Trump’s threats about the dollar could prompt other countries to find alternatives

When Republicans nominated Donald J. Trump as their presidential candidate this summer, the party’s platform included a promise to maintain the U.S. dollar’s role as the world’s reserve currency.

Since his election victory, Mr. Trump has indicated that he intends to make good on that promise. Last week he warned that if the group of nations known as the BRICS countries – which includes Brazil, Russia, India, China and South Africa – tried to create their own currency, he would punish them with 100 percent tariffs , which could compete with the dollar, excluding them from US markets.

“There is no chance that the BRICS will replace the US dollar in international trade, and any country that tries should say goodbye to America,” Trump wrote on social media.

The warning was intended to preserve the dollar’s premium status, but economists and analysts suggested it could have the opposite effect. Although it seems unlikely that the BRICS nations would be able to create their own currency, the United States’ aggressive use of tariffs and sanctions is why other nations are increasingly considering alternatives to the dollar. By making such threats, Mr. Trump could end up accelerating this trend.

“The threat of retaliation against the unlikely creation of a BRICS currency only reinforces the rest of the world’s concerns about the US willingness to use dollar dominance as an economic and geopolitical weapon,” said Eswar Prasad, the former head of the China department of the IMF. “This will increase other countries’ attempts to diversify away from using the dollar for international payments and for foreign reserves.”

The dollar has been the world’s dominant currency for about a century and has served as the world’s reserve currency since the end of World War II. It makes up the majority of global central banks’ foreign exchange reserves and is often used in international transactions such as trade and loans.