Trump’s tariffs threat on BRICS over alternative currency is unnecessary
By any reasonable measure, President-elect Donald Trump was right when he said over the weekend that “there is no chance that the BRICS will replace the U.S. dollar in international trade.” But without such a threat from this group of nations led by Brazil, Russia, India, China and South Africa, Trump’s threat of a 100% tariff in retribution seems unnecessary.
The dollar is the global reserve currency and there is no sign of that changing. People use it because it’s in their interest to do so. No one forces them. There is simply no currency out there in the world that can replace it in terms of volume or liquidity. It’s not even close.
On volume, International Monetary Fund data show that the dollar represents 58% of the value of foreign reserve holdings worldwide. The euro, which is the official currency of 20 European Union countries, comes in at a distant second at 19.8%. Next is the Japanese yen at 5.6%.
On liquidity—which refers to how many buyers and sellers a currency has, and the ease with which it can be traded at a price close to its true value—the dollar again reigns supreme. It’s the most actively traded currency in the world. Again, the euro and the yen are the two most traded currencies against it.
