Abhishek Khare

On January 21, 2025, Donald Trump, after assuming office as the 47th President of the United States, announced the possibility of imposing a 100% tariff on BRICS nations, including India, in response to their de-dollarisation efforts. The move signals a potential escalation in global trade tensions and raises questions about the impact on India-US trade relations, which is critical for both economies.

Implications of the Tariff

1. Impact on India’s Exports and Economy: A 100% tariff on Indian exports to the US would significantly increase the cost of Indian goods in the American market, making them less competitive. This would heavily impact key industries such as IT services, pharmaceuticals, textiles, and automotive manufacturing, which are vital to India's export-driven economy. Consequently, India's trade surplus with the US could shrink, forcing economic adjustments and potentially leading to job losses in sectors reliant on exports.
2. Geopolitical Ramifications: For BRICS nations, the proposed tariff may act as a trigger to accelerate efforts toward de-dollarisation and the creation of alternative trade mechanisms or currencies. Such a move could deepen the polarization of global economic blocs, pushing BRICS members and their allies to seek new partnerships to counter US influence. For India, this situation creates a diplomatic tightrope, as it must balance its strong economic ties with the US while maintaining its position within BRICS without compromising its economic interests.
3. Impact on Global Trade Systems: Global trade systems may also face significant disruption. The imposition of such steep tariffs could provoke retaliatory measures from BRICS nations, resulting in disrupted supply chains and intensifying trade wars. This could strain multilateral organizations like the WTO, as rising trade disputes challenge established global trade rules and cooperation frameworks.
4. Strain on US-India Relations: US-India relations, historically strong due to shared democratic values and robust economic ties, could suffer under such circumstances. Even though India’s government has clearly stated its lack of interest in de-dollarisation, its association with BRICS may bring it under scrutiny, potentially complicating strategic partnerships in areas like defence and technology collaboration.
5. Broader Financial Impacts: Finally, a tariff of this magnitude could lead to broader financial repercussions. Emerging economies within BRICS might experience financial market disruptions, while retaliatory actions could hasten the decline of the dollar’s dominance in global trade. This shift could reshape global financial systems, significantly impacting foreign reserves and international investments.

Significance

The current dip in oil prices highlights the fragile state of global energy markets, deeply intertwined with political and economic decisions. The uncertainty surrounding President Trump’s tariff proposals amplifies concerns about supply chain disruptions and their cascading effects on energy demand. This serves as a stark reminder of how geopolitical tensions can ripple through critical commodity markets, influencing prices and economic forecasts worldwide.

Future Impact

If the US goes forward with implementing these tariffs, it could trigger significant changes in the global trade landscape. BRICS nations may intensify their efforts to create a shared currency or alternative systems to reduce their reliance on the US dollar. Such actions could further weaken the dollar’s dominance in international trade. India, being a part of BRICS but also heavily reliant on trade with the US, might focus on strengthening bilateral trade agreements with other countries to minimize economic damage caused by the tariffs.

On a larger scale, these tariffs could lead to a rise in protectionist policies globally, eroding cooperation within multilateral trade institutions. As inflationary pressures and geopolitical tensions already challenge economies worldwide, these measures may exacerbate instability, with emerging economies bearing the greatest burden due to their dependency on global trade systems.

Conclusion

President Trump’s proposed 100% tariff on BRICS nations is a bold move designed to protect the US dollar's dominant position in global markets. However, it carries the risk of severe economic consequences, strained diplomatic relationships, and heightened polarization in the global economy. For India, the task will be to carefully balance its BRICS membership with its strong trade ties to the US. Over the long term, such measures have the potential to shift economic power dynamics and reshape the framework of global trade for years to come.