Last updated on February 24th, 2025 at 06:15 am
President-Elect’s Stark Warning to BRICS
On November 30, 2024, U.S. President-elect Donald Trump sent shockwaves through the global economy with a bold warning aimed at the BRICS bloc, which includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates. Trump said that if these countries continue to undermine the dominance of the U.S. dollar, they would face 100% tariffs on their exports to the U.S. This aggressive statement sent ripples across governments, currency experts, and global markets, raising concerns about the future of dollar dominance.
BRICS and the Challenge to the Dollar
The BRICS nations have been making moves towards reducing their dependence on the U.S. dollar. The discussions in the group have revolved around possibly establishing a new BRICS currency or trading with the use of national currencies currently existing to circumvent the dollar in international trade. This has been debated for decades, but the direct threat from the U.S. president to impose tariffs has escalated the geopolitical and economic tensions concerning dollar dominance sharply.
Global Reactions:
Experts Weigh In Currency experts and analysts have reacted differently to Trump’s warning. While many dismissed the idea of an immediate threat to the U.S. dollar, they acknowledged that BRICS’ rising economic influence and efforts to reduce reliance on the dollar could have long-term implications. Faisal Mamsa, CEO of Tresmark Investment, downplayed the threat, saying there is no credible evidence that BRICS could create an alternative currency capable of replacing the U.S. dollar. Most experts agree that while there may be efforts to challenge dollar supremacy, no substantial immediate shift is anticipated in the global currency markets.
Pakistan’s Economic Interests
Even though Pakistan is not a member of BRICS, the political tensions regarding the U.S. dollar could have far-reaching implications for Pakistan. The United States is still Pakistan’s largest export market, taking 20% of its total exports. In FY 2024, Pakistan shipped $5.9 billion worth of goods to the United States, indicating that trade with America is still an important relationship for Pakistan. Experts have sounded the alarm that with any fresh impositions of new tariffs alongside floating currency values, the Pakistani economy is likely to experience a two-way spillover impact-in export revenue erosion and increased trade deficits.
Changing Landscape of Global Trade S.S. Iqbal, international trade analyst, reports: “World trade dynamics are shifting as the US adopts an increasingly defensive economic position.”. This now diverges from its old path of continuing global dominance. Since the focus of the United States is directed at protecting national interests, fragmented trade practice is also found in globalization. However, this does not deny the continued dominant status of the dollar, because not many nations or coalitions have the muscle to challenge such dominance.
Pakistan’s Currency and the Stability of the Rupee
In these global changes, Pakistan has so far been able to maintain a relatively stable exchange rate for the Pakistani rupee against the U.S. dollar during 2024. Fluctuations notwithstanding, this has been the notable feature this year, as per some experts who believe this is due to interventions by Pakistan’s State Bank. The dollar’s exchange rate touched the high of Rs306 in 2023 but stabilized in 2024 and ended the year at Rs278.33.
Is the Dollar’s Dominance Under Threat?
Experts may still agree that it is the dominating currency in international trade, but political tensions regarding the future of this currency cannot be ignored. The threat of imposing 100% tariffs on the BRICS countries by the newly elected president would only fuel further fire for potentially reshaping global trade alliances. Still, most analysts assert that in the near term, such a shift from the U.S. dollar is not imminent, as it will continue to form the very nucleus of the financial system in the world for quite some time into the future.
The world economic landscape is taking a shape in which tensions between the U.S. and BRICS nations are salient. Even though there are some gurus who doubt the fact that the U.S. dollar would lose its supremacy anytime soon, political and economic moves both by the U.S. and emerging powers within BRICS also reflect the complex dynamics of international trade. For Pakistan, for example, the new scenario calls for high alertness since changes in the U.S. trade policy or the new global currency order could send shockwaves across their economies.
