As Donald Trump’s second term begins this Monday, January 20, 2024, the BRICS issue resurfaces. The US president promised during his campaign to impose 100% tariffs on countries in the economic bloc if they continue to undermine the US dollar.
Under Joe Biden’s administration, Washington has been relatively dismissive of the emerging market economic coalition. The real policy shift with the incoming Trump administration is its explicit treatment of BRICS as an entity.
At the heart of the Sino-American rivalry
Originally created by Brazil, Russia, India and China in 2009, then joined by South Africa in 2010, BRICS – dominated by Beijing – was set up to rival Western dominance on the international scene.
At the alliance’s 16th annual summit in Kazan, Russia, Egypt, Ethiopia, Iran and the United Arab Emirates were formally admitted to the group. The size of the bloc makes it increasingly unlikely that the United States will impose punitive 100% tariffs on BRICS. This would risk directing neutral nations in the rivalry between the United States and China towards Beijing… The world’s second largest economy could even intervene to mitigate the effects of possible American trade measures against BRICS members.
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China has already started to do this, proposing a zero tariff policy for least developed countries with diplomatic ties to Beijing, which came into effect in December last year (2024). It is based on similar measures extended to the least developed African countries.
The dollar is king
The tariff threat is conditioned by the fact that the BRICS dethrone the US dollar as the most used commercial currency in the world. Which could prove to be a daunting task for the alliance.
-Russia has pushed for dedollarization to bypass the SWIFT network for banking transactions and reduce the impact of U.S. sanctions on Moscow. One of the group’s options for overturning the dollar was to create a unified BRICS currency, a proposal floated by Brazil but which has yet to gain traction.
Another possibility was to set up multi-currency trading, which already exists between several members. Some trade between China and Russia is conducted through the yuan and the ruble. The countries also agreed to continue strengthening trade through local currencies and expressed support for the idea of an independent cross-border payment settlement infrastructure.
A still weak coalition
The lack of a concrete allied strategy and action by BRICS members raises doubts about their ability to pose a threat to the United States. The bloc is still too loose and unorganized to create substantial change.
BRICS members and partner countries could thus be protected from a trade war with the United States, of which China is one of the main targets. Although Beijing occupies an important position within the group, other member countries remain very cautious about the Asian giant’s dominance and potential trade imbalances. Even as China seeks to leverage its position, members’ internal caution will likely remain a limiting factor for grand currency ambitions.
