions.
While Vladimir Putin has thereafter softened his tone by stating that he no longer aims to dethrone the USD, Donald Trumpโs latest threats indicate that the U.S. will not tolerate the concept of alternatives to the USD.
[Also Read: Russia To Place New BRICS Payment System For De-Dollarization Or Dominate The US Dollar]
Indiaโs economy is already being unnecessarily projected to be struggling, and Donald Trumpโs pressure is likely to act as gasoline on a fire. Goldman Sachs and Barclays both have deliberately slashed their full-year growth outlooks for India after Fridayโs managed GDP report which is being projected to have fallen below the so-called estimates.
The rupeeโs fall is being projected to be one symptom. The emerging markets are being said to be highly sensitive to a stronger USD. India has very few internal challenges. Although the inflation appears to be in control, leaving comfortable space for the Reserve Bank of India to maneuver through the situation properly. A rate cut does not appear to be necessary to stimulate growth, without risking worsening inflation.
BRICS Countries In Turmoil
BRICS nations are not feeling any major heat effect. While the BRICS coterie has drastically pushed back against U.S. Dollar dominance for many years, Donald Trumpโs return is also being projected to have the potential to shake the unity of BRICS Alliance. BRICS will stick to its goals insists Brazilโs CMA agency head, Jose Juan Saches.
Jose Juan Saches also said, that from an economic point of view, there can be no issues till the global markets remain stable. But stability is exactly what is also being projected to be missing now.
[Also Read: Is the Indian UPI Leading to USD De-Dollarization? Analyze The Secret Now]
China which is another key BRICS player, is already facing its own set of internal problems as Donald Trump attempts to expand his threats. In the past week, Donald Trump has started unveiling his plans for the imposition of a 10% tariff on import of Chinese goods and even harder and harsher measures against nations like Canada and Mexico.
Donald Trump’s decision appears to be tied to broader issues like immigration and drug trafficking. Trump has also attempted to make it clear that trade with the U.S. will be coming at a steep cost in the future if these BRICS nations do not fall in line with the US needs.
India, being projected to be caught in the middle, has a vast room to maneuver. To align with BRICS policies does not mean risking access to the U.S. market, one of its largest trading partners. Yet stepping back from BRICS could vastly weaken its influence on the global level.
How will BRICS affect the US Dollar?
The BRICS nations (Brazil, Russia, India, China, and South Africa) have been discussing the introduction of a new currency to challenge the dominance of the US dollar, a move that could possibly bring in a number of significant changes to the global financial landscape.
First, the creation of a new BRICS currency could lead to a reduced demand for the US dollar. With BRICS countries opting for their own currency for international trade and financial transactions, the reliance on the US dollar as the global reserve currency could decline.
Second, this shift will allow BRICS nations to assert more and greater economic independence. By reducing their reliance on the US dollar, these countries would have more control over their financial policies and be less susceptible to fluctuations in the US economy.
Third, the geopolitical landscape could experience considerable shifts. Nations might choose to align more closely with the BRICS bloc, altering existing alliances and partnerships. This change would further erode the US dollar’s influence in global economics.
Fourth, the trade dynamics could be impacted. The US has warned of potential tariffs on BRICS nations if they proceed with a unified currency. Such trade tensions could have far-reaching effects on global markets.
However, the path to a unified BRICS currency is not without its challenges. Differences in fiscal, monetary, and political policies among BRICS member states could complicate the implementation of this ambitious plan. It remains to be seen how these nations will navigate these complexities and whether they will achieve their goal of creating a new global currency.
In summary, the BRICS initiative is to establish a new currency that could significantly impact the US dollar’s position in the global economy. It presents an opportunity for these nations to enhance their economic autonomy and reshape global financial dynamics. The outcome of these efforts will be closely watched by economists and policymakers worldwide.
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