A family photo of the leaders taken at the 16th BRICS Summit held in Kazan, Russia on October 24, 2024.
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President-elect Donald Trump has promised to impose 100% tariffs on BRICS countries if they continue to undermine the US dollar, but the threat will not curb the group’s expansion. the analyst told CNBC.
Most recently, Brazil announced its recognition of Indonesia as a member state last Monday.
Under the outgoing administration of President Joe Biden, Washington has been relatively unfavorable to the 10-nation coalition, with White House National Security and Communications Advisor John Kirby saying at a press conference last October that the United States economic union). as a “threat”. Sentiment could change once President Trump enters the White House later this month, following early indications that he could impose tariffs on alliance members if they destroy the U.S. dollar.
“A key policy shift for the incoming Trump administration will be to explicitly treat BRICS as an organization,” Mihaela Papa, research director at the MIT Center for International Studies, told CNBC in an email.
China will ease the pain of tariffs
Originally founded in 2009 by Brazil, Russia, India and China, and later joined by South Africa in 2010, the Chinese-led BRICS were established as a force to counter Western dominance on the international stage.
At the 16th Annual Summit of the Alliance held in Kazan, Egypt, Ethiopia, Iran and the United Arab Emirates were formally admitted to the group. More than 30 countries have expressed interest in joining the coalition in 2024, according to Russian officials and the official bulletin of the Chinese Communist Party’s Central Committee, but CNBC could not independently verify this estimate.
Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, said the U.S. is becoming increasingly unlikely to impose 100% punitive tariffs on BRICS countries, given the bloc’s size. Doing so risks steering countries toward neutrality in the U.S.-China conflict and hindering U.S. interests, Wrigley told CNBC in an email.
The world’s second-largest economy may even intervene to soften the pain of potential U.S. trade actions against BRICS members, said David Rubin, a senior fellow at Chatham House.
“From the perspective of the Chinese government, establishing China as an alternative pillar of the world order is a very important goal, and it cannot be achieved without the support of developing countries,” Rubin said in emailed comments. mentioned in. “And with around 120 countries counting China as a major trading partner, this shouldn’t be too difficult.”
China has already begun to do this, launching a zero-tariff policy for the least developed countries that have diplomatic relations with China. The policy has been in force since December and builds on similar measures extended to Africa’s least developed countries.
dollar is king
President Trump’s tariff threat is contingent on BRICS dethroning the US dollar as the world’s most widely used trading currency, which could be a tall order for the alliance.
Russia is pursuing de-dollarization to circumvent the SWIFT network, the globally recognized standard for banking transactions, and to limit the impact of U.S. sanctions against Russia. At the Kazan meeting, President Vladimir Putin reiterated that using the dollar as a “weapon” was a “big mistake,” the Guardian reported.
One of the group’s options for overthrowing the dollar was to create a unified BRICS currency. This is a Brazilian-led proposal that has not yet gained traction.
Another possibility is the creation of multi-currency trade, which already takes place between several member states, with some trade between China and Russia being carried out through the renminbi and ruble. There is. Countries also agreed to continue to strengthen trade through local currencies and expressed support for the idea of an independent cross-border payments infrastructure.
Chatham House’s Rubin said China’s currency is “much harder to use internationally than the dollar,” given that the majority of financial markets are denominated in dollars.
A true “talking shop”
Pantheon Macroeconomics’ Wrigley said the lack of concrete alliance strategy or action by BRICS members raises questions about whether they can be seen as a threat to the United States, and that the emerging-market alliance is currently a “talkhouse”. He said it was not too much.
Cecilia Malmström, a non-resident senior fellow at the Peterson Institute for International Economics, said the bloc remains too loose and unorganized to produce substantive change, and that a Kazan summit in 2024 would not be possible. The result was that there was “nothing really concrete.”
While this may only protect BRICS members and partners from a trade war with the US, the US has China as one of its main targets.
MIT’s Pappas said China occupies an important position within the group, but there is still a lot of domestic alarm among other member states about China’s dominance and the potential for trade imbalances. That’s what it means.
“Even if China tries to leverage its position, wariness within member states is likely to remain a limiting factor,” she added.
Additionally, many BRICS countries remain friendly with the United States as “important trading partners,” Gustavo Medeiros, head of research at Ashmore Group, told CNBC in an email.
“There is no reason to think that member countries would automatically be exposed to economic or geopolitical risks if a trade war broke out between the United States and China,” Medeiros said.
Correction: This article has been updated to accurately reflect the name of Mihaela Papa, director of research at the MIT Center for International Studies.
