The BRICS bloc is growing – and Trump’s threat of tariffs is not expected to put off those who want to join
A family photo of leaders at the 16th BRICS summit in Kazan, Russia on October 24, 2024.
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U.S. President-elect Donald Trump has vowed to impose 100% tariffs on BRICS countries if they continue to weaken the U.S. dollar — but that threat will not stop the group from expanding, analysts told CNBC.
Most recently Brazil He announced the acceptance of Indonesia joined the block last monday.
Last October, White House National Security Communications Adviser John Kirby said the United States was not looking at BRICS, an economic coalition of emerging markets, and was relatively indifferent to the 10-member coalition under President Joe Biden’s administration. like”danger.” The mood could change after Trump takes office later this month, after initial hints that he could impose tariffs on alliance members if they undermine the U.S. dollar.
“The key policy change with the incoming Trump administration is its treatment of BRICS as an entity,” Mihaela Papa, director of research at the MIT Center for International Studies, told CNBC in an email.
China will ease the tariff pain
Originally formed by Brazil, Russia, India and China in 2009, and later joined by South Africa in 2010, the Beijing-led BRICS was created as a force to challenge the dominance of the West on the international stage.
The 16th annual summit of the Alliance in Kazan It saw Egypt, Ethiopia, Iran and the United Arab Emirates officially admitted to the group. According to Russian officials and official paper According to the Central Committee of the Chinese Communist Party, more than 30 countries have expressed interest in joining the coalition in 2024. CNBC could not independently confirm these estimates.
According to Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, the size of the bloc makes it increasingly unlikely that the US will impose 100% punitive tariffs on the BRICS countries. Wrigley told CNBC in an email that doing so would risk neutralizing Beijing in the U.S.-China rivalry and interfering with U.S. interests.
According to David Lubin, senior researcher at Chatham House, the world’s second largest economy could take such a step to lessen the pain of any potential US trade measures against BRICS members.
“From Beijing’s perspective, establishing China as an alternative pillar of the global order is a critically important goal that cannot be achieved without the support of the developing world,” Lubin said in emailed comments. “And with nearly 120 countries considering China as a major trading partner, it shouldn’t be too difficult.”
China is already starting to do this, revealed a zero tariff policy for LDCs that have diplomatic relations with Beijing, based on similar arrangements for LDCs in Africa, which took effect last December.
The dollar is king
Trump’s threat of tariffs comes as BRICS dethrones the U.S. dollar as the world’s most-used trade currency, which could be a tall order for the alliance.
Russia is pushing for de-dollarization in order to bypass the SWIFT network, the globally recognized standard for banking transactions, and reduce the impact of US sanctions against Moscow. At the Kazan talks, Vladimir Putin repeated the use of the dollar as a “weapon”.big mistake“, – The Guardian writes.
One of the group’s options to topple the dollar was the creation of a single BRICS currency – a proposal put forward by Brazil that has yet to gain traction.
Another possibility was the establishment of multi-currency trade, which is already carried out between several members: part of the trade of China and Russia is carried out in yuan and ruble. The nations also agreed to continue to boost 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 given that financial markets are largely dollar-denominated, China’s currency is “less likely to be used internationally than the dollar.”
Just a “talking shop”
The lack of a concrete alliance strategy and action by BRICS members raises doubts that it will not be considered a threat to the US, Wrigley of Pantheon Macroeconomics said that the emerging markets alliance is now little more than a “talking shop”.
According to Cecilia Malmström, non-resident senior fellow at the Peterson Institute for International Economics, the bloc is still too loose and disorganized to produce any substantive change, with the Kazan summit in 2024 “not really resulting in anything concrete.”
This could insulate BRICS members and partner countries from a trade war with the US, which has China as one of its main targets.
According to MIT’s Pope, while Beijing has a significant presence in the group, there is still much domestic wariness among other member countries about Beijing’s dominance and potential trade imbalances.
“Even if China tries to use its position, domestic caution among members is expected to remain a limiting factor,” he adds.
Gustavo Medeiros, head of research at the Ashmore Group, told CNBC in an email that many BRICS members still maintain friendly relations with the United States as an “important trading partner.”
“There is no reason to believe that members of the bloc will automatically be at economic or geopolitical risk if a trade war breaks out between the US and China,” Medeiros said.
Correction: This article has been updated to accurately reflect the name of Mihaela Pope, director of research at the MIT Center for International Studies.
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