The US dollar is facing a growing challenge from BRICS countries, says economist Joe Sullivan. In an article for Foreign Policy magazine, Sullivan suggests that BRICS’ planned expansion and efforts to boost the use of national currencies in trade among members will strip the dollar of its hegemony over global trade, even if it doesn’t have a single currency.
Currently, BRICS is made up of Brazil, Russia, India, China, and South Africa, but in January, it will be joined by Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. This expansion will bring the group’s representation of global GDP to nearly half by 2040.
According to Sullivan, three of the original BRICS members (Brazil, China, and Russia) are major exporters of precious metals and rare earths. And the addition of Egypt, Ethiopia, and Saudi Arabia will give the bloc influence over 12% of global trade as these countries surround the Suez Canal, a key trade artery. Additionally, Saudi Arabia, Iran, and the UAE are major exporters of fossil fuels, giving the group greater weight in commodities markets. Sullivan also notes that Saudi Arabia owns over $100 billion in US Treasury bonds, which broadens the economic leverage of BRICS+ in financial holdings.
In addition to expanding its membership, BRICS countries are actively working to boost the use of national currencies in mutual trade. They have even signaled the possibility of introducing a new single trade currency at a summit next August. While this currency is still a work in progress, Sullivan believes that BRICS+ has the power to topple the dominance of the US dollar even without it.
Sullivan states that the BRICS+ nations do not need to wait for a shared trade currency before challenging the dominance of the US dollar. If they demanded payment in their own national currencies to trade with any of them, the role of the dollar in the world economy would go down, and a variety of currencies would gain importance.
According to Sullivan, global de-dollarization is much more likely now than it was six months ago, due to tectonic shifts in China’s economy and in Washington. He suggests that the recent slowdown in China’s economic growth means a more balanced BRICS, which serves shared interests rather than just those of a dominant China. Furthermore, there is growing skepticism in Washington about how closely dollar hegemony aligns with US national interests.
Sullivan concludes by stating that rumors of the death of the dollar as a global reserve may have been exaggerated in the past, but this time around, they may be no exaggeration. The growing use of national currencies and BRICS’ expansion could lead to a significant shift in the global trade landscape.
In summary, economist Joe Sullivan believes that the growing use of national currencies by BRICS countries, coupled with the bloc’s expansion, will challenge the dominance of the US dollar in global trade. BRICS’ increasing influence and efforts to boost the use of national currencies could lead to de-dollarization and a shift in the global trade landscape.