“Find another idiot…”: 5 moves China can take as Donald Trump’s tariff threat against the dollar escalates

Donald Trump has reignited global economic tensions with a stark warning to the BRICS countries: a 100 percent tariff if they undercut the US dollar in global trade. The former president, who will take office again in January, sent a direct message to the BRICS nations – Brazil, Russia, India, China and South Africa – calling for a commitment not to challenge the dollar’s dominance or face serious consequences economic consequences can be expected.

“The idea that the BRICS are trying to move away from the dollar while we watch is OVER,” Trump said in a scathing online post. “They will face 100% tariffs and say goodbye to selling to the wonderful U.S. economy.”

The president-elect suggested that the BRICS countries could find another “idiot,” but the group would not be able to replace the dollar with another currency in international trade.

China, a key player in the BRICS, now faces a crucial question: How to respond to another possible 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 core of U.S. financial stability by dumping its $734 billion holdings of U.S. Treasury bonds. Such a move would disrupt global markets and drive up U.S. bond yields. However, there is a risk that the value of China’s own foreign exchange reserves will fall and its financial leverage will be weakened.

China has already reduced its direct holdings of US debt by more than a third since 2017, partly shifting investments to avoid possible freezes, as happened in Russia after the invasion of Ukraine.

Another response could be a weakening of the yuan, which would make Chinese exports more competitive. During the previous US-China trade conflict, the devaluation of the yuan offset about two-thirds of tariff increases. Analysts say a similar move could counter Trump’s proposed tariffs, but it risks triggering capital outflows and further denting foreign investor confidence.

China could also restrict exports of rare minerals, as it did with gallium and germanium earlier this year, to key industries such as semiconductors and electric vehicles. This would temporarily impact U.S. access to vital materials but could accelerate efforts to diversify supply chains away from China.

Beijing could use its “Unreliable Entities List” or “Anti-Foreign Sanctions Law” to target U.S. companies in China. Companies like Apple and Tesla that generate significant revenue from the Chinese market could face business interruptions or consumer boycotts, further escalating tensions.

China is increasingly seeking to strengthen ties with traditional U.S. allies such as Japan, India, Germany and Australia while cementing its partnership with Russia. An alliance with these countries could help blunt the impact of a U.S.-led economic offensive.

Trump’s tariff threats could exacerbate existing tensions, but Beijing’s retaliatory options are fraught with risks, from market disruptions to economic fallout at home. With both sides prepared for escalation, the global economy could face another turbulent chapter.