During the BRICS summits in 2022, 2023 and 2024, member countries engaged in serious discussions about ways to reduce their dependence on the US dollar. While these efforts have since elicited serious punitive threats from the Trump administration, the recent US tariffs will further fuel either de-dollarisation or diversification of currencies used for international trade, particularly among BRICS countries.

The US dollar has been the singular most dominant currency and the sole major international reserve currency since the end of the 2nd World War, dominating and influencing international financial and monetary policies abroad. It became the standard currency for international transactions, hence, trade between countries involves converting local currencies into the US dollar. The current international financial and monetary system is disproportionately dominated by the US dollar, which accounts for about 90 percent of all currency trading. Until 2023, 100 percent of oil trading was conducted in US dollars, although one-fifth of such trade has since reportedly been conducted using non-US dollar currencies.

Amidst growing debates about the decline of US power, the US dollar stands out as the major anchor of American hegemony. Unsurprisingly, in December 2024, then-candidate US Donald Trump threatened to impose 100% tariffs on the BRICS group of nations if they created a rival currency, resulting in a shift away from the US dollar.

Trump wrote on his social media platform, Truth Social, that “The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER. “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.”

However, the recent US tariffs will fuel efforts by emerging powers not only to redirect and diversify their trade and economic partnerships from the US, which is increasingly proving to be an unpredictable and unreliable partner, but also to explore prospects of using other currencies in the pursuit of their economic interests.

Despite the threats of punitive sanctions, discussions on exploring the use of alternative currencies are likely to intensify on the back of what others are calling economic warfare through the weaponisation of tariffs.

The tariffs have triggered a tit-for-tat vicious cycle with China as the second largest economy, moving to protect international rules and its economic interests. The EU, Mexico and Canada have indicated they will respond strongly, while other countries are weighing their options.

The tariffs will add to growing international discontent against the weaponisation of economic instruments by the US. The BRICS countries have complained about the coercive instrumentalisation of the US dollar and the SWIFT payment system as economic sanctions against targeted countries.

During the Summits of the BRICS in 2022, 2023 and 2024, its leaders discussed and resolved to issue a "new global reserve currency," saying that they were ready to work openly with all countries committed to fair international trade. In April 2023, Brazilian President Luiz Inacio Lula da Silva spoke about the need for intra-grouping BRICS currency, stating, “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?

Who decided that the dollar was the (trade) currency after the end of gold parity?” Brazil, which is one of the main protagonists for the BRICS currency, is the current president of the grouping, and may seek to push the idea to be finalised. Other members of the BRICS are on board in pushing for diversification of trade, financial and monetary mechanisms to easily facilitate trade amongst member states.

The BRICS is the fastest-growing regional grouping with the potential to rival the G7. Originally launched as a grouping of emerging middle powers, Brazil, Russia, India, China and, later, South Africa, it has since expanded to include Iran, Saudi Arabia, the United Arab Emirates, Ethiopia, Egypt, and Indonesia to create one of the largest single groupings of countries in the world. The inclusion of some oil-producing states in the bloc, renders the grouping more weight, particularly if the parties continue to expand and strengthen intra-group policies, trade and economic relations.

There are about 34 other countries which have expressed interest in joining the grouping, amongst which is Turkey, a member of the North Atlantic Treaty Organization (NATO), as well as the European Union–Turkey Customs Union and Nigeria, one of the largest economies in Africa after South Africa and Egypt. Indonesia became the first Southeast Asian nation to formally join the intergovernmental grouping, which now spans Africa, Asia, Latin America, and the Middle East, with Turkey potentially bringing it closer to Europe.

As the fastest growing regional grouping, the BRICS represents about 45 per cent of the world’s population, which is about 3.25 billion people, and 35 per cent of global gross domestic product (GDP), based on purchasing power parity. In contrast, the G7 accounts for ten per cent of the global population and 30 per cent of the GDP. The BRICS has also seen increasing intra-group trade volumes and a major shift towards alignment of economic policies, while forging closer diplomatic intra-grouping ties.

While there is no doubt that the BRICS does not seek to replace the US dollar, the grouping has gathered momentum towards coordinated intra-group policies, in ways that could reduce their singular dependency on the US dollar as the currency of choice for global trade, foreign exchange reserves and the use of SWIFT as a global trade platform.

There is also a sense of unity and urgency within the BRICS. The rapid expansion of the grouping suggests immense potential in its growth into a major influential economic bloc. During the 6th BRICS summit in 2014, the BRICS states

The signing of the Agreement on the New Development Bank at the 6th BRICS summit in 2014, including a separate agreement providing for a reserve currency pool worth $100 billion indicates strong political will to create and consolidate institutions which resonates with the interests of its group members, setting them on a path towards economic independence. The development bank is meant to be an important source of capital for the BRICS states, operating in ways that simplify mutual settlement and lending operations while fundamentally reducing dependence on the US dollar and the Euro.

The diversification and expansion of intra-group trade and economic relations could solidify and strengthen the group of countries as an emerging region and market which could benefit from the use of currencies of its member countries or a shift from the costly singular reliance on the US dollar. A BRICS currency could also facilitate more efficient trade rules and processes amongst member countries using this monetary system, allowing the BRICS nations to increase their influence in global trade and financial markets, attracting more investment and reducing the dominance of Western financial institutions.

* Gideon H Chitanga, PhD, is a Researcher at the Centre for Africa China Studies (CACS), University of Johannesburg