BRICS provides new options for global financial order

With Donald Trump returning to the White House, the geopolitical and economic landscape is set to undergo a significant shift, particularly in terms of the US dollar's dominance in global trade. The expansion of BRICS — now known as BRICS plus with the inclusion of countries such as Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates — has raised concerns in Washington, because the grouping seeks to reduce its member states' reliance on the dollar by using local currency in intra-BRICS trade and possibly creating an alternative global currency.

The new US administration's threat to impose 100 percent tariffs on imports from BRICS member states if they pursue de-dollarization is indicative of the looming ideological battle in global finance.

China, the economic powerhouse within BRICS, has long pushed for free and convenient global trade.

As evidenced by the recent shift toward using BRICS member states' currencies in bilateral trade, the groundwork for an alternative financial system is slowly taking shape. The BRICS New Development Bank and the Asian Infrastructure Investment Bank are already working to provide financing to more countries.

The US administration's threat to impose 100 percent tariffs on goods from BRICS members is part of its strategy to further US interests and reinforce the dollar's position as the world's reserve currency. His "America first" strategy continues to advocate economic isolationism and maintaining the US' hegemony in the global financing mechanism. By issuing such threats, Trump aims to deter BRICS members from undermining the dollar's supremacy. But this approach might prove counterproductive for the US in the long run.

The global financial system is already showing signs of a gradual shift away from the dollar, and the US administration's confrontational stance could accelerate this shift, because some countries such as Russia and Iran have been already excluded from the US-led financial system due to sanctions.

Moreover, Trump's proposed tariffs could harm both the US and other economies, because they will increase inflation and raise US households' budget. Products from BRICS members, such as electronics from China, coffee from Brazil and minerals from South Africa, would become more expensive, exacerbating the already fragile global supply chains. This would disproportionately affect lower-income families in the US, contradicting Trump's promise to "Make America Great Again".

While BRICS has established alternative financial institutions, the push for a single, unified currency faces significant obstacles. The economic disparity within BRICS — from China's booming export to India's growing service sector and Brazil's commodity-based industries — makes the creation of a single trading currency a big challenge.

Despite this, the grouping's members share a common desire to reduce their vulnerability to US sanctions and its financial control mechanisms. However, the dollar's dominance is deeply entrenched in the global economy, and despite efforts by BRICS plus, alternatives are unlikely to rival the dollar's status in the near future — although the IMF's Special Drawing Rights or blockchain-based payment systems could emerge as regional solutions, the global shift away from the dollar will be slow and uneven.

China's approach to BRICS plus has been pragmatic, seeking to build a cooperative framework rather than antagonizing the West. As seen in its diplomatic stance, China emphasizes mutual development and prosperity through cooperation rather than confrontation. This contrasts with Russia's more combative stance, challenging Western financial hegemony.

As the world braces for Trump's next aggressive move, the future of global finance will be shaped by the complex interplay between geopolitics and economics. The global financial system's inertia, coupled with the dollar's entrenched role in global trade, means that any significant challenge to the dollar's dominance is still years away.

The US administration's aggressiveness might push more countries toward seeking alternatives to the dollar, but it will also deepen global economic fragmentation. In the end, the US policies may end up accelerating the diversification of global trade currencies — not necessarily to the benefit of the US, but perhaps in a more fragmented and less predictable global financial order.

The author is deputy secretary of the Middle East Studies Center and a postdoctoral fellow at the Institute of International and Regional Studies at Sun Yat-sen University.

The views don't necessarily reflect those of China Daily.

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