On October 24, 2024, at the 16th BRICS leaders’ meeting in Kazan, Russia, the leaders took a family photo.
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President-elect Donald Trump has promised to impose 100% tariffs on BRICS countries if they continue to depreciate the dollar, but analysts told CNBC that threat will not curb the group’s expansion.
Recently, Brazil Announced acceptance of Indonesia It became a member of the European Union last Monday.
Under outgoing President Joe Biden’s administration, Washington has been relatively dismissive of the 10-nation bloc, with White House national security communications adviser John Kirby saying at a press conference last October that the United States does not view the BRICS – emerging Market economic union – as a “threatenMarket sentiment may change when Trump enters the White House later this month, following signs he may impose tariffs on alliance members if they upend the dollar.
Mihaela Pappas, research director at MIT’s Center for International Studies, told CNBC via email: “A key policy shift for the incoming Trump administration is to explicitly treat the BRICS as one entity.”
China to ease tariff pain
Led by Beijing, the BRICS was originally formed in 2009 by Brazil, Russia, India and China and joined by South Africa in 2010, aiming to become a force to counter Western dominance on the international stage.
The 16th annual summit of the alliance was held in Kazan Egypt, Ethiopia, Iran and the United Arab Emirates have officially joined the group. According to Russian officials official documents More than 30 countries have expressed interest in joining the alliance in 2024, according to the Central Committee of the Communist Party of China.
Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, said the U.S. is increasingly unlikely to impose 100% punitive tariffs on BRICS countries due to the size of the group. Wrigley told CNBC via email that doing so could cause countries that remain neutral in the Sino-U.S. competition to turn toward Beijing and interfere with U.S. interests.
David Lubin, a senior fellow at Britain’s Chatham House, said the world’s second-largest economy might even step in to ease the pain of any potential U.S. trade measures against the BRICS.
“From Beijing’s perspective, establishing China as an alternative pillar of the global order is a vital goal that cannot be achieved without the support of developing countries,” Lubin said in emailed comments. “With around 120 countries considering China as their main trading partner, this shouldn’t be too difficult.”
China has already begun to do this and has proposed Zero tariff policy The measure, which targets least developed countries that have diplomatic relations with Beijing, has been in effect since December and builds on similar measures applicable to least developed countries.
dollar is king
Trump’s tariff threat is conditional on the BRICS countries overturning the dollar’s status as the world’s most widely used trading currency – a potentially difficult task for the BRICS alliance.
Russia has been pushing for de-dollarization to avoid the SWIFT network, the globally recognized standard for banking transactions, and to reduce the impact of U.S. sanctions on Moscow. In Kazan talks, Vladimir Putin reiterates use of US dollar as “weapon” and “big mistake”, reports The Guardian.
One of the group’s options for overturning the dollar is to create a unified BRICS currency – a proposal spearheaded by Brazil but which has yet to gain support.
Another possibility is to establish multi-currency trade, which is already happening between several member states: some trade between China and Russia is being conducted through the yuan and ruble. Countries also agreed to continue to strengthen trade through local currencies and expressed support for the idea of independent cross-border payment settlement infrastructure.
Chatham House’s Lubin noted that given that financial markets are largely denominated in dollars, the yuan is “much less useful internationally than the dollar.”
Just a “talk shop”
The lack of concrete alliance strategies and actions by the BRICS countries casts doubt on whether the BRICS countries will be seen as a threat to the United States. Wrigley of Pantheon Macroeconomics said that the emerging market alliance is currently nothing more than “empty talk.”
Cecilia Malmström, a non-resident senior fellow at the Peterson Institute for International Economics, said the EU remains too loose and disorganized to bring about any substantive change and that the 2024 Kazan summit “has no to achieve any real concrete results”.
This could insulate BRICS and partner countries from the fallout of a trade war with the United States, which has China as one of its main targets.
MIT’s Pappas said that while Beijing occupies an important role in the group, there is still wariness within other member countries about Beijing’s dominance and potential trade imbalances.
“Even if China seeks to exploit its position, caution within member states may remain a limiting factor,” she added.
Gustavo Medeiros, head of research at Ashmore Group, told CNBC via email that many BRICS members still maintain friendly relations with the United States as “important trading partners.”
“There is no reason to believe that EU member states will automatically face economic or geopolitical risks in the event of a trade war between China and the United States,” Medeiros said.
