As Donald Trump prepares to return to the White House in January 2025, his aggressive trade stance is already creating significant waves in the global economy. One of his most recent threats is aimed at the BRICS nations—Brazil, Russia, India, China, and South Africa, as well as newer members like Egypt, Ethiopia, Iran, and the UAE. Trump has warned these nations that if they move forward with the development of a common currency to rival the US dollar, they will face a staggering 100 percent tariff on their goods sold to the US. This threat comes after the BRICS bloc discussed, during a meeting in Russia’s Kazan in October, how to boost non-dollar transactions within their group. The suggestion of a new currency—potentially undermining the dominance of the US dollar—has already raised concerns, particularly in emerging markets that still rely heavily on the dollar for trade and international transactions.
India, a major player in the BRICS group, is walking a delicate line between its growing economic ties with the US and its membership in BRICS. The country has benefited enormously from trade with the US, especially in critical sectors like pharmaceuticals, IT services, and textiles. In FY24, India’s bilateral trade with the US surpassed USD 120 billion, making the US New Delhi’s largest trading partner. Despite India’s increasing trade relationships with both Western powers and emerging economies, its dependence on the US dollar remains a cornerstone of its global trade operations. Trump’s tariff threat has created new complexities for India’s strategic decision-making, as such policies would likely lead to higher costs for Indian exporters, making their products less competitive in the US market.
India has also been cautious about adopting a policy of de-dollarisation, which is seen as a potentially risky move that could disrupt the country’s strong economic ties with the US. Trump’s protectionist policies, particularly the 100 percent tariff warning, are seen as a direct challenge to India’s economic stability. While many countries have expressed frustration with the US’s dominance over the global financial system, India has remained pragmatic in its approach, not wanting to jeopardize its growing trade relationship with the US. The country’s economic priorities are rooted in strengthening its position as a leading global economy while maintaining stable relationships with both developed and emerging markets.
External Affairs Minister S. Jaishankar has voiced India’s concerns about the practicality and feasibility of adopting a BRICS currency. He argued that a common currency within the BRICS bloc faces many challenges, including the need for deep alignment on a range of fiscal, monetary, and economic policies across such diverse member countries. Jaishankar emphasized the importance of being realistic about the extent of cooperation among BRICS members, noting that the countries’ economies and policies are often too divergent to make such a currency feasible in the near future. His comments, widely reported by the Mail & Guardian, underline India’s cautious approach to the idea of a BRICS currency, particularly as many of the members already trade in their national currencies rather than a third-party currency.
Jaishankar further stated that many BRICS countries have little incentive to create a third currency when they could trade directly in their own currencies, avoiding the complexity and inefficiency of intermediary currencies. "The whole idea is, many of them say, 'Why do I need a third currency between us?' which is completely understandable," he said. He stressed that the creation of a common currency would require immense coordination on fundamental fiscal, monetary, and economic policies, which remains a significant hurdle for BRICS. Without such coordination, the idea of a shared currency could potentially harm the economic stability of individual nations, particularly India, which is performing well on its own and sees no immediate benefit in such a venture.
As the BRICS bloc continues to explore avenues to reduce its dependence on the US dollar, India remains focused on its own economic stability and growth. The country has been cautious about pushing too hard for de-dollarisation, partly due to the ongoing importance of the US dollar in global trade and finance. India’s reliance on the dollar for international transactions, as well as the attractiveness of its trade deals with Western powers, underscores the complexity of the current geopolitical and economic environment. If BRICS members do decide to move ahead with the creation of a common currency, India would likely face a difficult decision on how to balance its relationships with both the US and other BRICS countries.
In addition to the threat of tariffs, India is also wary of the growing influence of China within the BRICS bloc. While China’s economic might offers opportunities for collaboration within BRICS, India is cautious about Beijing using the group as a platform to further its own geopolitical and economic agenda. India’s own economic trajectory remains strong, but it is cautious about potential shifts in global trade dynamics that could impact its competitive edge in global markets. India also remains concerned about China’s attempts to dominate regional trade and politics, especially given the ongoing border tensions between the two nations. As a result, India’s foreign policy remains focused on balancing its relationships with Western countries, particularly the US, while maintaining constructive engagement with BRICS members.
Trump’s tariff threat is a stark reminder of the immense power that the US still wields in global trade. The US dollar remains the preferred currency for trade and investment in many parts of the world, and any challenge to its dominance is likely to face significant pushback from Washington. Trump’s recent comments, which include the assertion that BRICS countries attempting to replace the dollar will “say goodbye to selling into the wonderful US economy,” are a clear signal that the US will not tolerate any moves to undermine its financial supremacy. His remarks also reflect the broader tension between protectionism and globalisation, as countries around the world grapple with the growing influence of emerging economies like China and India, and the desire for greater financial independence.
India’s reluctance to fully support a BRICS currency stems from its desire to protect its economic interests and preserve its trade relationships with major powers. With the US as its largest trading partner and China’s growing influence within BRICS, India is positioning itself carefully to navigate these competing dynamics. As the global economic landscape continues to shift, India’s approach reflects its pragmatism and cautious optimism about its future as a major global economic player.
In conclusion, as the BRICS nations continue to debate the creation of a shared currency, the wider implications of such a move—particularly the risks posed by Trump’s trade policies and the US’s dominance in global finance—will play a crucial role in shaping India’s decisions. India’s strategic goals are firmly rooted in its commitment to economic growth, balanced foreign relations, and securing its place on the global stage without jeopardizing the relationships that have propelled its rise as an emerging power. How India responds to the challenges posed by Trump’s tariffs and the broader debate over de-dollarisation will be critical in determining its economic future in the coming years.
