Trump's threatened tariffs projected to harm economies of US and the BRICS

President Donald J. Trump has said repeatedly that he would impose 100 percent tariffs on countries that seek to reduce the US dollar’s dominant role in global finance. But if he carried through with such threats, the action would result in slower growth and higher inflation than otherwise in the US and most of the targeted economies, according to our analysis.

“You leave the dollar, you’re not doing business with the United States because we’re going to put 100 percent tariff on your goods,” then-candidate Trump said at a campaign rally in September.

Soon after taking office in January, Trump took particular aim at the BRICS countries—original members Brazil, Russia, India, China, and South Africa plus newcomers including Egypt, Ethiopia, and Iran—which have discussed possible ways to conduct more international commerce in something other than the dollar.

"We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100 percent Tariffs," Trump said January 30 on his Truth Social website in a post similar to one he posted in November. He even threatened Spain with a 100 percent tariff, mistaking it for a BRICS member.

The US dollar is by far the currency most commonly held as official reserves (figure 1), accounting for most of central bank reserves. The euro is the second most held reserve currency, with other currencies accounting for small shares. Similarly, the dollar is the most widely used currency in trade invoicing, followed by China’s renminbi (RMB), reflecting China’s prominence in international trade.