The President-elect Donald Trump also attacks the BRICSthreatening that he will impose duties up to 100% of the value of goods imported into the USA from countries belonging to the Emerging Group, now extended to five other economies (BRICS Plus).
The reason? Having announced the creation of a common currency – BRICS Pay – which wants to counter the dominance of the dollar. And while Trump isn’t too keen on a strong dollar due to the loss of competitiveness in international trade, the idea of losing a dollar-centric economy is undoubtedly worse than the impact on world trade.
Trump to BRICS: dollar or tariffs
Trump told BRICS to do not engage in the creation of an alternative currency to the dollar, otherwise it will impose duties of up to 100% on imports of goods from countries belonging to the group (Brazil, Russia, India, China, South Africa), with five other members from Africa added this year (Egypt, United Arab Emirates, Ethiopia, Iran).
“We ask these countries for a commitment not to create one new BRICS currency, nor to support any other currency to replace the mighty US dollar, otherwise will face 100% tariffs and expect to say goodbye to sales in the beautiful US economy,” Trump wrote in a post on his social media platform, Truth Social.
“They can go and find another ‘sucker’. There is no chance that BRICS will replace the US dollar in international trade, and any country that tries should say goodbye to America,” concluded the President-elect.
An armed truce with Canada
Against the Canada there is an armed truce. The Canadian Prime Minister Justin Trudeau met Trump at Mar-a-Lago after the future President had announced the introduction of duties of up to 25% on products imposed by Canada and Mexico, due to the illegal trade of Fentanyl, a drug that has devastating effects on the health of many Americans.
Trump talked about a “productive” meeting and he said he had “discussed many important topics”in addition to Fentanyl, also of “fair trade agreements that do not put American workers in crisis and the massive trade deficit that the USA has with Canada”.
The dollar appreciates
The effect of Trump’s threats is already being seen in foreign exchange markets, where the dollar is appreciating against the world’s major currencies. The dollar index, which summarizes the performance of the greenback against a basket of the main world currencies, is gaining ground on the Forex market, with trading around 106.25 (+0.4%). On the contrary, the euro fell this morning at $1.0519 (-0.57%), while the sterling exchange a 1.2699 USD (-0.26%).
According to Peter Kinsella, Global Head of Forex Strategy at UBP “the data indicates that the currencies of countries with large exposure to the United States for trade are affected by negative growth betas. The average loss over two years for the euro was in the range of 4%, while most other G10 currencies have seen annualized losses of between 2% and 6% against the USD. This data is consistent with what the models predicted. Similar effects are already evident this time, and in some cases are already heavily discounted without any tariffs having been announced.”
“The greatest uncertainty for investors – continues the analyst – is represented by the Trump’s views on the dollar. US presidents typically support a strong dollar. Trump and his advisors have made no secret of their desire to see weaker dollar exchange rates. However, achieving this goal appears to be inconsistent with Trump’s fiscal policy.”
