BRICS’ Economic Strategy At Risk Amid Dollar Boom

The global economic order is wavering under the impact of protectionist decisions from the United States. While the BRICS aim to reduce their dependence on the dollar, a major upheaval could be on the horizon. The resurgence of American tariffs could fuel a rise in the greenback, threatening to undermine emerging economies and hinder their efforts at dedollarization. This potential rise of the dollar, far from inconsequential, could mark a turning point for the global monetary balance.

American Protectionist Measures and the Surge of the Dollar

The United States, driven by Donald Trump, has relaunched an aggressive tariff policy, impacting a wide range of imported products. This decision is part of a strategy aimed at rebalancing the American trade balance and strengthening the status of the dollar in international markets. According to Goldman Sachs, this protectionist dynamic is expected to have a mechanical effect on the dollar’s value, making the American currency more attractive to investors. Thus, “entities that take long positions on the dollar will see their profits increase as tariffs enhance its appeal,” explain the bank’s analysts.

The consequences of this policy go beyond the United States. Indeed, Mexico and Canada are already experiencing the impact of these tariff increases, raising trade tensions between economic blocs. But it is mainly the BRICS that could be the primary victims. For several years, these emerging economies have been striving to reduce their dependence on the dollar in international trade. A depreciation of their respective currencies against a soaring greenback would complicate these efforts, making their imports more expensive and weakening their economic systems.

The BRICS in Difficulty Facing a Strengthened Dollar

One of the strategic pillars of the BRICS lies in the diversification of monetary transactions and the establishment of an economic system less dependent on the dollar. However, this rise of the greenback could reverse this trend. A too-rapid appreciation of the dollar would annihilate several years of work on dedollarization. Imported inflation in the BRICS bloc countries, combined with an increase in dollar-denominated debt, could significantly hinder their economic ambitions.

Furthermore, this situation highlights the block’s vulnerability to international monetary fluctuations. While China and Russia have attempted to impose the yuan and ruble as alternatives to the dollar, recent tensions in financial markets reveal that the adoption of these currencies remains limited. A too-strong rise of the greenback risks rekindling the dominance of the American financial system, which could reduce the BRICS’ room for maneuver in international transactions.

As the rise of the dollar seems inevitable in the short term, the BRICS will need to accelerate their efforts to counter this new reality. A revision of their monetary strategy, coupled with enhanced cooperation with other emerging nations, could be considered to mitigate the impact of this volatility. It remains to be seen whether this surge will be sufficient to challenge a dollar-dominated system or whether, on the contrary, this new reality will signal a resurgence of the greenback in global trade.