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A family photo of the leaders at the 16th BRICS Summit in Kazan, Russia on October 24, 2024.
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President-elect Donald Trump has pledged a 100 percent tariff against the BRICS nations if they continue to weaken the U.S. dollar, but the threat will not stop the group’s expansion, analysts told CNBC.
The last one, Brazil He announced the acceptance of Indonesia joined the block as a member last Monday.
Under President Joe Biden’s administration, Washington has been relatively dismissive of the 10-member coalition, and White House National Security Communications Adviser John Kirby said in a press conference last October that the United States does not see BRICS—the economic coalition of emerging markets—. as “the threat.” That sentiment may change when Trump enters the White House this month, saying he could impose tariffs on alliance members if they devalue the U.S. dollar.
“A key policy change with the Trump administration is the explicit treatment of BRICS as an entity,” Mihaela Papa, director of research at the MIT Center for International Studies, told CNBC via email.
China will ease the tariff pain
Originally established by Brazil, Russia, India and China in 2009, and later joined by South Africa in 2010, the Beijing-led BRICS emerged as a force to counter Western dominance on the international stage.
16th annual summit of the alliance in Kazan Egypt, Ethiopia, Iran and the United Arab Emirates were officially accepted into the group. According to Russian officials and official paper More than 30 countries on the Chinese Communist Party’s Central Committee have expressed interest in joining the coalition in 2024. CNBC could not independently verify that estimate.
The bloc’s size makes it increasingly difficult for the US to impose 100% punitive tariffs on the BRICS countries, according to Duncan Wrigley, chief China + economist at Pantheon Macroeconomics. Doing so would risk driving neutral nations into a U.S.-China rivalry with Beijing and interfering with U.S. interests, Wrigley told CNBC via email.
The world’s second-largest economy could also step in to ease the pain of any US trade measures against BRICS members, according to David Lubin, senior research fellow at Chatham House.
“From Beijing’s perspective, establishing China as an alternative pillar of the global order is a critical goal and cannot be accomplished without the support of the developing world,” Lubin said in emailed comments. “And with around 120 countries counting China as their main trading partner, this shouldn’t be too difficult.”
China has already started to do this, proposing a zero tariff policy For least developed countries that have diplomatic relations with Beijing, which came into force in December last year and is based on similar measures extended to least developed African countries.
The dollar is king
Trump’s tariff threat is conditional on the BRICS ousting the US dollar as the world’s most widely used trading currency, which could be a big demand for the alliance.
Russia is pushing for de-dollarization in an attempt to bypass the SWIFT network, the globally accepted standard for banking transactions, and reduce the impact of US sanctions against Moscow. During the talks in Kazan, Vladimir Putin repeated that he uses the dollar as a “weapon” and “as a weapon”.big mistake“, reports The Guardian.
One of the group’s options for overturning the dollar was the creation of a BRICS common currency—a proposal promoted by Brazil, which has yet to gain traction.
Another possibility was the establishment of multi-currency trade, which is already taking place between several members: some Chinese and Russian trade is being done in yuan and ruble. Nations have also agreed to continue to strengthen trade through local currencies and have expressed support for the idea of an independent cross-border settlement infrastructure for payments.
Chatham House’s Lubin notes that China’s currency is “much more useful internationally than the dollar,” given that financial markets are largely denominated in greenbacks.
Just a “talking shop”.
The lack of concrete alliance strategy and action by BRICS members raises questions about whether it will be seen as a threat to the US, Pantheon Macroeconomics’ Wrigley said, adding that the emerging market alliance is now little more than “talk shop”.
The bloc is still too loose and unorganized to produce meaningful change, with the 2024 Kazan summit producing “nothing concrete,” according to Cecilia Malmström, non-resident senior fellow at the Peterson Institute for International Economics.
This only serves to insulate BRICS members and partner countries from the trade war with the US, of which China is one of the main targets.
Despite Beijing’s significant position in the group, there is still considerable internal concern among other member nations about Beijing’s dominance and trade imbalances, according to MIT’s Papas.
“Even if China wants to take advantage of its position, the domestic prudence of its members is likely to remain a limiting factor,” he added.
Many BRICS members also maintain friendly relations with the U.S. as an “indispensable trading partner,” Ashmore Group head of research Gustavo Medeiros told CNBC via email.
“There is no reason to believe that members of the bloc would automatically be at economic or geopolitical risk in the event of a trade war between the US and China,” says Medeiros.
Correction: This article has been updated to accurately reflect the name of Mihaela Papa, director of research at the MIT Center for International Studies.
