Join 250,000+
professionals today

Add Insights to your inbox - get the latest
professional news for free.

Why Trump Threatens 100% Tariff on Dollar Ditchers

Join our 250K+ subscribers

Join our 250K+ subscribers

Subscribe

13 SEP 2024 / ECONOMY

Why Trump Threatens 100% Tariff on Dollar Ditchers

Why Trump Threatens 100% Tariff on Dollar Ditchers

In their first debate, Trump and Kamala Harris went head-to-head on tax policies, unveiling bold proposals that set the stage for a showdown in the 2024 election. Trump vowed to eliminate federal taxes on overtime pay and slash the corporate tax rate, a move that could cost Social Security and Medicare up to $1.6 billion by 2035. Harris countered with her plans to remove federal taxes on tips, introduce a $50,000 startup deduction, and expand the child tax credit to $6,000, though her approach might reduce federal revenue by over $2.2 trillion in the next decade. Their starkly different strategies reflect a deeper battle over the nation's economic direction. 

Meanwhile, in Wisconsin, Trump ramped up his economic agenda with a controversial proposal: a 100% tariff on any country that abandons the US dollar for other currencies. As global players explore de-dollarization, Trump's bold move aims to shield the dollar’s global supremacy. But is this the right play, or a risky gamble? As countries like China and Russia look to sidestep the dollar, Trump’s aggressive stance raises questions about the future of American economic influence. Let’s dive into the details and what’s at stake.  

The Rise of De-dollarization and Global Tensions 

The US dollar’s reign as the world’s primary currency has been unchallenged since the 20th century. But as Bob Dylan sang, “The times they are a-changin’.” From China to Russia, the BRICS nations (Brazil, Russia, India, China, and South Africa) have been pushing to reduce their dependence on the dollar. This year’s BRICS summit zeroed in on “de-dollarization,” a move aimed at shaking up the status quo. Countries are now experimenting with their own currencies for trade and exploring alternatives like digital payment systems to cut the dollar out of the equation. 

China, for instance, has been playing its cards close to the chest. Through currency swaps with major oil producers like Russia and Saudi Arabia, China has successfully made trades using its own renminbi. In a groundbreaking move, China even proposed using the Shanghai Petroleum and Natural Gas Exchange to handle oil trades in renminbi. As more oil-rich countries like Saudi Arabia, the UAE, and Iran join BRICS, this alternative trading strategy is gaining traction. 

Russia, too, has been busy. In response to Western sanctions, it doubled down on its partnership with China, developing the Cross-Border Interbank Payment System (CIPS) to bypass the US-controlled SWIFT system. With these strategic shifts, the dollar’s grip on international trade is loosening, and Trump’s tariff threat is his way of saying, “Not on my watch.” 

A Counter to De-dollarization 

Trump’s proposed 100% tariff is a shot across the bow to any country turning its back on the dollar. It’s a high-stakes play aimed at keeping the dollar on top. “The dollar is under major siege,” Trump declared, rallying his base with promises to protect the American currency. This aggressive economic nationalism is not new for Trump, who previously took a hard line on trade during his presidency. But will tariffs really do the trick? 

By positioning himself as the defender of the dollar, Trump hopes to resonate with working-class voters in swing states like Wisconsin, who have felt left out by current economic policies. With inflation, high gas prices, and economic uncertainty, Trump’s message of economic sovereignty is striking a chord. But defending the dollar may require more than just a protectionist stance. 

The Dollar’s Dominance 

Despite the noise around de-dollarization, the US dollar still holds the crown. According to the International Monetary Fund, the dollar accounts for 59% of global foreign exchange reserves. However, this is a significant drop from the 85% share it enjoyed in the 1970s. The writing on the wall? Central banks around the world are diversifying their reserves. 

JPMorgan’s latest report paints an interesting picture: while the dollar’s share in emerging market reserves has slipped, it remains the go-to currency for global liabilities and debt issuance. And despite the hype, a full-scale dethroning of the dollar isn’t likely anytime soon. JPMorgan estimates that meaningful erosion of the dollar’s dominance could take decades, not years. So, while the dollar may be down, it’s far from out. 

BRICS and Commodity Trade: A Major Shift 

The battle for currency supremacy is nowhere more evident than in the oil and commodities markets. The US dollar has long been the heavyweight champion in global trade, but with BRICS controlling 43% of global oil production, the tides are shifting. For oil importers like China and India, buying oil in their own currencies could be a game of dollars and sense. 

Just this year, China and France’s Total Energies executed their first renminbi-based oil trade—a milestone in the push toward a more diversified currency landscape. And talks between China and Saudi Arabia on developing a Central Bank Digital Currency (CBDC) for cross-border payments are adding fuel to the fire. As BRICS nations continue to forge new paths, the dollar’s dominance in global trade faces unprecedented challenges. 

Implications for the 2024 Presidential Race 

Trump’s fight to defend the dollar isn’t just an economic issue—it’s a political one, too. As we head toward the 2024 presidential race, this debate could become a pivotal point in the campaign. Wisconsin, the site of Trump’s announcement, is a key battleground state. Recent polls show Kamala Harris leading in the state, making Trump’s economic pitch more critical than ever, especially given the ongoing court cases against him for hush money payments.

The question remains: Will Trump’s aggressive tariff proposal help him swing undecided voters? His stance highlights growing economic tensions and signals that his platform will likely continue to focus on defending American interests against global economic shifts. But as more countries consider moving away from the dollar, Trump’s plan may be seen as a Band-Aid on a deeper economic wound.

The Future of the US Dollar 

So, where does this leave us? Trump’s pledge to protect the dollar is a high-stakes gamble that reflects broader global dynamics. As the world moves toward a more multipolar economy, alternative payment systems, CBDCs, and regional trade agreements could reshape the future of finance. The US dollar, while still dominant, faces headwinds that will challenge its supremacy in the years ahead. 

Will Trump’s protectionist measures be enough to stave off the inevitable? Only time will tell. One thing’s for sure: the landscape of global finance is changing, and the battle for currency dominance is far from over. As the saying goes, “You don’t change horses midstream”—but with Trump’s bold new plan, it looks like the stream itself is changing. Interesting isn't it. Stay tuned for the updates!

Until next time…

Don’t forget to share this story on LinkedIn, X and Facebook

📢MYCPE ONE Insights has a newsletter on LinkedIn as well! If you want the sharpest analysis of all accounting and finance news without the jargon, Insights is the place to be! Click Here to Join

Subscribed
KIMBERLY purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Ravi purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Rahim purchased a subscription.
Subscribed
Alan purchased a subscription.
Subscribed
Agrima Gulati purchased a subscription.
Subscribed
Rojin purchased a subscription.
Subscribed
Parth purchased a subscription.
Subscribed
Charles purchased a subscription.
Subscribed
Pooja purchased a subscription.
Subscribed
Katie purchased a subscription.
Subscribed
RONALD purchased a subscription.
Subscribed
Blaire purchased a subscription.
Subscribed
Emily purchased a subscription.
Subscribed
Brian purchased a subscription.
Subscribed
Lisa purchased a subscription.
Subscribed
Vicken purchased a subscription.
Subscribed
Jovita purchased a subscription.
Subscribed
Eric purchased a subscription.
Subscribed
Raza purchased a subscription.
Subscribed
Pierre purchased a subscription.
Subscribed
diane purchased a subscription.
Subscribed
Craig purchased a subscription.
Subscribed
Sonia purchased a subscription.
Subscribed
Kevin purchased a subscription.
Subscribed
Scott purchased a subscription.
Subscribed
CHRISTOPHER purchased a subscription.
Subscribed
Amy purchased a subscription.
Subscribed
Alifa purchased a subscription.
Subscribed
Brock purchased a subscription.
Subscribed
SARAH purchased a subscription.
Subscribed
Regina purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Jody purchased a subscription.
Subscribed
Therese purchased a subscription.
Subscribed
KAREN purchased a subscription.
Subscribed
Ray purchased a subscription.
Subscribed
A Lara purchased a subscription.
Subscribed
Richard Poston purchased a subscription.
Subscribed
Jordan purchased a subscription.
Subscribed
Mitul purchased a subscription.
Subscribed
Charles purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
Michelle purchased a subscription.
Subscribed
Richard T purchased a subscription.
Subscribed
Jill purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
Diane purchased a subscription.
Subscribed
Carl purchased a subscription.
Subscribed
Rebecca purchased a subscription.
Subscribed
Dominique purchased a subscription.
Subscribed
Tina purchased a subscription.
Subscribed
John purchased a subscription.
Subscribed
Shauna purchased a subscription.
Subscribed
Sang purchased a subscription.
Subscribed
Joni purchased a subscription.
Subscribed
Sun Yeul purchased a subscription.
Subscribed
Darryl purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Baldev purchased a subscription.
Subscribed
Sara purchased a subscription.
Subscribed
brook purchased a subscription.
Subscribed
Chris purchased a subscription.
Subscribed
Ray purchased a subscription.
Subscribed
Motaz purchased a subscription.
Subscribed
Bowen purchased a subscription.
Subscribed
Jeffrey purchased a subscription.
Subscribed
ANNE purchased a subscription.
Subscribed
Parker purchased a subscription.
Subscribed
Shauna purchased a subscription.
Subscribed
Paul purchased a subscription.
Subscribed
Sally purchased a subscription.
Subscribed
Alexander purchased a subscription.
Subscribed
Alan purchased a subscription.
Subscribed
Sarah purchased a subscription.
Subscribed
Sarah purchased a subscription.
Subscribed
Russell purchased a subscription.
Subscribed
JEROME purchased a subscription.
Subscribed
TEL purchased a subscription.
Subscribed
Andrew purchased a subscription.
Subscribed
Connie purchased a subscription.
Subscribed
Marlene purchased a subscription.
Subscribed
Teresa purchased a subscription.
Subscribed
Jessica purchased a subscription.
Subscribed
Pedro purchased a subscription.
Subscribed
Carrie purchased a subscription.
Subscribed
April purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
cheryl purchased a subscription.
Subscribed
Luke purchased a subscription.
Subscribed
Inge purchased a subscription.
Subscribed
Chirag purchased a subscription.
Subscribed
JOSEPHINE purchased a subscription.
Subscribed
Ashley purchased a subscription.
Subscribed
David purchased a subscription.
Subscribed
TONY ZHICONG purchased a subscription.
Subscribed
James purchased a subscription.
Subscribed
Gwendolyn purchased a subscription.
Subscribed
Cheryl purchased a subscription.