The president-elect of the United States, Donald Trump, threatened this Saturday (30) to apply 100% tariffs on member countries of the United States if they do not commit to abandoning plans to create a new currency or support another replacement for the dollar.
Trump also reinforced the impossibility of replacing the US dollar and said that countries that try should say goodbye to the US.
“We demand that these countries commit not to create a new BRICS currency nor support any other currency that replaces the mighty US dollar, otherwise they will suffer 100% tariffs and must say goodbye to sales to the wonderful North American economy” , Trump wrote on his social media platform, Truth Social.
“They can look for another ‘sucker’. There is no chance of the Brics replacing the US dollar in international trade, and any country that tries should say goodbye to the United States,” added the Republican.
Since January this year, . In addition to Brazil, Russia, India, China and South Africa, they joined the bloc as permanent members.
Understand de-dollarization proposals by Brics
The call. Authorities representing its members assess that the standardization of the use of US currency means that the US imposes itself on international business, even if it is not directly involved.
The president of the New Development Bank, Dilma Rousseff, criticized what she called during the BRICS Summit, held this year in Kazan, Russia.
Since the last meeting between the bloc’s leaders, Brics has ten fixed countries and . The Gross Domestic Product (GDP) of full members today represents 31.5% of all wealth produced in the world. Furthermore, they are home to 45.2% of the world’s population.
Robson Gonçalves, economist at Fundação Getulio Vargas (FGV), recalls the experience of European countries in consolidating the European Union (EU). When countries like Portugal, Italy, Greece and Spain faced a period of recession, what was concluded, especially from the Greek crisis, was that a local financing tool that did not depend on the US or the dollar was needed.
“Trade rules were needed for a common market. Despite the fits and starts, the European Union’s experience is successful”, says Gonçalves, who emphasizes that the parallel path does not mean ending up in rivalry.
“[O Brics] can be consolidated as an alternative. But why not copy lessons from the European Union to the Global South? Europe does not polarize, it is aligned. What one should think about is that, from an economic point of view, an alternative currency, an alternative fund is an initiative that can unite common interests, regardless of polarization with the United States. Nobody would have anything to gain from this”, he concludes.
The governance of the World Bank and the International Monetary Fund (IMF) is also one of the main criticisms of the BRICS member countries: while the first focuses on providing assistance and policy advice, the second provides financial assistance to countries with temporary imbalances.
Roberto Dumas, professor of Chinese economics at Insper, reinforces the group’s economic relevance, but indicates that its voice is diminished by the regulations of these institutions.
They would then have realized that they can establish one — formed by the octogenarian Bretton Woods Convention —, points out Dumas.
“These countries say, ‘I occupy a large part of the world, but the United States still dominates. They eventually won’t allow us to make decisions, so let’s form our bank.’ In this way, the financial system is moving towards becoming multipolarized”, says the Insper professor.
“These are countries that do not have the power to dictate there, but recognize their political and economic relevance, and want to have the power to speak. Those who do not have power in the Bretton Woods institutions seek a new economic order. The objective is not to destroy the existing one, but to complement it. And Brazil seeks to be part of an inevitable alternative governance”, concludes Dumas.
Reform of the financial system
In addition to having its own bank – which aims to finance its partners –, Brics is debating other alternatives to the parameters established since 1944.
Amid the devastation caused by the Second World War and the aftermath of the 1929 Crisis, economists from 44 countries met in Bretton Woods, New Hampshire, in the United States, to redesign the format of the international financial system.
The agreements defined a system of fixed exchange rates, in which countries’ currencies were pegged to the US dollar, which in turn was backed by gold.
The so-called dollar-gold standard remained in force until 1971, when it was overturned by then US President Richard Nixon, to protect the currency in the face of global demand for the precious mineral. But, to this day, both values are used as a reference in the market.
The objective of the NDB is precisely to make financing viable by reducing dependence on the dollar and the Bretton Woods institutions. During the Summit, the president of the BRICS Bank, Dilma Rousseff, . His assessment is that the US would benefit from the sovereignty of the use of currency in international transactions to hinder the growth of emerging economies.
However, one of the Brics agendas is, in addition to the eventual consolidation of a . However, according to Russian President Vladimir Putin, .
Still, Moscow defends the – standard tool for international transactions –, which would allow the country to negotiate with its partners, circumventing the post-Ukraine invasion.
“After the Berlin Wall fell, the world ended up becoming multipolarized. So, you have groups of countries that organize themselves around common interests”, points out Robson Gonçalves, economist at Fundação Getúlio Vargas (FGV).
Gonçalves reinforces that by meeting with other countries with common interests, Brazil becomes stronger.
From his point of view, the integration priority for the Brazilian State should be with Mercosur. However, mainly considering the progress of the free trade agreement with the European Union (EU), the bloc “faces serious problems of mismatch”.
“Mercosur is an unfulfilled promise. Therefore, this [o Brics] It is a better way to gain a voice in the international environment”, says the economist.
Brazil in Brics
Since the beginning of the Brics articulation, the group has become the main forum for power projection in which Brazil has an active role and voice, argues William Daldegan.
“The country has managed to implement the principles of pacifism, universalism and defense of multilateralism, so dear to its foreign policy, in a pragmatic way over time. It wins through political and economic closer ties with other partners, it wins through the projection of power alongside China and India, it wins through the bargaining process in other multilateral forums”, explains the UFPel professor.
Although there are those who criticize the approach with the bloc, Roberto Dumas is clear and direct: “it is better to be there to give your opinion than to be left out and not have decision-making power”.
In addition to the countries already invited to BRICS, Dumas reinforces that there are other emerging countries that are interested in participating in this new governance. Once inevitable, from his point of view, he indicates that the desire of nations to be involved is “no nonsense”.
“Brazil entered the acronym as a participant that enjoyed macroeconomic similarities. They no longer exist, but the country still remains. This is because it is better to be in a group, despite not agreeing on everything, to make decisions and be able to influence governance decisions, than to be completely apart”, concludes the Insper professor.
BRICS Summit
The idea behind the group was born in 2001. Originally “BRIC”, the term created by the then chief economist of Goldman Sachs, Jim O’Neill, referred to Brazil, Russia, India and China, countries that according to him would drive growth economic situation in the world by 2050.
The meeting, more informal at first, was structured and matured over time, growing around the common geopolitical and economic interests of its members.
In addition to the four countries already mentioned, the group includes South Africa, Iran, Saudi Arabia, the United Arab Emirates, Egypt and Ethiopia.
This year’s Summit, held in October, established a new definition: the BRICS Partner States.
Turkey, Indonesia, Algeria, Belarus, Cuba, Bolivia, Malaysia, Uzbekistan, Kazakhstan, Thailand, Vietnam, Nigeria and Uganda.
What emerged as an economic group, in Dumas’ assessment, has been consolidating itself as an “anti-West” bloc.
Whether it is or not, the fact is that the group seeks to consolidate this new financial governance.
“BRICS is currently the main grouping of ‘non-G-7’ countries. Its importance is due to both the geographical aspect, as it brings together countries from the South and all continents, and the economic aspect, as it brings together the main developing economies. With a markedly diverse and inclusive bias – which is reinforced by the recent expansion momentum”, says William Daldegan, professor of the International Relations course at the Federal University of Pelotas (UFPel).
“Its relevance comes from the reasons raised by the economist O`Neill, in the early 2000s, which were influenced by the growth of especially China and India.”
Lula on alternative currency to the dollar
Brazilian President Luiz Inácio Lula da Silva defended in October, during a summit meeting of the Brics countries in Kazan, Russia, that the , avoiding the need to use the dollar.
The development of a payment clearing mechanism in local currencies is one of Brazil’s priorities in the BRICS, which wants to see the bloc less dependent on the use of the dollar in its internal transactions.
Brazil from 2025 and intends to accelerate this proposal, and also expand the operations of the New Development Bank, the Brics bank,.
Trump tariffs should raise US interest rates
President-elect Donald Trump’s pledge to impose tough tariffs on the United States’ three biggest trading partners is expected to raise prices, which would set the stage for the Federal Reserve to stop cutting interest rates and possibly raise them.
Fed Chairman Jerome Powell said in a recent speech in Dallas that it is still too early to consider how Trump’s tariff plans would affect the U.S. economy.
Campaign rhetoric is one thing, but the policy enacted is another. Trump, however, says he will not waste any time, last week threatening to slap 25% tariffs on Mexico and Canada and an additional 10% duty on Chinese goods on the first day of his second term on January 20.
Trump’s tariffs would almost certainly raise prices on imported goods like avocados, cars and tequila. That would affect about $1.5 trillion worth of goods flowing through North America, according to an International Monetary Fund estimate.
Wall Street has already expressed some concern about the possibility of inflation reigniting under a second Trump term, with bond yields rising rapidly ahead of Election Day and in the weeks following.
On the plus side, because persistently high inflation, induced by heavy tariffs, would prevent the Fed from reducing borrowing costs, cash and bond investments could also retain some of their luster for a little longer.
(*With information from Gisele Farias and João Nakamura)
