In 2001, a Goldman Sachs banker analysing the then “emerging markets” of Brazil, Russia, India and China predicted they would challenge, if not surpass, the US and other Western economies in the coming decades. If the banker’s serendipitous acronym BRIC did not convince the said countries to launch a group by that name in 2009, it certainly publicised their potential in the wake of the 2008 market crash. Initially, BRIC attempted to isolate their economies from the crash but widened their gaze towards reforming multilateralism, improving South–South trade, redistributing voting rights in the IMF and World Bank, and expanding local currency settlement.
With South Africa’s membership in 2014 making it “BRICS”, the group ambitiously launched institutions mirroring the western-controlled Bretton Woods institutions – the World Bank and IMF – with the New Development Bank and the Contingent Reserve Arrangement. The capitalisation of these institutions, however, was never large enough to challenge the status quo – which was anchored to the US dollar as the de facto global reserve currency. This reality gave the US a tremendous instrument of national power since not only could they finance their multitrillion foreign debt (now Congressionally authorised to US$5 trillion) by printing greenbacks, but those holding the said greenbacks do so in “safe” US Treasuries, which pay interest through the same mechanism.
During the first Trump administration, he became convinced that unfair trading practices and theft of intellectual property rights were behind the US’s humongous trade deficit (then US$375 billion) with China. His decision in 2018 to slap higher tariffs on a slew of Chinese-made goods marked a more aggressive US posture towards China that was continued by Biden after 2020. Russia’s invasion of Ukraine in 2022 deepened this posture, especially after the US and EU imposed sanctions against Russia while China increased trading by utilising their local currencies. Russia then placed de-dollarisation explicitly on the BRICS 2023-24 agenda, and the group – now expanded by five new members, Iran, the UAE, Indonesia, Ethiopia and Egypt – was considered “anti-West”.
Trump’s return as US president this year and his scorched-earth tariff war not only against Russia and China in BRICS but against erstwhile allies in Europe and across the world, especially in the Global South – stirred new interest in BRICS. This is due to Goldman Sachs’s initial assessment of a reordering of the world order on account of the US and the West’s comparative decline should its hegemonic role be challenged. As such, China’s President Xi’s decision to not attend this month’s BRICS summit in Brazil, combined with Russia’s Putin’s absence – because of a possibility of being arrested – placed a damp squib on the event.
Nonetheless, under Brazil’s Lula chairmanship, BRICS+ issued a statement that was quite critical of a number of US initiatives, including its support of Israel’s bombing of Gaza, its own bombing of member Iran’s nuclear enrichment facilities (with no evidence of Iran going nuclear), and its unilateral imposition of massive tariffs, etc. Though there was no mention of any de-dollarisation initiatives, Trump immediately dubbed these criticisms “anti-American” and threatened an additional 10% tariff increase over previous levels. For Brazil’s exports to the US, Trump announced their tariff increase could go as high as 50%, to which Lula defiantly announced that he would reciprocate on Brazil’s US imports. Since the US imports most of its coffee, orange juice and sugar from Brazil, a 50% tariff would be felt immediately by US consumers. In this test of wills, we shall have to see who blinks first.
BRICS has always been weakened by the rivalry between China and India, which is both tactical and strategic. They have a border issue going back to old British boundaries in the Himalayas, and in what was seen by India as a Chinese betrayal, the latter invaded and has since occupied the disputed territory. China is also a firm ally of Pakistan, the perennial opponent of India for ownership of undivided Kashmir. Strategically, even though it would appear to be unrealistic, India has aspirations of rivalling China’s economic rise. As such, India has hedged its bets on de-dollarisation and positioning BRICS as an overt counterweight to American unipolarity since, in the near and medium term, this will benefit China most of all.
Ironically, with BRICS as a group punching below its weight, China will also benefit most from Trump’s tariff war as they rush to fill demands that would be too expensive to source from the US.
