Family photo of the leaders taken at the 16th BRICS Summit in Kazan, Russia on October 24, 2024.
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President-elect Donald Trump has vowed to impose 100% tariffs on the BRICS countries if they continue to undermine the US dollar, but the threat will not curb the group's expansion, analysts told CNBC.
The latest is Brazil It announced the acceptance of Indonesia To the bloc as a member last Monday.
Under outgoing President Joe Biden's administration, Washington has been relatively dismissive of the 10-member alliance, with White House national security communications adviser John Kirby saying during a news conference last October that the United States was not looking at BRICS – an emerging market economic alliance -. K “to threatenSentiment may change once Trump enters the White House later this month, after early indications that he may impose tariffs on coalition members if they sabotage the US dollar.
“The major policy shift with the incoming Trump administration is its explicit treatment of BRICS as an entity,” Mihaela Pappas, research director at the MIT Center for International Studies, told CNBC via email.
China will ease the pain of tariffs
The Beijing-led BRICS group was originally formed by Brazil, Russia, India and China in 2009, then joined by South Africa in 2010, and was established as a force to challenge Western hegemony on the international stage.
The sixteenth annual summit of the Alliance in Kazan It saw Egypt, Ethiopia, Iran and the United Arab Emirates officially join the group. According to Russian officials and Official paper From the Central Committee of the Communist Party of China, more than 30 countries have expressed interest in joining the alliance in 2024. CNBC was unable to independently verify this estimate.
The size of the bloc makes it increasingly unlikely that the United States will apply 100% punitive tariffs on BRICS countries, according to Duncan Wrigley, chief economist for China+ at Pantheon Macroeconomics. Doing so would risk steering countries neutral in the US-China rivalry toward Beijing and interfering with American interests, Wrigley told CNBC via email.
The world's second-largest economy could step in to ease the pain of any potential US trade measures against BRICS members, according to David Lubin, a senior research fellow at Chatham House.
“From Beijing’s perspective, establishing China as an alternative pillar of the global order is a critical goal that cannot be achieved without the support of the developing world,” Lubin said in email comments. “Since about 120 countries consider China their main trading partner, this should not be too difficult.”
China has already begun to do this, as it proposed a Zero tariff policy For least developed countries that have diplomatic relations with Beijing, which came into effect as of December last year and builds on similar measures extended to African least developed 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 be a tall order for the alliance.
Russia is pushing to halt dollar trading in an attempt to circumvent the SWIFT network, a globally recognized standard for banking transactions, and to limit the impact of US sanctions against Moscow. At the Kazan talks, Vladimir Putin repeatedly used the dollar as a “weapon” and a “tool.”Big mistake“, The Guardian reported.
One of the group's options for ousting the dollar was to create a single BRICS currency — a proposal led by Brazil, which has yet to gain traction.
Another possibility was to establish multi-currency trade, which already takes place between several members: some Chinese and Russian trade is through the yuan and the ruble. The countries also agreed to further promote trade through local currencies and expressed support for the idea of creating an independent infrastructure for settling cross-border payments.
Chatham House's Lubin points out that the Chinese currency is “much less usable internationally than the dollar,” given that financial markets are largely denominated in dollars.
Just a “shop to talk”
The lack of a concrete alliance strategy and action by BRICS members raises doubts about whether it will be seen as a threat to the US, with Wrigley of Pantheon Macroeconomics saying the emerging markets alliance is currently little more than a “talk shop.”
The bloc remains too loose and disorganized to bring about any substantive change, with the 2024 Kazan summit not yielding “anything really concrete,” according to Cecilia Malmstrom, a non-resident fellow at the Peterson Institute for International Economics.
This may only 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 holds an important place in the group, there is still a lot of internal caution among other member states about Beijing's dominance and potential trade imbalances, according to MIT's Pappas.
“Even if China seeks to strengthen its position, internal caution among members is likely to remain a limiting factor,” she adds.
Many BRICS members still maintain friendly relations with the United States as an “important trading partner,” Gustavo Medeiros, head of research at Ashmore Group, told CNBC via email.
“There is no reason to believe that members of the bloc would automatically be exposed to economic or geopolitical risks in the event of a trade war between the United States and China,” Medeiros says.
