Trump said he’ll put a 100% tariff on countries that give up the dollar. That could backfire.

US President-elect Donald Trump issued a new tariff threat over the weekend, this time against countries seeking to find US dollar alternatives — but in doing so, he may be elevating a non-threat, said economists.

“The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER,” Trump wrote on Truth Social on Saturday, referring to a group of nine emerging nations comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates.

“We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” he added.

The US dollar gained on the political uncertainty, with the Dollar Index up 0.6% at 3:10 a.m. ET on Monday.

Trump’s stance on the issue may actually backfire. Even as some countries have looked for dollar alternatives in recent years, economists have not worried about the US dollar’s dominance, which for decades has underpinned the global economy.

“It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar,” wrote Brad Setser, a senior fellow at the Council on Foreign Relations, on X.

The former US trade and Treasury official said trying to force countries to use the dollar makes the use of the US dollar appear to be a “favor” to the US — when that is not the case now. Coercing countries to use the greenback could be a long-run threat to the dollar’s global role, Setser wrote.

In a Monday note, Deutsche Bank analysts said the BRICS-focused tariffs would not help the US economy.

“It seems to further point to Dollar strength being a theme of the new administration as against Trump 1.0 where initially they tried to talk the Dollar down,” the Deutsche analysts wrote.

Countries around the world already use the US’ currency

The US dollar is so pervasive and entrenched in the world’s financial order that countries use the greenback voluntarily — they have few other options for international trade and payments.

This is in part due to the size, liquidity, and depth of the Treasury bonds market, which is used to finance the US’ deficit spending.

“As long as the US is the only country willing and able to offer unfettered access to its domestic financial markets, and is willing to run huge trade deficits to accommodate foreign mercantilism and maintain the supremacy of the USD, BRICS nations have little choice,” Michael Pettis, a senior fellow at the Carnegie Endowment for International Peace, wrote on X.

Cutting the US’ trade deficits — a key Trump talking point for both his terms — translates to foreigners owning fewer US assets, Pettis said. It’s impossible to both reduce a country’s trade deficit and increase its dollar dominance, he highlighted.

“Warning BRICS nations against replacing the US dollar suggests just how confused the incoming administration is about the global trade and capital system. Maintaining USD dominance is completely inconsistent with stated US trade policies,” Pettis wrote.

A trade war with Brazil, India, and China wouldn’t help the US economy, wrote Setser. There’s also almost no direct trade between the US and Russia now.

Brazil uses its US dollars from trade with China to buy US goods. Threatening 100% tariffs on India could hurt the country’s alignment with the US, and high tariffs on Chinese goods would be “one hell of a shock to the US” since US importers would likely pass the cost onto consumers.

De-dollarization discussions are rife, but even BRICS isn’t sold

Trump’s comments came amid intense discussions about de-dollarization in recent years following sweeping sanctions against Russia over its invasion of Ukraine.

To be sure, there are steady shifts away from the US dollar globally — but only in central bank foreign reserves and foreign exchange derivatives, according to an analysis of data from 2000 to 2024 published by ING published in late October. And these declines are from very high levels.

The share of US dollars used in SWIFT transactions increased from 2016 to 2024, ING found.

“In other major areas, including international debt securities, interest rate derivatives, and transactions, the US dollar retains strong footing, showing little signs of losing its dominant position in the short and long run thanks to its wide market capacity and favourable interest rate environment,” wrote ING’s analysts.

In October, Russian President Vladimir Putin opened a summit of BRICS nations by calling for an alternative payment system. He said he wasn’t against the greenback but took issue with the weaponization of it.

“We are not refusing, not fighting the dollar, but if they don’t let us work with it, what can we do? We then have to look for other alternatives, which is happening,” Putin said at the October summit, where organizers advised summit guests to bring dollars and euros.

The US and Trump do not need to worry about BRICS creating a new, dollar-rivaling currency. Putin has already put the idea of a common currency firmly on the back burner, although Russia is touting trade in local currencies and crypto.

BRICS members also have many competing priorities and rivalries — just look at China and India.

BRICS’ chatter about a common currency is “going nowhere and simply isn’t currently a real risk to the US economy,” wrote Setser.

Then again, Trump’s tariff threats could just simply leverage to get what he wants — because that was how he played in his first term.

Last week, Trump threatened 25% tariffs on imports from top trading partners Canada and Mexico, and an additional 10% tariff on China. He took issue with the countries over their role in the flow of drugs and illegal migrants into the US.

Canadian Prime Minister Justin Trudeau met Trump in Florida on Friday and promised tighter border controls, Reuters reported, citing a senior Canadian official.

Mexico’s President Claudia Sheinbaum said on Thursday that she and Trump had a friendly phone conversation discussing illegal migration and fentanyl trafficking.