Trump just swung at Putin's war machine. He missed
While financial markets were breathing a sigh of relief about the postponement of new tariffs from July 9 to August 1, these threats triggered yet more turmoil. If Trump proceeds with new tariffs against BRICS countries, the consequences for US trade policy and global influence could be profound, and not in the positive way that Trump envisions.
For starters, new tariffs on BRICS members and partners will not severely weaken the economies of Russia and Iran. An escalation of US-China trade tensions benefits Russia, as it can readily supplant American supplies of oil, liquefied natural gas and coal to China. As Russia-China trade volumes reached $244.8 billion and Russia-India trade reached $70.6 billion, the Russian economy can lean on intra-BRICS trade to fill supply chain gaps.
Higher prices on goods supplied by BRICS members and partners will merely accelerate Russia's domestic production targets. President Vladimir Putin has urged Russia to reduce its GDP share allotted to imports to 17 per cent by 2030 and higher costs of foreign goods will give the upper hand to domestic producers of manufactured goods.
While Trump's outrage towards BRICS is partially related with its solidarity with Iran against American and Israeli attacks, these new tariffs will have a negligible impact on the Iranian economy. If anything, they could convince Russia and China to deepen their economic ties with Iran and give new momentum to India's May 2024 deal to operate the Iranian port of Chabahar.
The impulsive imposition of tariffs on BRICS members and partners will also undo positive steps towards a de-escalation of trade tensions between the US and China. Due to the London and Geneva agreements, the US has agreed to ease restrictions on aircraft engine, semiconductor design software and ethane exports to China.
In exchange, China has taken steps towards easing non-tariff barriers on rare earth supplies. These new tariffs could not only stall further trade talks but reignite the industrial supply chain bottlenecks that were ebbed through months of tireless negotiations.
Aside from upending the US's bilateral trade ties with key partners, the new tariffs do even more lasting damage to its global image. BRICS countries are expanding the Contingent Reserve Arrangement (CRA) which will allow them to borrow funds in local currencies instead of the US dollar. Russia's Transfer of Financial Messages (SPFS) and China's Cross-border Interbank Payment System (CIPS) are incrementally diluting SWIFT dominance.
These new tariffs will intensify discussions about de-dollarisation as Global South countries seek to insulate themselves from US trade barriers and sanctions. They will also fuel Chinese President Xi Jinping's crusade against 'unilateral bullying' which aims to form an anti-tariff coalition consisting of EU member states, Middle East regional powers and emerging African economies. Instead of being a show of strength that reinforces US hegemony against the Chinese challenge, Trump's tariffs could give Beijing an intended gift.
The US's trade war against BRICS is understandable given its frustrations with the anti-Western policies of its member states. Succumbing to those frustrations with impulsive tariffs could do the US more harm than good.
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