Rise of BRICS and the West: The dethroning of the US Dollar

The International Monetary Fund (IMF) has been warning about a growing rift in global trade along geopolitical lines.

- Madhusudhanan S

This trend could potentially lead to the collapse of world trade and a slowdown in global growth. But before delving further, it is essential for readers who may not follow international trade to understand BRICS. Here is a brief background:

Brief background of BRICS

The alliance of BRICS is built on a foundation of friendship, solidarity, and shared interests. BRICS represents over 42% of the global population, 30% of the world’s territory, 23% of global GDP, and 18% of global trade. After formalizing it as BRIC on June 16, 2009, the leaders held the first BRIC Summit in Yekaterinburg, Russia. In 2010, South Africa was invited to join, thus becoming BRICS.

Understanding how international trade relations are reshaping is crucial before examining how the US dollar’s dominance has impacted BRICS nations and why BRICS is leading the trend towards de-dollarization. This article concludes with an overview.

Reshaping of trade relations

On May 7, 2024, Gita Gopinath, the First Deputy Managing Director of the IMF, stated, “After years of shocks—including the COVID-19 pandemic and Russia’s invasion of Ukraine—countries are reevaluating their trading partners based on economic and national security concerns.”

The IMF observes that some countries are reconsidering their heavy dependence on the dollar for international transactions and reserve holdings. This shift indicates increasing polarization in trade relations, with nations moving away from globalization towards protectionism.

A World Bank study on global trade noted a slowdown, with only a marginal expansion in goods and services by 0.2% in 2023, marking the slowest pace in 50 years outside of global recessions. It further stated, “It would have declined outright but for the growth of trade in services.”