In October, BRICS—a nine-nation trading and security bloc—officially decided that its members may trade between and among themselves as well as with partners using their respective currencies.
The decision could prove to be the bloc’s most important since it was officially founded in 2009.
“We reiterate our commitment to enhancing financial cooperation within BRICS. We recognize the widespread benefits of faster, low-cost, more efficient, transparent, safe and inclusive cross-border payment instruments built upon the principle of minimizing trade barriers and non-discriminatory access,” reads the declaration issued following the BRICS Summit held in the central Russian city of Kazan, from October 22 to 24, 2024.
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The Summit, the 16th of its kind, included the induction of several new members, including Ethiopia, the UAE, Egypt, and Iran, and featured the unveiling of a symbolic currency, hinting at the bloc’s future plans for trade.
The decision to welcome the use of local currencies in financial transactions and the allusions to a monumental shift in global trade drew the ire of many in the West, particularly US President-Elect Donald Trump.
The US had already been on tenterhooks at the prospect of countries such as Russia, China and Brazil using their own currencies as they trade, as part of a general thrust to de-dollarize the global trading regime. Over the last few years, Russia has largely depended on trade using China’s convertible Yuan (RMB) in light of the sanctions imposed on Moscow by Washington and its allies in the West.
The Chinese Yuan has also been designated by the International Monetary Fund (IMF) as a reserve currency as of late.
On November 30, 2024, Trump warned against what has been termed a “de-dollarization” by countries of the Global South and East.
“The idea that BRICS countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100 percent tariffs, and should expect to say goodbye to selling into the wonderful U.S. economy. They can go find another “sucker!”. There is no chance that the BRICS will replace the US Dollar in international trade, and any country that tries should wave goodbye to America,” Trump wrote on X (formerly Twitter).
International debate ensued, with two questions standing out: What triggered BRICS countries to push for inter-state trade using national currencies? And, is it practical for a global trading giant like the US to opt for such a tariff regime and risk hikes in the price of imported goods?
This is not to mention the deteriorating relations between the US and its largest trading partners, especially China.
Does Trump expect the BRICS countries to go back on their word, or does he just want some kind of a bargaining chip as he heads into his second term in the White House?
The response from Russia, a leading proponent of the argument against the US Dollar, was swift.
“…they say economic influence of some kind, to make other countries use the dollar; it will probably further strengthen the tendencies to use national currencies. The Dollar is beginning to lose its attractiveness as a reserve currency for a number of countries,” said Kremlin Spokesperson Dmitry Peskov .
Other BRICS members, such as India, signaled they may not be going along on the drive to de-dollarization.
“We have never actively targeted the dollar. That is never part of either our economic policy or our strategies. Some others may have that,” Indian Foreign Minister S. Jaishankar said.
If and when BRICS succeeds in getting its members and their trading partners to do business between and among themselves using their own currencies, the influence of the dollar will likely take a hit.
BRICS countries command roughly 45 percent of the world’s population and 35 percent of global GDP when measured at purchasing power parity.
According to the latest data, mutual trade between BRICS countries has reached almost USD 678 billion annually, growing by more than 10 percent every year. BRICS members’ trade with the rest of the world is growing at almost the same rate as global trade, sitting at three percent per year.
Constantinos Berhutesfa (PhD), a political analyst and former anti-graft commissioner at the AU, foresees that Trump will eventually back down.
“It is not a practicable proposition. Tariffs like those Trump threatened will harm consumers in the US more than countries exporting to the US. Prices of consumer goods will go through the roof in the event the US slaps such exorbitant tariffs on imports. I don’t think Trump will carry on with that idea,” he told The Reporter Magazine.
Costantinos believes it is the notion of a common BRICS currency, rather than the decision to trade using national currencies, that sent shockwaves across the Western world.
Zemedeneh Negatu, chairman of Fairfax Global, considers the developments “..a gradual, unmistakable shift of economic power from West (led by the US) to East (the ‘Global South’)”
He also predicts the tariff proposal will not work as a long-term solution.
“…the US economy could account for as low as 6.2 percent to 18 percent of the global economy in the next 30 years, from 26 percent today. In the same period, the US Dollar, as a global currency reserve, is forecast to decline to about 40 percent from 59 percent today. As a reference, the Dollar accounted for 71 percent of global reserves as recently as 2000. Therefore, practical policies which make the US economy globally competitive and keep Americans prosperous is what America needs,” Zemedeneh wrote on X.
The US Dollar’s supremacy has its roots in the aftermath of World War II and the creation of what came to be known as the Bretton Woods institutions in 1944. In the decades since, the US has been accused of weaponizing its influence as the holder of the world’s reserve currency against countries and governments who it deems to have gone astray.
Speaking at a press briefing during the Kazan BRICS Summit, Russian President Vladimir Putin said it was not the Dollar per se that BRICS is trying to push back on, but the weaponization of it.
The sentiment was echoed in a written response to The Reporter Magazine from Evgeny Terekhin, Russian ambassador to Ethiopia.
“We are aware that not everyone is prepared to accept the natural development of events. The Western community, which once took the lead owing to well-known historical occurrences—such as the Great Discoveries, the development of capitalism and the amassing of wealth largely through colonial empires—seeks to retain its privileged status indefinitely. The United States and its subordinate Western countries are reviving the spirit of the Cold War with their doctrinal documents proclaiming the need to eliminate alleged threats to their dominance posed by Russia, China, and other nations pursuing independent national policies,” reads the Ambassador’s statement.
To Terekhin, countries are either at the table or on the menu under the West-dominated world order.
“The Dollar,” the ambassador noted, “long touted as the global commons of humanity, has been weaponized to suppress and penalize geopolitical competition and the non-compliant.”
He sees the move away from the Dollar as a move towards the Global South and East asserting their right to participate fully in decision-making processes across all aspects of international life.
“The recent threatening shout-out of [US President-Elect Donald Trump] is another manifestation of obsolete colonial thinking, which is desperately trying to save the US’ vanishing dominance over the World,” Ambassador Terekhin said, asked what he makes of Trump’s tariff threats.
Still, whether BRICS can weaken the Dollar’s hold on global trade remains to be seen as critics argue the bloc lacks the unifying ideological and geographical forces that tie together organizations such as the European Union.
They see the lack of harmony with regards to the use of local currency in trading, with India having taken a different route from the rest, betrays what could further grow into disagreement within the bloc, particularly if and when it attempts to realize its ambitions for a common currency.
