The BRICS bloc is growing – and Trump’s tariff threat is not expected to deter potential members

President-elect Donald Trump has vowed to impose 100% tariffs on BRICS countries if they continue to undermine the US dollar, but that threat will not stop the group from expanding, CNBC analysts report.

Most recently, Brazil announced the accession of Indonesia to the block as a member last Monday.

During outgoing President Joe Biden’s administration, Washington was relatively dismissive of the 10-member coalition, and White House national security adviser John Kirby said during a press briefing last October that the US was not considering BRICS, an economic coalition of developing countries. like “a threat.” The mood could change when Trump enters the White House later this month after early signs he may impose tariffs on alliance members if they undermine the U.S. dollar.

“A key policy shift of the incoming Trump administration is its apparent treatment of the BRICS as a single entity,” Michaela Pope, director of research at MIT’s Center for International Studies, told CNBC via email.

Originally formed by Brazil, Russia, India and China in 2009, then joined by South Africa in 2010, the Beijing-led BRICS was created as a force to challenge the West’s dominance on the international stage.

16th annual summit of the alliance in Kazan Egypt, Ethiopia, Iran and the United Arab Emirates were officially accepted into the group. According to Russian officials and official paper According to 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 that estimate.

According to Duncan Wrigley, chief economist at Pantheon Macroeconomics, the size of the bloc makes it increasingly unlikely that the US will impose punitive 100% tariffs on BRICS countries. That would risk making the countries neutral in the U.S.-China rivalry vis-a-vis Beijing and interfering with U.S. interests, Wrigley told CNBC via email.

According to David Lubin, a senior fellow at Chatham House, the world’s second-largest economy could even step in to ease the pain of any possible US trade measures against BRICS members.

“From Beijing’s perspective, establishing China as an alternative pillar of the world order is a critically important goal, and it cannot be achieved without the support of developing countries,” Lubin said in emailed comments. “And with about 120 countries counting China as their top trading partner, it shouldn’t be too difficult.”

China is already beginning to do this by highlighting a zero tariff policy for least developed countries that have diplomatic relations with Beijing, which came into force last December and is based on similar measures extended to least developed countries in Africa.

Trump’s threat of tariffs depends on the BRICS dethroning the U.S. dollar as the world’s most widely used trading currency — which could prove a tall order for the alliance.

Russia is pushing for de-dollarization in an attempt to bypass the SWIFT network, the globally recognized standard for banking transactions, and limit the impact of US sanctions against Moscow. At the talks in Kazan, Vladimir Putin repeated the use of the dollar as a “weapon” and “big mistake“, – reports The Guardian.

One of the group’s options to topple the dollar was the creation of a single BRICS currency, a proposal initiated by Brazil that has yet to gain traction.

Another possibility was the establishment of multi-currency trade, which already occurs between several members: part of Chinese and Russian trade is conducted through yuan and ruble. The countries also agreed to continue strengthening trade through local currencies and expressed 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 suitable for international use than dollars,” given that financial markets are largely denominated in greenbacks.

The lack of a concrete alliance strategy and action by BRICS members raises doubts about whether it will be seen as a threat to the US, and Pantheon Macroeconomics’ Wrigley says the alliance with developing countries is currently little more than “talk”.

The bloc is still too loose and disorganized to make any meaningful changes, and the 2024 Kazan summit failed to produce “anything concrete,” according to Cecilia Malmstrom, a senior fellow at the Peterson Institute for International Economics.

It could simply insulate BRICS members and partner countries from a trade war with the US, one of the main targets of which is China.

Despite Beijing’s strong position in the group, there is still great caution among other member countries about Beijing’s dominance and potential trade imbalances, according to MIT’s Pappas.

“Even as China seeks to strengthen its position, domestic caution among members is likely to remain a limiting factor,” she adds.

Many BRICS members also remain friendly with the U.S. as a “critical trading partner,” Gustavo Medeiros, head of research at the Ashmore Group, told CNBC by email.

“There is no reason to believe that members of the bloc will automatically be at economic or geopolitical risk in the event of a trade war between the US and China,” says Medeiros.

Correction: This article has been updated to accurately reflect the name of Michaela Pope, Director of Research at MIT’s Center for International Studies.