Trump’s 100% tariff threat: What’s at stake for India and Rupee settlement mechanism?

Published: Sep 13, 2024 Duration: 00:02:42 Category: News & Politics

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Donald Trump has made an announcement if he is back in power he plans to slap a 100% tariff on countries that do not use the US dollar for trade with the United States he said if you abandon the dollar you are not doing business with the United States maintaining the Dollar's dominance is a major issue for Trump in the runup to the elections but what is a central issue for India if this happens India has opted for a different route in international trading since 2022 the rupee settlement mechanism this allows countries to trade in Indian rupees shielding exporters from Wild currency swings it is still in its early stages but over 22 countries including Russia are already on board the idea is to reduce dependence on the dollar coming back to Trump's declaration the US dollar currently makes up 59% of global foreign exchange reserves a major share but still a decline from 85% in the 1970s and countries like India China Russia Brazil and South Africa are already exploring dollarization strategies while a complete shift away from the dollar as the global Reserve currency seems unlikely in the near future bricks nations are actively developing alternative Financial systems initiatives such as China's union pay India's UPI and Russia's spfs are key examples of this trend with India for example pushing to make UPI Global and that is one more important benefit from this this Oil Business historically oil and natural gas have been traded predominantly in US Dollars on Western exchanges but with the bricks expansion now including Saudi Arabia the UAE Iran Egypt Argentina and Ethiopia there is a shift bricks plus Now controls 43% of global oil production for major oil importers like China and India the expanded bricks block presents a chance to negotiate oil deals in their own currency India has already taken a step in this direction by establishing a local currency settlement system with the UAE allowing for trade in rupees and dams however if Trump wins and sticks to his word it could hit Indian exporters hard the US is a major export market for India and sticking with dollar denominated trade might limit their ability to manage exchange rate risks and could hinder efforts to promote the rupee as a Global Currency this could also burden reporters and impact their economic activity

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