Zinger Key Points
- BRICS is an intergovernmental organization, comprises nine countries.
- Trump resurfaced his old threat of 100% tariffs on these nations for panning a BRICS reserve currency.
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President Donald Trump has resurfaced his old threat of imposing 100% tariffs on the BRICS nations via Truth Social, the social media platform owned by his company Trump Media & Technology Group Corp. DJT. But this fund manager, while agreeing with his views asks how the will U.S. manage the production of essential goods.
What Happened: Trump, who had issued the 100% tariff threat earlier in December, warned the BRICS nations again, calling them “hostile,” for planning a combined BRICS currency.
Aditya Sesh, founder and managing director of Basiz Fund Services, told Benzinga that the U.S. is justified in using tariffs to protect the dollar’s strength and promote reciprocal trade, aiming to boost American exports and improve negotiating leverage for the country.
However, Sesh out that “Assuming 100% tariffs are imposed, how will the U.S. manage production from Slippers to Ships? Will American factories come up so quickly, and if so, at what cost? What about the inflationary impact of consumables in the U.S. when imports become expensive? It will also impact not just the American capital markets but also global capital markets.”
Trump announced Thursday that the U.S. will implement a 25% tariff on imports from Canada and Mexico, effective Saturday, Feb. 1. The decision comes in line with Trump’s pledge to impose tariffs, citing concerns over illegal immigration, trade imbalances, and fentanyl trafficking from Canada and Mexico.
BRICS, an intergovernmental organization, comprises nine countries including Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.
Trump, in his post, drew a firm line, demanding a commitment from these nations to abandon such efforts. He also suggested these nations find “another sucker nation” to trade with, emphasizing the importance of access to the US economy.
The statement expresses confidence that the BRICS nations will be unsuccessful in their attempts to displace the dollar in international trade. It concludes with a stark warning: any country that attempts to challenge the dollar’s position should expect a severed trading relationship with the U.S.
Why It Matters: U.S. economists, back in December had questioned Trump’s views on this matter. Jeremy Siegel, in a note dated Dec. 9, 2024, argued that Bitcoin BTC/USD posed a greater threat to the dollar’s reserve currency status than any BRICS initiative.
A senior economist at WisdomTree and former professor at the University of Pennsylvania, Siegel said that he finds it contradictory that Trump threatens BRICS nations with tariffs for seeking a new reserve currency, while simultaneously supporting Bitcoin, a similar alternative global currency.
Similarly, in his X post dated Dec. 4, Peter Schiff, who is the chief economist and global strategist at Europac.com said that Trump has “the relationship backwards” and the BRICS nations are at a disadvantage, exchanging valuable goods for U.S. fiat currency, which is subject to inflation. The U.S. receives tangible products it cannot produce domestically, while the BRICS nations receive currency that loses value, he added.
Meanwhile, the SPDR S&P 500 ETF Trust (ARCA SPY) slipped in late trading Thursday as investors weighed the economic fallout from rising trade tensions between the longstanding
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