If Republican Presidential Candidate, Donald Trump were to win the 2024 Presidential election (at this time he is trailing the Democratic Party’s candidate and current US Vice President Kamala Harris) he will take over when the world is facing several geopolitical challenges – especially the Russia-Ukraine conflict and the turbulent situation in the Middle East ever since October 2023. Trump would thus certainly have his task cut out.
On the Russia-Ukraine conflict, the former US President and Republican Presidential candidate has repeatedly stated that the conflict would end soon after he takes over (he has often referred to his personal rapport with Russian President Vladimir Putin). He has also blamed US President Joe Biden’s policies for the current situation in the Middle East.
Geopolitics has also had a significant impact on the global economic architecture. As a result of stringent sanctions imposed by the US on Russia, in the aftermath of the Russia-Ukraine conflict, countries have been seeking to reduce their dependence upon the US dollar and moving towards what is called ‘de-dollarization’. The US dollar’s share of global reserves was estimated at 59% in 2023.
While the Brazil, Russia, India, China, South Africa (BRICS+ grouping which expanded in January 2024 with the entry of Iran, Egypt, Ethiopia, and the United Arab Emirates) has been discussing a common currency, the grouping has also recently come up with an inter-payment system (which has been adopted by 159 countries). At an individual level too, countries – other than China and Russia — have been moving towards trade in local currencies. This is even more so for commodities – especially oil (20% of global oil trade in 2023 was carried out in Non-Dollar currencies)
It is not just countries which are aligned in the Russia/China camp, but countries which share robust ties with the US — like India, UAE, Saudi Arabia — who have also favoured the reduction of dependence upon the US Dollar for trade. It would be pertinent to point out that while going in for trade in non-dollar currencies, there is a realisation that the dollar will continue to remain the dominant global currency. Senior Indian officials for example have reiterated this point and argued for the need to be realistic and nuanced on this issue. India has also been cautious regarding a common BRICS currency.
Trump’s simplistic approach towards economic issues
Donald Trump who imposed tariffs on several countries, during his previous tenure as president, resulting in souring of ties with allies and partners, has already said that the US would impose tariffs on countries which go for de-dollarization. While speaking at a rally in Wisconsin on September 7, 2024 said Trump:
“You leave the dollar and you’re not doing business with the United States because we are going to put a 100% tariff on your goods”
Some of the possible ways of punishing countries going in for de-dollarization discussed by Trump and his economic advisers include; tariffs and export controls.
In conclusion, Donald Trump’s statements on key economic and foreign policy issues needs to be taken with a pinch of salt. His true test will be how he acts when he is in power. While it is true, that some of his economic policies, in his previous tenure, resulted in worsening ties even with US allies in the current situation, it would be tough to adopt a rash approach vis-à-vis de-dollarization since, as discussed earlier, countries which share close ties with the US have also gone for de-dollarization. While the US under a Trump Presidency would be well advised to avoid any hasty steps, instead it needs to introspect as to why countries are looking to reduce their dependence on the US Dollar, it is also important to bear in mind that the US dollar is likely to remain the dominant global currency, as has been mentioned earlier, and some of the commentary which is dismissive of the US Dollar is rather pessimistic and over the top.
