What Trump’s 100 pc tariff threat to BRICS means for India, global trade

Former US President Donald Trump, now president-elect, has issued a stark warning to BRICS nations — comprising Brazil, Russia, India, China, and South Africa — threatening to impose 100 per cent tariffs on their exports, if they pursue an alternative currency to the US dollar.

Trump's post argued that the dominance of the dollar must remain unchallenged, with non-compliance leading to severe economic consequences for these nations.

This fiery rhetoric has raised significant questions about its implications for global trade and the geopolitical landscape.

Geopolitical and economic context

Economist Santosh Mehrotra, speaking on The Federal's programme Capital Beat, highlighted that the primary targets of Trump's threat are China and Russia. Both countries are leading efforts to diversify away from the dollar, especially amid economic sanctions on Russia following the Ukraine war. Trump’s threats are aimed at counteracting these moves, reinforcing US dominance in global trade and currency markets, he pointed out.

Also Read: Trump's 100% tariff threat to BRICS: Bluster or serious concern?

India’s role, Mehrotra noted, remains relatively peripheral in this confrontation. “India is not the key target,” he asserted, although the country could still face collateral consequences from broader US policies.

BRICS’ response and the new currency debate

At the 2024 BRICS summit in Kazan, Russia, discussions included a proposal for a new BRICS currency. However, the plan remains in its infancy.

Indian foreign minister S Jaishankar labelled it a long-term process requiring years of negotiations. Mehrotra affirmed this sentiment, noting that the dollar’s dominanc, currently facilitating 58 per cent of global trade — will not be easily displaced.

An alternative, already in practice, involves bilateral trade in local currencies, such as India-Russia oil trade and Brazil-China transactions. While this trend may grow, Mehrotra cautioned it will not fundamentally challenge the dollar in the short term.

Impact on India

India faces a dual challenge from Trump’s tariff threats and its own internal policies. Mehrotra highlighted how India’s rising tariffs over the past decade have already increased production costs, affecting the competitiveness of Indian exports. If the US imposes additional tariffs, it could further hurt India's trade prospects.

Also Read: Not sure if US law will permit Trump’s threat of 100% tariff on BRICS nations: Ex-RBI Guv

To mitigate these risks, Mehrotra urged policymakers to allow the rupee to depreciate in line with inflation rates. This would enhance the competitiveness of Indian exports, counteracting higher production costs caused by tariffs and domestic inflation.

Domestic and global lessons for India

India clearly must tread carefully within the BRICS framework, balancing its relationships with Russia, Brazil, and South Africa, while maintaining a cautious stance on China. Domestically, India must prioritise economic reforms to boost export competitiveness and avoid being overly reliant on protectionist policies.

Internationally, India has recourse through the World Trade Organization (WTO) to challenge unjust tariff impositions. Mehrotra emphasised the need for strategic diplomacy and legal avenues to safeguard India’s trade interests.

While Trump’s threats may seem like political posturing aimed at bolstering his domestic base, the broader implications for global trade are significant. For India, the key lessons lie in adopting sound economic policies, enhancing bilateral ties, and preparing for potential trade disruptions.

Also Read: Trump threatens BRICS countries of 100% tariff if they drop dollar as currency

As Mehrotra succinctly concluded, “India has tools to address these challenges, but proactive policy measures are essential to navigate this evolving global landscape.”

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