“Go find another idiot,” Trump warns the BRICS crew

The global trade arena is bracing for the fallout as Donald Trump prepares to take the presidential oath this January, heralding the start of what many fear will be the start of World War II. The new US president has laid down the gauntlet with a groundbreaking proposal – a stunning 100 percent tariff on BRICS countries, including India, if they dare to bypass the US dollar in international trade. This bang comes hot on the heels of the crucial BRICS summit in October, at which the bloc – which now boasts new members such as Egypt, Iran and the United Arab Emirates alongside stalwarts Brazil, Russia, India, China and South Africa – over a A bold shift towards non-EU member states debated dollar transactions and the strengthening of local currencies.

Trump’s sharp rebuke was met with a violent outburst on social media: “The idea that the BRICS countries are trying to move away from the dollar while we stand idly by is over. We require these countries to commit that they will not create new BRICS countries.” Currency nor will they support another currency to replace the powerful US dollar, otherwise they will face 100 percent tariffs and face to say goodbye to selling to the wonderful US economy.”

At the core of Trump’s aggressive trade doctrine is the principle of reciprocity, which he wants to use like a weapon against nations he sees as trade manipulators. In a recent fiery speech, Trump said, “Reciprocity is a word that is very important in my plan because we generally don’t impose tariffs,” and criticized countries like India for what he said were disproportionately high tariffs. But despite his vehement criticism, Trump acknowledged the more generous nature of India’s trade relations and commented wryly: “You do it… Kind of a nicer accusation. “They thanked you so much for shopping in India,” underscoring the complicated dance of diplomacy and trade.

At the BRICS summit in Kazan in October this year, Russian President Vladimir Putin made a sensational display of serious accusations against the Western powers, claiming they had “weaponized” the dollar. He criticized sanctions imposed on Russia after its invasion of Ukraine, saying they would “undermine confidence in this currency and weaken its power.” This claim underscores the escalating tensions surrounding global financial systems and currency dominance.

President-elect Donald Trump ratcheted up his tariff rhetoric last week, reaffirming his assertive stance on trade. He has made clear his intention to use high tariffs as a tool to bend US trading partners to his will. Trump announced the imposition of sweeping tariffs of 25% on all imports from Canada and Mexico and an additional 10% on Chinese goods, citing those countries’ role in enabling illegal migration and drug trafficking.

Those statements have raised significant international tensions, with speculation already rife about possible countermeasures from Mexico and a hasty diplomatic effort by Canadian Prime Minister Justin Trudeau, who made a brief visit to Trump’s Mar-a-Lago estate on Friday evening.

Trump’s recent election victory was significantly bolstered by his promise to impose tough tariffs on foreign imports into the US and advocated for an aggressive 60% tariff on Chinese goods. This tough approach to trade reflects Trump’s broader “America First” economic policy, which aims to realign global trade dynamics and strengthen U.S. economic sovereignty. As the world watches, the possibility of a global trade shakeup is emerging, setting the stage for a contentious start to the Trump administration.

Using the numbers

Assuming everything else remains equal, determining the impact of threatened tariffs on U.S. inflation is a simple exercise. The three countries (China was also threatened with an additional 10% tariff) account for 42% of US goods imports (15.6% Mexico, 13.5% China and 13.0% Canada, based on the last 12 months balance sheet). The weighted tariff increase is therefore 8.5%. About 11% of consumer spending is on imported goods (according to an older study by the San Francisco Fed), so the direct increase in consumer prices would be 0.9%. However, as discussed in last week’s commentary, the ultimate impact on inflation would be smaller due to changes resulting from the tariff, such as a stronger U.S. dollar and price cuts by foreign producers. So prices would likely rise by less than 0.9%. Yale University’s Budget Lab estimates that tariffs (and retaliatory measures) could increase U.S. consumer prices by 0.75% in 2025.