The BRICS bloc is rising – and Trump's tariff risk just isn’t anticipated to discourage the candidate nations

Family photo of heads of state and government taken at the 16th BRICS Summit in Kazan, Russia, on October 24, 2024.

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President-elect Donald Trump has promised a 100 percent tariff against BRICS if they continue to undermine the U.S. dollar – but the threat will not slow the group's expansion, analysts tell CNBC.

Most recently, Brazil announced the admission of Indonesia to the union last Monday.

Under the administration of outgoing President Joe Biden, Washington was relatively hostile to the 10-member coalition. John Kirby, White House national security communications adviser, said during a press conference last October that the US does not see BRICS – an economic coalition of emerging economies. as a “threat”. The mood could change once Trump enters the White House later this month following early signs that he may impose tariffs on alliance members if they undermine the U.S. dollar.

“A key policy shift of the new Trump administration is the explicit treatment of the BRICS as an entity,” Mihaela Papa, research director at the MIT Center for International Studies, told CNBC by email.

China will ease tariffs

Originally founded in 2009 by Brazil, Russia, India and China and supported by South Africa in 2010, the Beijing-led BRICS countries were created as a force to rival Western dominance on the international stage.

At the alliance's 16th annual summit in Kazan, Egypt, Ethiopia, Iran and the United Arab Emirates were officially admitted to the group. More than 30 countries have expressed interest in joining the coalition in 2024, according to Russian officials and an official paper from the Central Committee of the Communist Party of China. CNBC could not independently verify this estimate.

According to Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, the size of the bloc makes it increasingly unlikely that the US will impose 100 percent tariffs on BRICS countries. This would risk making the nations in the U.S.-China rivalry neutral toward Beijing and harming U.S. interests, Wrigley told CNBC by email.

According to David Lubin, senior research fellow at Chatham House, the world's second-largest economy could even intervene to ease the pain of potential US trade measures against BRICS members.

“From Beijing’s perspective, establishing China as an alternative pillar of the global order is a critically important goal that cannot be achieved without the support of developing countries,” Lubin said in emailed comments. “And since around 120 countries count China as their most important trading partner, this shouldn’t be too difficult.”

China is already starting to do so, proposing a zero-tariff policy for the least developed countries with diplomatic ties with Beijing, which came into effect in December last year and builds on similar measures extended to the least developed African countries.

The dollar is king

Trump's threat of tariffs is conditional on the BRICS countries replacing the US dollar as the world's most widely used trading currency – which could prove a major challenge for the alliance.

Russia is pushing for dedollarization to bypass the SWIFT network, a globally recognized standard for banking transactions, and curb the impact of U.S. sanctions against Moscow. At the Kazan talks, Vladimir Putin reiterated the use of the dollar as a “weapon” and a “big mistake,” The Guardian reports.

One of the group's options for toppling the dollar was to create a single BRICS currency – a proposal led by Brazil that has not yet been implemented.

Another possibility would be to establish multi-currency trading, which already takes place between several members: some Chinese and Russian trade is carried out in yuan and ruble. The nations also agreed to further strengthen trade in local currencies and expressed support for the idea of ​​an independent cross-border payment settlement infrastructure.

Chatham House's Lubin notes that the Chinese currency is “much less usable internationally than the dollar” because financial markets are largely denominated in the greenback.

Just a “specialist workshop”

The lack of a concrete alliance strategy and actions from BRICS members raises doubts as to whether this is viewed as a threat to the US. Pantheon Macroeconomics' Wrigley said the emerging market alliance is currently little more than a “chatterbox.”

According to Cecilia Malmström, non-resident senior fellow at the Peterson Institute for International Economics, the bloc is still too loose and disorganized to bring about substantive change. The summit in Kazan in 2024 resulted in “nothing really concrete”.

This could simply protect BRICS members and partner countries from a trade war with the US, whose main target is China.

Although Beijing holds a significant position in the group, there are still major internal concerns about Beijing's dominance and possible trade imbalances among other member states, according to MIT's Papas.

“Even if China tries to exploit its position, internal caution among members is likely to remain a limiting factor,” she adds.

Many BRICS members continue to maintain friendly relations with the U.S. as a “crucial trading partner,” Ashmore Group research director Gustavo Medeiros told CNBC by email.

“There is no reason to believe that the members of the union would automatically be exposed to economic or geopolitical risk in the event of a trade war between the USA and China,” says Medeiros.

Correction: This article has been updated to correctly reflect the name of Mihaela Papa, research director at the MIT Center for International Studies.