Throwing bricks at BRICS: Trump affirms position on trade and taxes

 

Over time US President Donald Trump has promised to impose steep new taxes on trade, including a 10 to 20 per cent tariff on all imports, at least a 60 per cent tariff on Chinese imports, and a 25-100 percent tariff on Mexican imports.

Tariffs threaten higher consumer prices, disruption of supply chains, and challenge competitiveness, and changes the manufacturing landscape as businesses adapt, analysts note but the new US President is committed to his causes.

Tariffs can also serve to buttress political and economic dominance. US President Donald Trump on January 20 reaffirmed his aim to impose 100 per cent import tariffs on the BRICS countries if they persist in taking steps towards cutting the use of the dollar in global trade.

BRICS nations, including Brazil, Russia, China, South Africa and India have been working on reducing dollar dominance in the global financial system by replacing it with a new global currency.

Named after its first five participants, 19 nations have now joined as partners or associates. BRICS has added Indonesia, Ethiopia, Iran, Egypt, Nigeria and the United Arab Emirates, among other nations which joined in 2025.

The BRICs considers themselves a counterweight to the G7 group which comprises the world's biggest economies. BRICS represent over 4.3 billion of the world’s population. The G7 has much of the remainder.

BRICS has been targeting the expansion of settlements in national currencies and enhancing cooperation between banks, cheered on by Russian leader Vladimir Putin.

Trump, after taking the oath as 47th US President on Monday, reiterated his commitment to slapping the 100 per cent tariff on BRIC nations if they persevere.

The case of India

We are yet to see the response of the BRIC nations. However, Financialexpress.com notes that “For India, the threat of tariffs looms large. In FY24, the US was India’s largest trading partner, with exports amounting to $77.5 billion, up 46% from $53.1 billion in FY20. Such a drastic move by the US could deal a severe blow to Indian exports, especially in sectors like steel, textiles, and agricultural products.”

The site notes that “ Trump’s history of imposing punitive tariffs during his first term, including on Indian steel and aluminum, signals that he may follow through with such threats. India had responded in kind, levying retaliatory tariffs on US products like apples, almonds, and walnuts. These actions, while manageable in smaller doses, could escalate quickly and harm both nations’ economies.”

BRICS, formed in 2009, excludes the United States. Among its leaders, China has become a significant regional development partner, the major investor in infrastructure, and the funder of Chinese private sector led ventures across the Caribbean region.

Policy analysts from the region consider as pivotal the announcement that the BRICS will establish a new development bank based in Shanghai which will rival the IMF and the World Bank.

It is slated to form of a new development body able to fund infrastructure projects, and a reserve fund to support economies facing currency and balance of payments crises.

The New Development Bank as it will be known will have capital of US$50 billion with each country contributing US$10 billion, while the reserve fund will have US$100 billion.

Leverage

President Trump believes that the US has the leverage over the BRICS nations. "If the BRICS nations want to do that, that's OK, but we're going to put at least a 100 per cent tariff on the business they do with the United States... It's not even a threat.,,We have them over a barrel. And there's no way they're going to be able to do that.”

The BRICs were motivated in their efforts after the US threw Russia out of the Society for Worldwide Interbank Financial telecommunications (SWIFT), which is pivotal to international financial transactions.

Iran also was cut off from SWIFT in 2012, following which Tehran yielded at the negotiating table in 2015. But after this, the US reimposed oil and financial sanctions on Iran under the first Trump administration in 2018, and SWIFT again suspended its access to banks.

MSN.com notes that in June 2024, Ministers of Foreign Affairs of the BRICS countries met in Russia's Nizhny Novgorod pushed for more use “of local currencies in bilateral and multilateral trades and financial transactions between the member countries.”

The site adds that in December 2024 Reserve Bank of India (RBI) governor Shaktikanta Das” said India has not taken any steps towards de-dollarisation and is only looking to de-risk domestic trade from geo-political upheavals.”

Analyst Eric York, writing at tax foundation.org, says that “at least a dozen estimates on Trump’s proposed tariffs show they will have a harmful effect on the American economy, supporting the standard view among economists that tariffs reduce trade and distort production, leading to lower standards of living.”

She added, “Tariffs increase the price of foreign-produced goods, incentivizing consumers to switch to domestically produced goods and providing domestic producers room to increase their prices. The benefits that domestic producers receive, i.e., higher prices and sales, come at the expense of consumers (including business consumers). For this reason, tariffs are redistributive, taking income from some and giving it to protected businesses.”

Photo: india.com photograph of Prime Minster of India Narendra Modi

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