Hitting the BRICS
Donald Trump is building a powerful alliance - against America!
If your goal is to truly isolate America, it requires concerted efforts in two directions at once. First you need to alienate America’s long-term allies, as Donald Trump did this week by blindsiding Canada, South Korea, and Japan with heavy new tariffs. (He’s keeping the EU in suspense, for now.)
Then, to further that isolation, it is necessary bully neutral nations until they become actively hostile towards the United States. Donald Trump threatening BRICS member and partner nations with a ten percent tariff just for being in the BRICS bloc, is a master stroke in this regard.
Let’s consider the eleven full members of the BRIC bloc, as per the BRICS website:
Brazil has bent over backwards to maintain good relations with the US. It nixed Venezuela joining the BRICS to avoid America’s wrath. India has also tried hard to stay neutral. (It has long been considered part of the Quad military alliance - America, India, Australia, and Japan - in any future conflict with China.) Saudi Arabia delayed officially entering the BRICS bloc for the longest time to keep from angering the US. (Yes, the same Saudi Arabia that continues to buy US weapons and US bonds.) South Africa also tried hard to stay friends with the West, at least until Donald Trump began letting white South Africa ‘refugees’ immigrate to the United States. Egypt is still the second-largest recipient of US foreign aid - mostly a bribe to not go to war with Israel - and ostensibly a US ally.
These five nations have put great pressure on BRICS to go slow on de-dollarization, and for the BRICS to not become overtly politicized against the West.
Donald Trump clearly believes that the BRICS alliance is hostile towards the United States. The irony is that, Mr. Trump’s incessant bullying and threatening is radicalizing the BRICS bloc. He’s rapidly turning the BRICS into what he fears it is.
Trump’s repeated sabre-rattling has already had an effect. Lena Petrova has watched the proceedings of the BRICS annual summits for several years. She was shocked by the change this year, with multiple speakers now ranting about throwing off the shackles of colonialism. Others raged against how all the major global institutions - the UN Security Council, the World Bank and the IMF - are rigged against the developing world. A few spoke passionately of de-dollarization as the only way to be free of American bullying.
Despite the desires of at least five members to keep BRICS politically neutral, the BRICS+ final statement was nothing short of a poke in the eye for Donald Trump - condemning Israeli and American attacks on Iran, calling for an end to the ‘genocide’ in Gaza, demanding a Palestinian state, and demanding that Israel return to its 1967 borders. One has to guess that the final document reflects the minimum that the expanded BRICS+ membership was willing to accept.
Mr. Trump seems convinced that BRICS+ countries will withdraw en masse the day after he imposes his 10% tariffs.
I doubt that will happen, because of something called Purchasing Power Parity, or PPP for short. PPP refers to the fact that $100 US dollars buys very different amounts of goods and services in London, New Delhi, Beijing, and Cairo. PPP corrects for this. It is a much more accurate measure of how many goods and services are purchased in each country than is GDP based on US dollars.
Between them, the eleven BRICS members and ten BRICS+ partners make up about 45% of the world’s PPP GDP. The United States, on the other hand, represents only 15% of global PPP GDP.
Stated differently, three times as much stuff is sold in the BRICS+ nations every year as is sold in the United States. What’s worse, the US is clearly committed to buying fewer and fewer goods from foreigners, and most of what the US does buy is bought with borrowed money - in dollars that have been shrinking in value in recent months.
Why would any BRICS+ nation abandon a trading market three times as large as the United States, just to maintain a trading relationship with a country that wants to import far less?
I have to suspect the BRICS+ countries have already craft a joint response if Donald Trump tariffs them. All 21 BRICS+ countries will likely match whatever tariffs Donald Trump imposes on them with equal ‘reciprocal’ tariffs.
If Trump escalates wildly, BRICS+ will do the same, knowing the US will lose access to 21 nations collectively making up the majority of the world’s population, while each of the BRICS+ nations will only lose one trading partner, albeit a large one. We can also guess that much of what is no longer bought from the US during such a trade war will be bought instead from other BRICS+ nations, which will further soften the blow.
If all that wasn’t bad enough, yesterday Donald Trump pledged a 50% tariff on all imports to the United States from Brazil, until such time as all criminal charges against former Brazilian President Jair Bolsonaro are dropped. Brazil’s President Lula immediately threatened matching tariffs on US imports to Brazil.
Brazil is one of the very few nations in the world with whom the US has a trade surplus. In other words, the US stands to lose more in any trade war than Brazil would. Such a trade war would undoubtedly drive Brazil closer to Russia and China. It would likely also make the whole BRICS+ bloc more hostile to the West.
If the BRICS bloc were to give up all efforts to remain politically neutral, that’s when BRICS becomes truly dangerous. That’s when the current limited push to trade in local currencies will shift into overdrive. That’s when a Chinese CIPS-based non-dollar trade settlement system will be adopted by the entire bloc.
If ten more countries join BRICS+ as partners next year, BRICS+ will almost certainly make up more than half of global PPP GDP, as well as a clear majority of the planet’s population. If Donald Trump has made that giant trading bloc actively hostile towards the West, it won’t end well, either for the United States, the G7, or the US dollar.
PS: I apologize. I under-estimated the extent of “Mafia Don’s” recklessness. Though it was unwise for Trump to even threaten Brazil with 50% tariffs, I didn’t think he would be so brain-dead stupid as to actually follow through on that threat. Apparently I was wrong. According to Reuters, the 50% tariffs on Brazil start August 1st.