OBSTACLES TO A COMMON CURRENCY
Trump has long been critical of BRICS. This is largely because the group has consistently floated the idea of adopting a common currency to challenge the dominance of the US dollar in international trade.
Such a move makes sense if we focus on trade figures. In 2024, the value of trade among the BRICS nations was around US$5 trillion, accounting for approximately 22 per cent of global exports. Member nations have always felt their economic potential could be fully realised if they were not reliant upon the US dollar as their common currency of trade.
During their 2024 summit, which was held in the Russian city of Kazan, the BRICS nations entered into serious discussions around creating a gold-backed currency. At a time when the Trump administration is waging a global trade war, the emergence of an alternative to the US dollar would be a very serious pushback against US economic hegemony.
But the freshly concluded BRICS summit did not present any concrete move towards achieving that objective. In fact, the 31-page Rio de Janeiro joint declaration even contained some reassurances about the global importance of the US dollar.
There are two key obstacles hindering BRICS from translating its vision of a common currency into reality. First is that some founding member nations are uncomfortable with adopting such an economic model, in large part due to internal rivalries within BRICS itself.
India, currently the fourth-largest economy in the world, has a history of periodic confrontation and strategic competition with China. It is reticent about adopting an alternative to the US dollar, concerned that this could make China more powerful and undercut India’s long-term interests.
Second is that the BRICS member nations are dependent on their bilateral trade with the US. Simply put, embracing an alternative currency is counterproductive when it comes to the current economic interests of individual countries. Brazil, China and India, for example, all export more to the US than they import from it.
In December 2024, following his election as US president, Trump said: “We require a commitment from these countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US dollar or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy”.
This blunt message all but killed any enthusiasm that was there for this grand economic model.
