Author: Prof. Engr. Zamir Ahmed Awan, Founding Chair GSRRA, Sinologist, Diplomat, Editor, Analyst, Advisor, Consultant to Global South Economic and Trade Cooperation Research Center, and Non-Resident Fellow of CCG. (E-mail: awanzamir@yahoo.com).

In a bold, characteristically unilateral move, former President Donald Trump recently hinted at imposing a 100 percent tariff on BRICS countries if they move away from using the US dollar as their reserve currency. Coupled with remarks suggesting Canada should become a U.S. state to avoid such tariffs, these statements underscore the potential for disruptive shifts in global trade policies. While his rhetoric may resonate with segments of his political base, the broader implications for global trade and the American economy warrant serious scrutiny.

Impact on Global Trade and the BRICS Block

Trump’s proposed policies could intensify already growing efforts by BRICS nations (Brazil, Russia, India, China, South Africa) to reduce reliance on the US dollar. With full membership recently granted to Iran, Egypt, Ethiopia, and the UAE, BRICS is becoming an increasingly influential bloc. For countries like China—poised to overtake the US as the largest global economy in the coming decade—such tariffs would likely accelerate efforts to establish alternative trading currencies, bypassing the dollar’s dominance.

The weaponization of tariffs and sanctions, hallmarks of Trump’s administration, has already driven countries like Russia and China to seek financial independence through mechanisms like the BRICS corridor, enabling sanctioned nations to sustain trade. A tariff war of this magnitude would push more countries to join these alternative economic frameworks, undermining long-term US influence.

Specific Impact on China

China, as the largest economy within BRICS and a critical player in global trade, would be disproportionately affected by Trump’s proposed tariffs. Given its position as the "world’s factory," the US is one of China’s largest export markets for electronics, machinery, and consumer goods. A 100 percent tariff on Chinese goods would significantly disrupt this dynamic, leading to a sharp decline in trade volumes between the two nations.

Domestically, China might face short-term challenges, including reduced export revenues and disruptions to supply chains. However, these pressures are likely to accelerate China's long-term strategies to reduce reliance on the US market. This includes:

Boosting Regional Trade: Through mechanisms like the Regional Comprehensive Economic Partnership (RCEP), China could deepen trade ties within Asia.

Expanding BRICS Partnerships: Leveraging the BRICS corridor and partnerships with other members, China could establish alternative markets for its goods and services.

Advancing Technological Independence: Already focused on self-reliance in critical industries like semiconductors and AI, China would likely double down on domestic innovation to mitigate the impact of tariffs.

Moreover, the proposed tariffs would provide fresh impetus for China’s efforts to internationalize the yuan as an alternative reserve currency, challenging the dominance of the dollar. If successful, this could fundamentally reshape global financial systems, further reducing the US's leverage over international trade.

China is also well-positioned to capitalize on the fallout by presenting itself as a champion of globalization and fair trade, contrasting starkly with the US’s protectionist approach. This narrative could help Beijing strengthen alliances with other nations disillusioned by unilateral American policies, potentially enhancing its global influence while further isolating the US.

Consequences for the US Economy and Public

High tariffs, often marketed as protecting domestic industries, can backfire by increasing costs for American consumers and businesses. For example:

Increased Consumer Prices: Tariffs on imported goods from BRICS countries—key suppliers of affordable electronics, textiles, and raw materials—would lead to higher costs for everyday goods.

Retaliation: Counter-tariffs from affected countries could harm US exporters, particularly in agriculture and high-tech industries.

Disruption of Supply Chains: Businesses reliant on global supply chains would face operational challenges, reducing their competitiveness.

The economic strain from these tariffs would disproportionately impact low- and middle-income Americans, who spend a larger share of their income on goods likely affected by such policies.

Transforming Global Alliances

Trump’s approach could inadvertently catalyze new global alliances. Disaffected nations, particularly in the Global South, may find common cause in resisting US economic coercion. These developments could reshape global trade routes, with China leading initiatives like the Belt and Road and fostering economic corridors with BRICS and beyond.

For instance:

Emerging Trading Blocs: New alliances could coalesce around BRICS, creating alternative trade structures that diminish US dominance in global commerce.

Shift to Regionalism: Nations may prioritize regional trade agreements, reducing exposure to US tariff policies.

Increased Financial Decoupling: Efforts to establish non-dollar-based financial systems would gain momentum, weakening the US's ability to use economic levers as foreign policy tools.

Way Forward: Preventing a Global Trade Crisis

To mitigate the fallout from Trump’s proposed tariffs, a collective strategy by affected nations is imperative. Some measures include:

Strengthening Multilateral Forums: Revitalizing the WTO or creating alternative dispute resolution mechanisms to counter unilateral actions.

Diversifying Trade Partnerships: Expanding trade relationships within Asia, Africa, and Latin America to reduce dependence on the US market.

Promoting Dialogue: Diplomatic channels should remain open to negotiate mutually beneficial trade terms rather than escalating retaliatory measures.

Investing in Domestic Resilience: Nations must bolster local industries and innovate to reduce reliance on imports, particularly from tariff-imposing countries.

Further Isolation of America

While Trump's rhetoric aims to project strength, such policies risk isolating the US from the global economy. History has shown that economic isolation rarely leads to sustainable growth. Instead, America could face new challenges, including the erosion of its financial hegemony and increased hostility from former allies.

If pursued, these tariffs would likely prove counterproductive, harming the very constituencies they are intended to protect while accelerating shifts in global power structures. To avoid this, it is crucial for US policymakers to embrace multilateralism, foster fair trade, and acknowledge the interconnectedness of the modern global economy.

The world is watching, and the choices made in the coming months will define not only America’s economic future but also its standing in a rapidly changing world order.

(ASIA PACIFIC DAILY)