External Affairs minister S. Jaishankar clearly committed a blunder by publicly declaring in London that there was no unified position within BRICS on currency multipolarity. He further added that India would support US led financial architecture.
Does Jaishankar even know what the evolving US-led global financial architecture under Trump 2.0 might be since everything is in such a flux?
In any case, where was the need to make such a premature commitment when overall tariff negotiations are underway and no one—including the non-biological being to whom the minister reports—has a clue where reciprocal tariff talks may be headed?
Any rookie diplomat would tell you that in the current uncertainty enveloping the global trading system, currency policy is a definitive bargaining chip. Yet, Jaishankar sought to give it away for nothing. Trump has already thrown subtle hints that he would seek currency adjustments favourable to the US from strong trading nations like China, Japan , Brazil etc. Who knows, India too may be a target.
One will not be surprised if there is a sort of replay of the 1985 Plaza Accord, under which the US forced Japan and other strong trading partners like Germany to strengthen their currencies so that US exports get propped up artificially. Japan in the 1980s was beating America badly in exports of auto, electronics and textiles and the only way the US could fight this was by forcing Japan to appreciate their currency and make Japanese exports less competitive. The US exploited this instrument and tried to protect its own auto industry. But thankfully the China of 2025 is not like Japan of the 1980s. Beijing will not take such threats lying down – as is already evident from their foreign minister’s statement that China is prepared for any kind of war, trade related or otherwise.
Given that currency is an extraordinarily potent weapon in a trade war, it was unwise on Jaishankar’s part to make such an impromptu public commitment to unequivocally be part of the US-led financial architecture.
Purely as a cautionary tale, Jaishankar should have just recalled what Trump did just before leaving office in 2020 end. He put India officially under a currency manipulation watch along with a few other countries like Taiwan and South Korea which were formally US allies.
It should not come as a surprise if Trump resumes that project as added ballast to high reciprocal tariffs. Simply put, forcing a trading partner to appreciate their currency has the same effect as imposing higher import tariffs by the US.
So Jaishankar’s statement about BRICs and the Indian position on multipolarity of currency was rather ill timed and even self harming. Perhaps Jaishankar was also indiscreet in suggesting publicly that BRICS had no unified position on currency multipolarity. In such times when the US is brazenly bulldozing the open international trading system, it would have been more sensible to consult other BRICs countries and use the grouping to knock some sense into the US. That might have been deft diplomacy.
Trump is showering Russia with unprecedented favours but catch Russia speaking about BRICs in the tone Jaishankar has deployed.
Purely on facts, it is evident that many developed and developing countries , even those outside BRICs, have been gradually diluting their dollar reserves and stocking up on more and more gold. Post Ukraine war and the US freezing ofRussia’s dollar assets, many developed and developing nation central banks have doubled their annual purchase of gold in their reserves. This has clearly come at the cost of the dollar. India itself resorted to massive purchases of Russian crude by paying in rupees. Otherwise this trade would have been in dollars if the sanctions on Russia were partial.
Trump doesn’t realise it is America’s draconian sanctions in recent years that have motivated nations to stock up more gold at the expense of dollars in their reserves. Over 100 countries have been under comprehensive or partial US economic sanctions of varying nature. The US is inadvertently causing de-dollarisation by its own behaviour. India itself is a signatory to earlier BRICs agreements that encourage local currency trade between nations of this grouping.
Trump’s threat that he would impose 100% tariffs on BRICS nations (which now includes UAE, Iran, Egypt, Indonesia among others willing to join) is at best empty rhetoric. A 100% tariff on China and India will likely cause inflation riots in America. Trump knows this.
No wonder he has postponed his promised 25% tariffs on Canada and Mexico by a month after seeing the US stock market meltdown as reaction to such draconian moves in the name of making America great again. At least on the economic and trade front, Trump is clearly misreading the mandate he has got from the electorate.
That is why it is inexplicable that India should be making such loose commitments in public as S. Jaishankar did when he sought to put all eggs in the US basket. US-led financial architecture has its own structural vulnerabilities. Many sensible economists believe that the Federal Reserve balance sheet expansion from about $800 billion in 2008 to about $5 trillion in the years after the global financial crises—and then to about $9 trillion dollars after Covid via the relentless printing of dollars post Covid to stimulate the economy—has not produced proportionate real economy growth. It has implicitly weakened the dollar and created a financial bubble.
Today, the dollar is not necessarily in a good place. This is partly reflected in US tech stocks bubble, where about a dozen big shares account for more than a third of the total US market capitalisation. This is a dangerous skew. These stocks suffered a jolt when China produced a much cheaper and equally effective AI product, DeepSeek. Other such products are expected to follow from China. This can make the dollar more vulnerable in the future. Trump’s chaotic approach may thrive in the short to medium term and attract global capital as a “safe haven” economy but the underlying fundamentals of this so called safe haven are undoubtedly weak. India is well advised to hedge her bets via a truly multipolar trade, investment and currency strategy in the longer run.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.
