The global economic order vacillates under the effect of protectionist decisions of the United States. While the BRICS aims to reduce their dependence on the dollar, a major upheaval could be looming. The return in force of American customs tariffs could fuel an increase in the greenback, which would threaten to weaken emerging economies and slow down their dedollarization efforts. This potential rise in the dollar, far from trivial, could mark a turning point for global monetary balance.
US protectionist measures and the outbreak of the dollar
The United States, under the leadership of Donald Trump, has revived an aggressive customs tariff policy, which has impacted a wide range of imported products. This decision is part of a strategy that aims to rebalance the American trade balance and strengthen the status of the dollar in international markets. According to Goldman Sachs, this protectionist dynamic should have a mechanical effect on the value of the dollar, which would make American currency more attractive to investors. Thus, “the entities that take long positions on the dollar will see their profits increase as the prices reinforce its attraction”, explain Bank analysts.
The consequences of this policy go beyond the United States. Indeed, Mexico and Canada are already undergoing the impact of these pricing increases, which increases trade tensions between economic blocks. But it is mainly the BRICS that could be the main victims. For several years, these emerging economies have been working to reduce their dependence on the dollar in international trade. A depreciation of their respective currencies in the face of a greenback in full ascent would complicate these efforts, which would make their imports more expensive and weaken their economic systems.
BRICS in difficulty against a reinforced dollar
One of the BRICS strategic pillars lies in the diversification of monetary transactions and the establishment of an economic system that is less dependent on the dollar. However, this rise in the greenback could reverse this trend. An overly brutal appreciation of the dollar would destroy several years of work on dedollarization. Inflation imported into the countries of the BRICS Bloc, combined with increased debt denominated in dollars, could considerably slow down their economic ambitions.
In addition, this situation provides information on the vulnerability of the block in the face of international monetary fluctuations. If China and Russia have tried to impose yuan and ruble as an alternative to the dollar, recent tensions on the financial markets reveal that the adoption of these currencies is still limited. A too strong rise in the greenback is therefore likely to rekindle the domination of the American financial system, which can reduce the room for maneuver of the BRICS in international transactions.
While the rise in the dollar seems inevitable in the short term, the BRICS will have to speed up their efforts to counter this new deal. A review of their monetary strategy, coupled with enhanced cooperation with other emerging nations, could be considered to limit the impact of this volatility. It remains to be seen whether this burst will be enough to question a system dominated by the dollar or if, on the contrary, this new gives will sign in force of the greenback in the world trade.
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