When Republicans nominated Donald J. Trump to be their presidential candidate over the summer, the party’s platform included a pledge to maintain the role of the United States dollar as the world’s reserve currency.
Since winning the election, Mr. Trump has indicated that he wants to deliver on that promise. Over the last week he warned that if the group of nations known as BRICS countries — which include Brazil, Russia, India, China and South Africa — tried to create their own currency to rival the dollar, he would punish them with 100 percent tariffs and shut them out of U.S. markets.
“There is no chance that the BRICS will replace the U.S. Dollar in International Trade, and any Country that tries should wave goodbye to America,” Mr. Trump wrote on social media.
The warning was intended to preserve the dollar’s premier status, but economists and analysts suggested that it could have the opposite effect. Although it appears unlikely that the BRICS would be able to create their own currency, the aggressive use of tariffs and sanctions by the United States is the reason that other nations have increasingly been considering alternatives to the dollar. By making such threats, Mr. Trump could end up accelerating that trend.
“Threatening retaliation against the unlikely creation of a BRICS currency only reinforces the rest of the world’s concerns about the U.S. willingness to wield dollar dominance as an economic and geopolitical weapon,” said Eswar Prasad, the former head of the I.M.F.’s China division. “This will intensify other countries’ attempts to diversify away from use of the dollar for international payments and for foreign exchange 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 foreign exchange reserves held in global central banks and is widely used in international transactions such as trade and loans.
