Donald Trump’s latest tariff threat appears to have stemmed at least in part from a nascent blockchain-based entrant into the influential world of global financial messaging.
The president-elect’s move came in a Saturday afternoon post where he promised 100% tariffs on countries looking to move away from the dollar.
“[A]ny Country that tries should wave goodbye to America,” he wrote.
The target was an organization called BRICS, which currently boasts 10 nations and is led by the Western adversaries of China and Russia.
One new product offering appears to be a key stumbling block.
“The proximate cause of Trump’s threat is the development of BRICS Pay,” wrote Douglas Holtz-Eakin, the president of the American Action Forum, in a Monday morning note.
BRICS Pay is a new attempt by the group to use digital payment and QR code technology to provide an alternative to dollar-dominated networks — specifically the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
President-elect Donald Trump during a recent stop in Washington, D.C., as he prepares to assume the presidency next year. (ALLISON ROBBERT/POOL/AFP via Getty Images) ·ALLISON ROBBERT via Getty Images
Trump’s post immediately raised fears of a complicated trade war that would potentially span five continents and is set to be another active front for negotiations between Trump’s transition team and overseas leaders in the months ahead.
A Kremlin spokesman quickly responded on Monday that Trump’s move would backfire, adding that the dollar is already in decline.
“Today, we begin building a new, fair, and decentralized financial system for the future,” the BRICS pay website promises as it touts its new effort to be “a new global financial and payments architecture.”
The group aims to offer traditional bank-to-bank connections as well as newer digital means to move money as part of an overall effort to allow more cross-border payments without involving dollars.
The still-unfolding goal is to provide a comprehensive online wallet that would allow citizens and businesses in these countries to make payments around the globe using their national currencies.
It was formally launched this October as a direct counter to SWIFT, a Belgium-based system that currently dominates the connections of banks around the world and is dominated by dollars.
The SWIFT system is largely the reason that 88% of foreign exchange transactions currently involve the dollar — even if there’s not an American on one side of the transaction.
The logo of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is seen in Hong Kong in 2022. (Getty Images) ·NurPhoto via Getty Images
The recent announcement of a rival came after a BRICS Business Forum in Russia and could have outsized effects on Vladimir Putin and his countrymen, who have been largely banned from the SWIFT system since their invasion of Ukraine in 2022.
The SWIFT network has indeed gained a measure of prominence in recent years as a lever for the West to impose economic sanctions — not just on Russia but other adversaries of the West.
Other nations in the coalition have long been critical of the dollar for other reasons, with the Chinese government saying that the dollar’s dominance is “the main source of instability and uncertainty in the world economy.”
BRICS was founded in 2009 by Brazil, Russia, India, China, and South Africa. It has recently expanded to include Iran, Egypt, Ethiopia, and the United Arab Emirates. Saudi Arabia has also been invited to join.
The group has been rechristened BRICS+ and says it now represents over one-third of the earth’s area, nearly a quarter of its export volume, and 45.2% of its population.
Turkey, Azerbaijan, and Malaysia have also reportedly applied to become members.
A larger threat from BRICS is that this informal coalition will establish its own currency, much like the euro, to directly challenge the dollar.
But it’s a notion that experts say is fuzzier.
It’s still just an idea, with Capital Economics writing earlier this year that whether or not they “make an explicit pledge, a BRICS currency is not a viable challenger to the dollar.”
An Atlantic Council model that tracks the dollar’s place and analyzed BRICS efforts concluded that “the dollar’s role as the primary global reserve currency is secure in the near and medium term.”
And the idea of an entirely new currency appears to be downplayed for now, with Kremlin spokesman Dmitry Peskov telling reporters Monday in response to Trump’s threat that “more and more countries are switching to the use of national currencies in their trade and foreign economic activities.”
The perhaps more immediate question is whether BRICS Pay can get a foothold in the years ahead and help push forward the larger “de-dollarization” trend, a possibility that President-elect Trump is clearly trying to forestall.
Chinese President Xi Jinping and Russian President Vladimir Putin, center in the front row, prepare for a a group photo with BRICS+ meeting participants during a BRICS leaders summit in October in Kazan, Russia. (Getty Images) ·Contributor via Getty Images
“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,” Trump wrote in his post.
What remains to be seen is whether Trump — as he appears to have successfully done with recent tariff threats against Mexico and Canada — can jumpstart talks with these nations and then create a path to possibly head off the need to make the threats a reality.
He recently promised to put 25% tariffs on everything imported from Mexico and Canada in order to spur the countries to do more to halt the flow of illegal immigration and drugs.
It had an immediate effect, with Trump shortly thereafter holding a call with Mexican President Claudia Sheinbaum and visiting with Canadian Prime Minister Justin Trudeau over dinner at Mar-a-Lago in Florida to start talks.
But whether this latest threat against a much broader array of nations will lead to similar results remains to be seen.
“What exactly constitutes a satisfactory ‘commitment’ remains unclear, as is the authority under which such tariffs would be levied,” Holtz-Eakin noted Monday.
“So, for now, it is just talk.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance’s Rachelle Akuffo, Rick Newman, and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
