Shaktikanta Das Reacts To Trump’s Tariff Threats; Dismisses De-Dollarization

RBI Governor Shaktikanta Das has downplayed concerns over US President-elect Donald Trump’s tariff threats against BRICS nations (Brazil, Russia, India, China, and South Africa). Speaking on December 6, 2024, Das called it premature to react to Trump’s remarks, adding that it would be prudent to wait for clearer US policy before taking any action. Trump had threatened 100% tariffs on BRICS exports to the US if they pursued efforts to reduce the dominance of the US dollar in global trade.

Trump’s warning came after the BRICS summit in Kazan, where member nations discussed strategies to move away from the US dollar and enhance the use of local currencies in international trade. In a Twitter post, Trump warned that any attempt by BRICS countries to challenge the US dollar’s supremacy would have severe consequences, including crippling tariffs and potentially losing access to the US market.

In response, Governor Das said, “Let the policy come first,” stressing that it’s too soon to anticipate the effects of any potential US actions. His comment reflects the RBI’s stance of waiting for more clarity before taking steps.

RBI Deputy Governor Michael Patra echoed a similar sentiment, noting that if Trump’s proposed tariffs were implemented, they might not be isolated and could provoke retaliatory actions from BRICS nations, potentially through currency movements. He suggested that it’s challenging to predict the natural course of events, emphasizing the need for patience until a broader economic equilibrium is reached.

Addressing media speculation, Governor Das confirmed that while the idea of a BRICS currency had been discussed among member countries, no official decision had been made. He pointed out the unique challenges presented by the geographical spread of BRICS nations. Unlike the Eurozone, where a single currency works due to geographical proximity, BRICS nations are spread across different regions, complicating the possibility of a unified currency.

On the topic of de-dollarization, Das clarified that India is not working to reduce its dependence on the US dollar. Instead, India’s efforts—such as the opening of special vostro accounts and agreements for local currency trade with certain countries—are aimed at de-risking the economy from the volatility of the US dollar. Das explained, “This is not about de-dollarization, it’s about de-risking our trade,” signaling that these steps are precautionary, not aimed at undermining the dollar’s role.

What Trump Said: A Stern Warning to BRICS

Trump’s comments were direct, warning BRICS nations that any efforts to challenge the US dollar or create an alternative currency would result in devastating economic consequences. “There is no chance that the BRICS will replace the U.S. dollar in international trade,” Trump wrote, adding, “Any country that tries should wave goodbye to America.”

Trump’s statement underlined his administration’s firm stance on the dollar’s continued dominance in global trade and financial markets. This rhetoric comes in the wake of the BRICS summit, where the group discussed moving away from the dollar and finding alternatives for trade.

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