US President-elect Donald Trump’s recent threat to impose 100 per cent tariffs on imports from BRICS nations —if they create an alternative to the US dollar — highlights a powerful new impulse in Washington: Leveraging tariffs for various economic and political purposes. While defending the dollar’s status as the global reserve currency is one aspect, Trump and his team have broader ambitions to overhaul the global economic order using tariffs as their primary tool.
Delhi must prepare for fundamental changes in the international trading and financial system in the second term of President Trump. The commerce ministry is reportedly reviewing India’s trade with the US and developing strategies to address the incoming Trump Administration’s economic policies.
On BRICS and the discussion of “de-dollarisation”, Trump is making preemptive threats against a move that is yet to materialise. His trademark aggressive stance essentially tells the BRICS countries, “Don’t even think about it.” Sceptics have long maintained that BRICS’ rhetoric about de-dollarisation exceeds its actual financial capabilities and their commitment to collective action.
The BRICS nations lack unity in their goal to reduce the dollar’s dominance in the global financial system. Although Delhi may echo Sino-Russian rhetoric about building a new global economic order, the realists in the government recognise its vital economic interests are tied to Washington. After all, the US remains India’s most important economic and technological partner.
Delhi’s primary concern should not be Trump’s threats against a hypothetical BRICS currency, but rather his determination to reshape the global economic system. Despite its rhetoric, BRICS neither had nor is likely to gain the ability to restructure the global economic order. The US, however, possesses the financial clout to force major systemic changes — as demonstrated when Washington modified the nuclear nonproliferation order for India during 2005–08. Trump brings both longstanding conviction and strong political will to transform the international trading system.
Though Trump entered politics only in 2016, he has consistently opposed free trade agreements that he believed undermined American economic interests while benefiting both allies and adversaries. He criticised Japan’s growing trade deficits in the 1980s, opposed NAFTA in the 1990s, and challenged China’s trade practices in the 2000s.
During his first term (2017–21), Trump immediately withdrew from the Pacific Free Trade talks, renegotiated NAFTA, and imposed substantial tariffs on China, Canada, and the European Union. While reaching settlements with Europe and Canada, he maintained tariffs against China. President Joe Biden, after taking office in January 2021, continued these China tariffs, reflecting Washington’s new consensus on Beijing’s commercial challenges. Biden also maintained Trump’s policies that weakened the World Trade Organisation.
Trump has successfully reoriented US trade policy and intends to pursue this direction vigorously in his second term. During his 2024 presidential campaign, he called tariffs the “most beautiful word” in English — after only “faith” and “love”— and pledged to impose 60 per cent tariffs on Chinese imports and 20 per cent on all others.
His post-election cabinet appointments confirm his commitment to wielding tariffs as a powerful policy instrument. Scott Bessent, his Treasury Secretary nominee, recently outlined how tariffs can achieve various objectives beyond reducing trade deficits.
Bessent argued, “Tariffs are also a useful tool for achieving the president’s foreign policy objectives. Whether it is getting allies to spend more on their own defence, opening foreign markets to US exports, securing cooperation on ending illegal immigration and interdicting fentanyl trafficking, or deterring military aggression, tariffs can play a central role.” According to Bessent, America’s position as the world’s largest importer — and thus the most crucial market for other countries’ exports — underlies this expansive use of tariffs. “Our size gives us market power and the ability to dictate terms. Other countries need us more than we need them. We have to but use that power.” This suggests that in Trump’s second term, the US might deploy tariffs like sanctions to influence both allies’ and adversaries’ policies.
Bessent dismisses concerns that higher tariffs will fuel inflation and increase consumer costs. He maintains that strategic tariff use can boost treasury revenue, strengthen domestic production, and reduce dependence on industrial products from rivals like China. Drawing on Alexander Hamilton, America’s first Treasury Secretary and architect of its industrialisation, Bessent challenges conventional wisdom against using tariffs for economic or foreign policy goals.
How might America’s trade partners respond? Europe, which maintains a substantial trade surplus with the US, and which Trump has called “more dangerous than China”, has discussed retaliatory tariffs. However, European Central Bank President Christine Lagarde has advised against retaliation, suggesting instead negotiations with Trump and increased US purchases to reduce the trade deficit.
Trump recently threatened Mexico and Canada with 25 per cent tariffs unless they curbed cross-border drug and migrant flows. Notably, America’s two largest trading partners responded with offers to negotiate rather than confront the incoming US government.
India, which had trouble resolving the trade disputes with the US during Trump’s first term, must reassess its commercial engagement with America. This requires understanding the transformed global trade landscape while emphasising reciprocity and mutual benefit in dealings with Trump. As External Affairs Minister S Jaishankar put it in his address to a business summit in Delhi on Monday, “A lot of what lies ahead would be in fashioning terms of engagement (with the US) that are perceived as mutually beneficial. And in that regard, the more that India can bring to the table, the stronger our appeal.”
Delhi is acutely conscious that Trump’s trade policies combine negotiation with pressure. Bessent describes tariffs as Trump’s “loaded gun” on the negotiating table — a threat that might remain unused. Significantly, Bessent notes that Trump seeks to create a “fair-trade block” among allies and friends sharing common security interests and reciprocal tariff approaches. This is an objective with which India has no quarrel.
With China as Trump’s primary tariff target, India must consider how to leverage this situation through creative trade policies toward America. Under Prime Minister Narendra Modi’s watch, there have been many significant advances in Indo-US relations over the last decade. Bilateral trade, despite its growing volumes, has been one exception. President Trump’s second term presents Delhi the challenge and opportunity to transform the trade relationship with the United States.
The writer is a contributing editor on international affairs for The Indian Express
