{"id":145461,"date":"2024-12-03T20:01:16","date_gmt":"2024-12-03T14:31:16","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=editorial-analysis&#038;p=145461"},"modified":"2025-03-03T11:41:10","modified_gmt":"2025-03-03T06:11:10","slug":"brics-over-ditching-the-dollar","status":"publish","type":"editorial-analysis","link":"https:\/\/pwonlyias.com\/stage\/editorial-analysis\/brics-over-ditching-the-dollar","title":{"rendered":"Trump Threat to BRICS over Ditching the Dollar"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Recently the U.S. President-elect, Donald Trump, threatened BRICS (Brazil, Russia, India, China, South Africa) countries with 100% import tariffs if they create their own currency or back any existing currency to replace the U.S. dollar as the world\u2019s reserve currency.<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>U.S. dollar&#8217;s status as the global reserve currency<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Global Acceptance:<\/b><span style=\"font-weight: 400;\"> The dollar is widely accepted worldwide for trade, investment, and reserves, making it the preferred currency for international transactions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Global Trade Dominance:<\/b><span style=\"font-weight: 400;\"> The dollar is heavily used in global markets, especially for commodities like oil, gold, and other key resources, which creates constant demand for it in international trade.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Financial Markets:<\/b><span style=\"font-weight: 400;\"> The U.S. has the largest and most liquid financial markets, making the dollar the go-to currency for international investments and central bank reserves. This liquidity ensures its dominance in global finance.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Stability: <\/b><span style=\"font-weight: 400;\">The U.S. economy&#8217;s stability, effective inflation control, and strong financial institutions build trust in the dollar, reinforcing its position as the global currency of choice.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc\/pw-only-ias?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Classes<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Reasons for Demand for a New BRICS Currency<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Sanction Avoidance<\/b><span style=\"font-weight: 400;\">: Countries like<\/span><b> Russia and Iran have faced sanctions from the U.S.<\/b><span style=\"font-weight: 400;\">, limiting their ability to conduct trade in dollars.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">This has prompted them to seek alternatives to the U.S. dollar in order to avoid the risks associated with reliance on a single currency.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Political and Economic Autonomy<\/b><span style=\"font-weight: 400;\">: Countries want to <\/span><b>reduce U.S. influence over global financial systems,<\/b><span style=\"font-weight: 400;\"> such as SWIFT and the International Monetary Fund (IMF), which are often used to impose sanctions and exert pressure on sovereign states.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Mitigating Concentration Risks<\/b><span style=\"font-weight: 400;\">: Nations seek to diversify their foreign reserves beyond the U.S. dollar, mitigating the risks associated with holding a large portion of their reserves in one currency.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Strengthening Economic Cooperation<\/b><span style=\"font-weight: 400;\">: BRICS countries, with their growing economic power, have sought to<\/span><b> enhance intra-group trade by using local currencies<\/b><span style=\"font-weight: 400;\"> or a new BRICS currency, bypassing the U.S. dollar and reducing transaction costs.<\/span><\/li>\n<li><b>Enhancing Financial Integration<\/b><span style=\"font-weight: 400;\">: A common currency or payment system within BRICS could facilitate smoother trade and investment flows, and increase economic cooperation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Shift in Global stance<\/b><span style=\"font-weight: 400;\">: As the global economic center of gravity increasingly shifts towards emerging economies, there is a growing aspiration among non-Western and developing countries, such as India, to transition from a unipolar to a multipolar world.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 18pt;\"><b>India\u2019s Position on Currency and Trade<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Internationalisation of the Rupee<\/b><span style=\"font-weight: 400;\">: In response to sanctions and trade challenges, India has initiated steps to internationalize the Indian rupee, allowing payments for international trade in rupees.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Efforts are being made for local currency trade integration among BRICS nations.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Trade Relations with Russia<\/b><span style=\"font-weight: 400;\">: India\u2019s trade with Russia has shifted toward local currency settlements, although issues <\/span><b>like trade imbalance and banking reluctance due to potential U.S. sanctions persist.\u00a0<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Conversely, Russia-China trade is more balanced, with significant use of the ruble and yuan.\u00a0\u00a0\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>India&#8217;s Clarification on Dollar Usage<\/b><span style=\"font-weight: 400;\">: India\u2019s External Affairs Minister clarified that while India seeks to find &#8220;workarounds&#8221; in trade with certain countries due to U.S. policies, it has never targeted the U.S. dollar or sought to replace it.\u00a0<\/span><\/li>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India\u2019s focus is on finding alternative solutions for transactions where dollar access is limited.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.7992%;\">\n<tbody>\n<tr>\n<th style=\"width: 100%; border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle;\">\n<h4><span style=\"color: #000000; font-size: 15pt;\"><b>Global Trends in Reserve Currencies<\/b><\/span><\/h4>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Decline of Dollar\u2019s Share<\/b><span style=\"font-weight: 400;\">: According to IMF, the share of the U.S. dollar in global foreign exchange reserves has been <\/span><b>gradually declining over the past two decades.\u00a0<\/b><\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400; color: #000000;\">However, this decline has not been fully offset by an increase in the shares of the euro, yen, or pound.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><b>Rise of Non-Traditional Reserve Currencies<\/b><span style=\"font-weight: 400;\">: The IMF notes a rise in the share of non-traditional reserve currencies like the <\/span><b>Chinese renminbi, Australian dollar, and South Korean won,<\/b><span style=\"font-weight: 400;\"> with the Chinese renminbi gaining the most ground, matching a quarter of the decline in the dollar\u2019s share.<\/span><\/span><\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-textbooks?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Textbooks\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC NCERT Textbooks From PW Store<\/span><\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Way Forward<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Caution in BRICS Financial Reforms<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India should carefully monitor financial reforms within BRICS to ensure that China does not dominate the bloc\u2019s economic direction.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Balancing interests within BRICS while preserving sovereignty<\/b><span style=\"font-weight: 400;\"> and influence is key to avoiding asymmetry in economic power.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Diplomatic Engagement<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India must diplomatically engage with the U.S. to clarify that<\/span><b> diversifying trade mechanisms and promoting local currencies is not intended to undermine the U.S. dollar<\/b><span style=\"font-weight: 400;\"> but to foster global financial multipolarity and stability.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">India should emphasize that its approach to trade reforms is cooperative, not adversarial, aiming for inclusivity rather than anti-Americanism.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Future Financial Reforms<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>UPI Internationalization<\/b><span style=\"font-weight: 400;\">: India should expand the global reach of its Unified Payments Interface (UPI) to provide a reliable and accessible payment mechanism.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Central Bank Digital Currency (CBDC)<\/b><span style=\"font-weight: 400;\">: Accelerating the development and implementation of the digital rupee will enhance India&#8217;s financial resilience and adaptability in global trade.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Strengthening Strategic Balance<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Maintaining robust ties with the U.S. while promoting local currency trade among BRICS will help India safeguard its strategic and economic priorities in a multipolar world.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div class=\"vc_table_green\"><\/p>\n<table style=\"width: 99.6375%;\">\n<tbody>\n<tr>\n<td style=\"width: 111.19%; text-align: center;\" colspan=\"2\"><span style=\"font-size: 18pt;\"><b>Also Read<\/b><\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/editorial-analysis\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Daily Editorials<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/daily-current-affairs\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Daily Current Affairs<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/quiz\/\" target=\"_blank\" rel=\"noopener\"><b>Daily Current Affairs Quiz<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/mains-answer-writing\/\" target=\"_blank\" rel=\"noopener\"><b>Daily Main Answer Writing<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-previous-year-papers?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Previous+Year+Papers\" target=\"_blank\" rel=\"noopener\"><b>Check Out Previous Years Papers From PW Store<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/pwonlyias.com\/stage\/upsc-test-series-courses\/\" target=\"_blank\" rel=\"noopener\"><b>UPSC Test Series<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 49.797%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-textbooks?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Textbooks\" target=\"_blank\" rel=\"noopener\"><b>Check Out UPSC NCERT Textbooks From PW Store<\/b><\/a><\/td>\n<td style=\"width: 61.393%; text-align: center;\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books\/upsc-modules?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+Modules\" target=\"_blank\" rel=\"noopener\"><b>Check Out UPSC Modules From PW Store<\/b><\/a><b>\u00a0<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. President-elect, Donald Trump, threatened BRICS (Brazil, Russia, India, China, South Africa) countries with 100% import tariffs if they create their own currency or back any existing currency to replace the U.S. dollar as the world\u2019s reserve currency.<\/p>\n","protected":false},"author":11,"featured_media":145423,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"tags":[],"paper-wise":[2084],"subject":[2102],"acf":[],"_links":{"self":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/editorial-analysis\/145461"}],"collection":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/editorial-analysis"}],"about":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/types\/editorial-analysis"}],"author":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/comments?post=145461"}],"version-history":[{"count":2,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/editorial-analysis\/145461\/revisions"}],"predecessor-version":[{"id":145464,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/editorial-analysis\/145461\/revisions\/145464"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media\/145423"}],"wp:attachment":[{"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/media?parent=145461"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/tags?post=145461"},{"taxonomy":"paper-wise","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/paper-wise?post=145461"},{"taxonomy":"subject","embeddable":true,"href":"https:\/\/pwonlyias.com\/stage\/wp-json\/wp\/v2\/subject?post=145461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}