Trump’s BRICS Tariff Proposal Criticised for Ignoring Roots of Non-Dollar Trade Shift

New Delhi, July 11: US President Donald Trump’s proposal to impose a 10% tariff on BRICS nations for conducting trade in non-dollar currencies has sparked criticism, with the Global Trade Research Initiative (GTRI) highlighting that it is Washington’s own actions that have driven this global shift away from the dollar.

According to the Global Trade Research Initiative (GTRI), the increasing use of local currencies in global trade is a response to US-imposed sanctions and Society for Worldwide Interbank Financial Telecommunication (SWIFT) restrictions. Countries like India and China turned to rupees, dirhams, and yuan out of necessity to bypass financial blockades, making this shift a survival strategy, not an act of defiance.

Trump’s Tariff Plan and Sanctions Strategy Raise Concerns

According to GTRI, Trump’s proposed tariffs on BRICS nations and his suggested 500% penalties on countries buying Russian oil could severely hamper global trade relations. Srivastava described such arrangements as “MASALA deals” — Mutually Agreed Settlements Achieved through Leveraged Arm — and advised India to tread cautiously.

“Over 90% of Russia-China trade is now settled in rubles or yuan. India pays for Russian oil in rupees and dirhams. Even Saudi Arabia is exploring non-dollar oil trade, a move that challenges the longstanding petrodollar agreement from the 1970s,” said GTRI Founder Ajay Srivastava. He also pointed out the inherent contradiction in Trump’s narrative, stating, “The shift from the dollar wasn’t a revolt; it was the only route left.”

SWIFT’s Evolving Role in Global Trade

SWIFT, originally a neutral global messaging system linking over 11,000 banks in more than 200 countries, has increasingly been leveraged as a geopolitical tool. Under pressure from the US, it has restricted access to countries like Iran, Venezuela, and Russia.

These actions have forced importers of oil and gas from sanctioned nations to circumvent dollar-based systems. India, for example, settles Russian crude imports in rupees and UAE dirhams using non-SWIFT channels. China similarly uses the yuan for its gas imports from Russia.

“This isn’t an anti-dollar strategy. It’s a survival mechanism,” GTRI clarified.

India’s Currency Diplomacy and Strategic Stance

In 2022, the Reserve Bank of India (RBI) permitted international trade settlements in Indian rupees, offering relief to countries grappling with dollar shortages. In response, Russian banks opened rupee accounts in India specifically for oil payments. However, India has taken a firm stance on monetary sovereignty, rejecting China’s proposal for a common BRICS currency.

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations