President-elect Donald Trump was at it again on Saturday, using tariffs in an attempt to impose his will on other countries. Just four days ago, he threatened to slap a 25 percent tariff on everything imported from Mexico and Canada, plus an additional 10 percent tax on goods from China, as a way, he said, to force the countries to do more to stop the illegal immigration and drug trafficking that hurts the United States. This time around, Trump demanded a “commitment” from BRICS countries to use the U.S. dollar and threatened to slap 100 percent tariffs on them if they act to undermine it.
Yes, it’s true: In less than one week, Donald Trump has twice resorted to tariff threats to try to force other countries to come to his terms. Apparently, like drugs, tariffs are addictive — at least for Donald Trump.
Trump’s threats suggest that a paradigm of his administration in dealing with others is emerging. To make countries comply with his demands, he will exert maximum pressure. While the outgoing Secretary of State Antony Blinken is fond of warning that the U.S. talks from a “position of strength,” the incoming president appears to be keen on using it — or threatening to use it. He is providing the world with some textbook cases in economic coercion.
Trump’s warning to the BRICS countries may have been intensified by the negative reaction of Mexican and Canadian leaders to his threat of tariff hikes. They tried hard to pacify the would-be master of the White House by offering to do more to help him fight illegal immigration and drug trafficking.
Tellingly, last year, 83 percent of Mexico’s exports went to America; Canada sent 75 percent of its exports to Uncle Sam. This exceptionally heavy reliance on the U.S. market renders Mexico and Canada highly vulnerable to Washington’s whims. They are left with no choice but to make important concessions to Trump, even though that means diverting their scarce resources to help a much bigger and richer neighbor. Dr. Henry Kissinger, the former U.S. secretary of state, is said to have once admonished an official that it is fatal to be a U.S. ally. Should Mexico and Canada start thinking of de-risking?
Unfortunately for Trump, threats to the BRICS countries are unlikely to prompt their leaders to scramble to be the first for an audience with the president-elect. After all, BRICS countries do not rely on the U.S. market half as heavily as Mexico or Canada. China, not the U.S., is the largest trading partner of the other eight BRICS countries.
In fact, Trump would be shooting himself in the foot if he follows through with his threat. While it’s true that tariffs would very likely shut the door on all products from BRICS countries, badly hurting their exports, Trump would be well-advised to keep in mind that the BRICS countries are important producers and exporters of finished products and inputs. Consequently, tariffs would mean depriving the U.S. of the raw materials that it desperately needs — rare earths from China, crude oil from the UAE and Saudi Arabia and lithium from Indonesia, for example. Meanwhile, consumer goods from non-BRICS countries would ignite inflation in the United States. Also, an alternative supply of components and parts, if available, would likely be more expensive, making U.S. products less competitive in international markets.
Trump’s misguided move would also wean the U.S. off some of the most dynamic and fast-growing markets in the world. BRICS countries are unlikely to turn the other cheek when slapped. On the contrary, it is virtually certain that they would hit back with punitive tariffs of their own, most likely through collective action. High tariff walls against American goods would thus be erected. Is the U.S. prepared to lose these growing markets, which show signs of becoming much bigger, especially with the expansion of the group? Trump would probably be pulling the trigger of economic suicide, not salvation. Punishing BRICS would invariably hurt the U.S. economy, resulting in American companies saying goodbye to sales in much of the wonderful Global South.
More important, the BRICS alliance prioritizes moving away from the U.S. dollar. The Global South has had more than enough of dollar hegemony. For decades, Washington has alternately exported inflation and deflation to the detriment of developing countries, and it habitually engages in fleecing them by buying up their devalued assets. Washington’s successive interest hikes during the COVID-19 pandemic, for example, left more than a few developing countries in debt, solely because most of their debts were denominated in U.S. dollars.
Global South countries also learned, to their shock, that Washington and its Western allies cut Russian banks off from SWIFT, the supposedly independent global bank messaging network, in a bid to reduce the Russian ruble to (in the words of President Joe Biden) “rubbles.” While some developing countries had been victims of Washington’s secondary sanctions, an increasing number of them have now begun to wonder when the other shoe will drop on their heads.
Apparently, de-dollarization is a logical step toward economic independence and prosperity for the Global South. Unsurprisingly, the BRICS summit in Kazan in October called for exploring the creation of a payment and clearance system in their own currencies. Further, the BRICS leaders pushed for the establishment of a new payment system that would offer an alternative to SWIFT.
Trump’s threat is the first major open attack that Washington has launched against the grouping that prides itself in championing the cause of the Global South. It is perhaps the most serious outside test for the grouping since its inception. On the line is not just the reputation of the grouping but also the dream of the Global South. The contest is therefore one between forces intent on maintaining American hegemonic power and those favoring a more just and fair international order. This serious challenge will have to be met with resolve and strength if the aspirations of the Global South are to be kept alive.
In this context, the BRICS countries are expected to stand up to Trump’s threat. With a combined GDP approximately 1.5 times that of the United States, as well as the support of other developing countries — especially the 30-some countries lining up to join the group — they will likely rise to the challenge. Donald Trump will hit a wall and come to regret that he has chosen the wrong target.
