Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Family photo of leaders taken at the 16th BRICS Summit in Kazan, Russia, October 24, 2024.
Anadolu | Anadolu | fake images
President-elect Donald Trump has promised a 100% tariff against BRICS nations if they continue to undermine the US dollar, but the threat will not stop the group’s expansion, analysts told CNBC.
More recently, Brazil announced the admission of Indonesia He joined the block as a member last Monday.
Under outgoing President Joe Biden’s administration, Washington has been relatively dismissive of the 10-member coalition, with White House National Security Communications Advisor John Kirby saying during a press briefing last October that the United States would not considers the BRICS, an economic coalition of emerging markets, as a “threat“Sentiment could change once Trump enters the White House later this month, following early indications that he could impose tariffs on alliance members if they subvert the US dollar.
“A key policy change of the incoming Trump administration is its explicit treatment of the BRICS as an entity,” Mihaela Papa, research director at the MIT Center for International Studies, told CNBC by email.
China will ease tariff pain
Originally created by Brazil, Russia, India and China in 2009, later joined by South Africa in 2010, the Beijing-led BRICS was created as a force to rival Western dominance on the international stage.
The 16th annual summit of the alliance in Kazan Egypt, Ethiopia, Iran and the United Arab Emirates were officially admitted to the group. According to Russian officials and official paper From the Chinese Communist Party Central Committee, more than 30 countries have expressed interest in joining the coalition in 2024. CNBC could not independently verify this estimate.
The size of the bloc makes it increasingly unlikely that the United States will slap 100% punitive tariffs on BRICS countries, according to Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics. Doing so would risk making nations neutral in the US-China rivalry toward Beijing and interfere with US interests, Wrigley told CNBC by email.
The world’s second-largest economy could even intervene to ease the pain of any potential US trade measures against BRICS members, according to David Lubin, a senior fellow at Chatham House.
“From Beijing’s point of view, establishing China as an alternative pillar of the global order is a critically important goal and cannot be achieved without the support of the developing world,” Lubin said in emailed comments. “And given that about 120 countries count China as their main trading partner, this shouldn’t be too difficult.”
China is already beginning to do so, proposing a zero tariff policy for less developed countries with diplomatic relations with Beijing, which came into force in December last year and builds on similar measures extended to less developed African countries.
The dollar is king
Trump’s tariff threat is conditional on the BRICS dethroning the US dollar as the world’s most widely used trading currency, which could prove a difficult task for the alliance.
Russia has been pushing for de-dollarization in a bid to bypass the SWIFT network, a globally recognized standard for banking transactions, and reduce the impact of US sanctions against Moscow. At the Kazan talks, Vladimir Putin reiterated the use of the dollar as a “weapon” and “big mistake“reports The Guardian.
One of the group’s options to bring down the dollar was to create a unified BRICS currency, a proposal spearheaded by Brazil, which has yet to gain traction.
Another possibility was to establish multi-currency trade, which is already taking place between several members: some Chinese and Russian trade is carried out through the yuan and the ruble. The nations also agreed to continue strengthening trade through local currencies and expressed support for the idea of an independent cross-border settlement infrastructure for payments.
Chatham House’s Lubin notes that the Chinese currency is “much less usable internationally than dollars,” given that financial markets are largely denominated in dollars.
Just a ‘gathering’
The lack of a concrete allied strategy and action by BRICS members raises questions about whether they will be seen as a threat to the US, and Pantheon Macroeconomics’ Wrigley says the emerging-market alliance is currently not much more than a “conversation.”
The bloc is still too flexible and disorganized to create any substantial change, and the 2024 Kazan summit will yield “nothing really concrete,” according to Cecilia Malmström, a non-resident senior fellow at the Peterson Institute for International Economics.
This could simply isolate BRICS members and partner countries from a trade war with the United States, which has China as one of its main targets.
While Beijing occupies an important position in the group, there is still a lot of internal wariness among other member countries about Beijing’s dominance and potential trade imbalances, according to MIT’s Papas.
“Even if China tries to take advantage of its position, internal caution among members is likely to remain a limiting factor,” he adds.
Many BRICS members also maintain friendly relations with the United States as a “crucial trading partner,” Gustavo Medeiros, head of research at Ashmore Group, told CNBC by email.
“There is no reason to believe that the bloc’s members would automatically be at economic or geopolitical risk in the event of a trade war between the United States and China,” says Medeiros.
Correction: This article has been updated to accurately reflect the name of Mihaela Papa, research director at the MIT Center for International Studies.
