Seriously Weird

Recently, President-Elect Donald Trump floated a "seriously weird" idea: imposing a 100% tariff on BRICS countries—Brazil, Russia, India, China, and South Africa—if they abandon the U.S. dollar as the standard trade currency. However, what Trump did not directly address is the role U.S. sanctions on Russia played in prompting the BRICS nations to explore alternative trade arrangements. Establishing a unified BRICS currency is a logical step to strengthen trade and economic cooperation among these nations.

The Push for a BRICS Trade Currency

BRICS countries have been increasingly exploring the idea of creating an alternative currency for trade and investment to reduce reliance on the U.S. dollar. This effort gained momentum due to the erosion of trust in the dollar, particularly following U.S. sanctions on Russia and the seizure of Russian-owned properties and assets. A collective BRICS currency could challenge the dollar’s dominance, especially given the economic clout of countries like China and India.

The Economic Impact of a 100% Tariff

Trump’s proposed tariffs would double the cost of goods imported from BRICS countries, which supply key commodities, technology, and manufactured goods to the U.S. Here are the potential consequences:

1. Inflation Surge: Essential goods imported from BRICS nations—electronics, machinery, textiles, and agricultural products—would become significantly more expensive. This would lead to an inflation spike, disproportionately affecting American consumers.

2. Consumer Costs: Average Americans would bear the brunt of higher prices. Industries relying on BRICS imports, such as electronics and pharmaceuticals, would see costs skyrocket, with life-saving medications potentially becoming unaffordable.

3. Impact on Small Businesses: Many small U.S. businesses depend on imports from BRICS countries. Tariffs would strain their operations, leading to closures and layoffs.

4. Retaliatory Tariffs: BRICS countries are likely to impose reciprocal tariffs on U.S. exports, affecting American agriculture and small family-owned businesses. This would further harm the U.S. economy.

5. Supply Chain Disruptions: The U.S. heavily relies on BRICS countries for pharmaceuticals and raw materials. Tariffs would exacerbate supply chain issues, potentially leading to shortages in stores.

Broader Economic and Geopolitical Consequences

1. Loss of Global Competitiveness: Higher costs for raw materials would make American products less competitive on the global market, leading to manufacturing closures and rising unemployment.

2. Accelerated De-dollarization: A high tariff policy could push BRICS countries to deepen trade relationships with other nations, bypassing the U.S. market. This would accelerate the trend toward de-dollarization and create regional trade blocs that diminish American influence in global trade.

3. Fragmentation of Global Trade: A fractured global trade system could emerge, with BRICS nations leading a shift away from U.S.-centric economic policies.

Policy Implications

While the intent of such tariffs may be to protect U.S. interests, their actual impact could harm American consumers and businesses, erode global trust in U.S. trade policies, and reduce American influence. Tariffs often operate on a trickle-down economic model, where the ultimate burden falls on consumers. This "seriously unconventional" or rather “seriously weird” proposal risks backfiring, highlighting the need for thoughtful, strategic trade policies rather than reactionary measures.