Tump's 100% tariff threat on BRICS: Ex-RBI Governor Subbarao questions if US laws permit such sanctions
By Sunita Iyer | First Published Dec 2, 2024, 1:30 PM ISTBRICS, established in 2009, is the only significant international bloc that excludes the United States. Its current members include South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates, alongside the founding nations—Brazil, Russia, India, and China.
President-elect Donald Trump’s warning that BRICS nations could face 100% tariffs if they shift away from the US dollar has raised questions about the feasibility of such a move, particularly given uncertainties about its alignment with US laws, former RBI Governor Duvvuri Subbarao said on Monday.
Subbarao also highlighted internal divisions within BRICS—now a nine-member group including India, Russia, China, and Brazil—regarding the creation of an alternative currency to the US dollar. Efforts to establish a common currency remain stalled due to both political and economic challenges.
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"Donald Trump has threatened to slap 100 per cent tariffs on imports from countries that try to move out of the dollar. His ire was particularly directed at the BRICS bloc which has been actively talking about developing an alternative to the dollar. Trump is known to bark more than he bites," Subbarao told PTI news agency.
BRICS, established in 2009, is the only significant international bloc that excludes the United States. Its current members include South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates, alongside the founding nations—Brazil, Russia, India, and China.
In recent years, some members, particularly Russia and China, have pushed for alternatives to the US dollar or the creation of a unified BRICS currency. However, India has notably refrained from joining these efforts, reflecting differing priorities within the group.
"It’s not clear to what extent he will carry out his threat. What yardstick will America use to determine if a country has moved out of the dollar? And does American law permit imposing sanctions on countries merely because they are de-dollarising?,” the former RBI chief asked.
Will India adopt BRICS common currency?
A BRICS common currency could, in theory, protect the bloc from the dominance of the US dollar, but in practice, the project remains unlikely due to both political and economic challenges, former RBI Governor Duvvuri Subbarao observed. He noted that it is highly improbable that member nations, particularly India, would surrender their monetary policy autonomy to adopt a shared currency that could be destabilized by economic issues within the bloc.
Responding to a query, Subbarao highlighted that while the costs of moving away from the dollar are high for both China and India, China is in a stronger position. This is due to its extensive trade network and the success of its Belt and Road Initiative (BRI) projects in emerging economies. Over the last decade, China has made significant progress in internationalizing its currency, the Renminbi (RMB), with a considerable portion of its trade now invoiced and settled in RMB. Additionally, many Chinese loans under the BRI are denominated in its currency.
In contrast, India’s global trade share remains modest, and the country continues to rely heavily on investments in hard currencies like the US dollar. Subbarao emphasized that India has a long way to go before the Rupee can achieve internationalization.
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