A family photo of leaders taken at the 16th BRICS Summit in Kazan, Russia on October 24, 2024.
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President-elect Donald Trump has promised a 100% target against the BRICS countries if they continue to weaken the US dollar – but the threat will not stop in the expansion of the group, analysts told CNBC.
Recently, Brazil Indonesian license announcement joined the block as a member last Monday.
Under the administration of outgoing President Joe Biden, Washington has been largely out of the 10-member coalition, with White House National Security Communications Adviser John Kirby saying at a meeting news last October that the US does not see BRICS – an economic bloc of emerging markets – as “a threat“Sentiment could change once Trump enters the White House later this month, after early indications he may impose tariffs on alliance members if they convert to the US dollar.
“A key policy move by the incoming Trump administration is its unique treatment of BRICS as an entity,” Mihaela Papa, director of research at MIT's Center for International Studies, told CNBC via email. .
China will ease the tariff pain
First formed by Brazil, Russia, India and China in 2009, and then joined by South Africa in 2010, the Beijing-led BRICS was established as a force to compete with Western dominance on the international stage.
The 16th annual summit of the federation in Kazan saw Egypt, Ethiopia, Iran and the United Arab Emirates officially admitted to the group. According to Russian officials and official paper of the Central Committee of the Communist Party of China, 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 more unlikely that the US will impose 100% punitive tariffs on the BRICS countries, according to Duncan Wrigley, chief China + economist at Pantheon Macroeconomics. Doing so would risk steering neutral nations in the U.S.-China rivalry toward Beijing and hindering U.S. interests, Wrigley told CNBC by email. .
The world's second largest economy could even step in to ease the pain of any trade measures the US may face against BRICS members, according to David Lubin, a senior researcher at Chatham House.
“From Beijing's perspective, establishing China as another pillar of the world order is an extremely important goal and cannot be achieved without the support of the developing world,” Lubin said in emailed comments. that some 120 countries count China as their main trading partner, this should not be too difficult.”
China is already starting to do this, putting forward a zero cost policy for least developed countries with diplomatic ties to Beijing, which came into force last December and builds on similar measures extended to least developed African countries.
Dollar is king
Trump's tariff threat is responsible for BRICS dethroning the US dollar as the world's most widely traded currency – which could be a tall order for the alliance.
Russia has been pushing for de-dollarization in an attempt to dismantle the SWIFT network, a globally recognized standard for banking transactions, and to reduce the impact of US sanctions against Moscow. During the Kazan talks, Vladimir Putin repeated that the dollar was used as a “weapon” and “big mistake“, The Guardian reports.
One of the group's options to surpass the dollar was to create a unified BRICS currency – a proposal spearheaded by Brazil, which has yet to catch on.
Another opportunity was to establish multi-currency trade, which already takes place among several members: some Chinese and Russian trade is done through yuan and rubles. Countries have also agreed to continue strengthening trade through local currencies and have shown support for the idea of an independent cross-border settlement infrastructure for payments.
Chatham House's Lubin notes that China's currency is “much less used internationally than dollars,” as financial markets are largely denominated in the greenback.
Really 'talking shop'
The lack of strong strategy and action from BRICS members raises doubts about whether it will be considered a threat to the US, with Pantheon Macroeconomics' Wrigley saying the emerging markets alliance is not the -currently much more than “talking shop.”
The bloc remains too loose and disorganized to create any substantial change, with the Kazan summit in 2024 leading to “nothing really concrete”, according to Cecilia Malmström, non-resident senior fellow at the Institute of Economics Peterson International.
This may simply protect BRICS members and partner countries from a trade war with the US – which has China as one of its main targets.
While Beijing holds an important position in the group, there is still much internal caution among other member countries about Beijing's leadership and potential trade imbalances, according to MIT's Papas.
“Even if China is trying to accelerate its position, internal caution among members is likely to remain a limiting factor,” she said.
Many BRICS members still maintain their friendly relationship with the US as a “vital trading partner,” Gustavo Medeiros, head of research at Ashmore Group told CNBC in an email.
“There is no reason to believe that members of the bloc would automatically be in economic or geopolitical danger if there is a trade war between the US and China,” Medeiros says.
Correction: This article has been updated to correctly reflect the name of Mihaela Papa, director of research at MIT's Center for International Studies.
