Trade tensions rise as Trump's threats to impose tariffs on BRICS increase. Picture: Sergey Bobylev/Photohost Agency
THE BRICS nations (Brazil, Russia, India, China, and South Africa) face heightened scrutiny as unconfirmed reports about a potential unified currency unfold, drawing sharp warnings from US President Donald Trump.
Trump is expected to return to the White House after winning the US presidential election and his threat of punitive tariffs has raised concerns about the future of South Africa-US trade relations.
The US President’s remarks have stoked fears that economic ties between South Africa and the US could falter, with critics warning that the ramifications might leave many disadvantaged.
Finance Minister Enoch Godongwana said in reaction to the claims that there had never been a discussion about a BRICS currency to his knowledge. “It does not even exist in our documents or our declarations. So it’s not a project.”
Godongwana, however, said: “We must begin to trade with each other in terms of local currencies. So, if I’m dealing with the Chinese, there’s no reason they cannot accept my brand. I’m talking about recognizing common local currencies when we trade.”
When reached for comment, Department of International Relations and Cooperation (Dirco) ministerial spokesperson Chrispin Phiri said sustained misreporting on the matter had led to the incorrect narrative that BRICS was planning to create a new currency, yet this was not the case. “The discussions within BRICS focus on trading among member countries using their national currencies.”
Phiri said it was important to note the following:
“The image of President Vladmir Putin holding a bill, which bore the flags of Brazil, Russia, India, China, and South Africa, led many to believe that BRICS had officially launched a joint currency. The currency President Putin is holding is a mock-up of a BRICS bill at the Kazan summit presented to him by enthusiasts, not an officially adopted BRICS currency note.
“BRICS is not discussing the creation of a common BRICS currency, and South Africa supports the increased use of national currencies in international trade and financial transactions to mitigate the impact of foreign exchange fluctuations; this is a position that was also put forward at the recent BRICS Summit in Kazan Russia,” he said.
Phiri said BRICS leaders had called for a reformed international financial system to facilitate trade in local currencies. “South Africa supports the increased use of national currencies in global trade and financial transactions to mitigate the impact of foreign exchange fluctuations.
“Strengthening correspondent banking networks and developing infrastructure for settlements in national currencies could further this aim. Enhancing BRICS payment systems to accommodate trading in local currencies does not imply de-dollarisation.
Independent political analyst Professor Sipho Seepe said Trump has been consistent and unwavering in his commitment to put America first.
“This fits well with “Make America Great Again". This is nothing new. All US presidents have prioritized their country first. The only difference is that Trump is brutally honest about it. The others have used vague and often vacuous language to convey almost the same.
“Trump's threats are encouraged by the fact that some of the BRICS countries lack the conviction on where they stand. South Africa is one such country. One minute, President Cyril Ramaphosa gets overly excited when he finds himself in the presence of the Western leaders. He displays the same excitement in the presence of Putin and Xi Jinping.
Seepe felt that Trump knew well that he could count on countries with presidents lacking the backbone.
Independent economic analyst Professor Bonke Dumisa criticised Trump, arguing he had established a “track record for playing to the gallery and disrespecting global multilateral bodies and being disrespectful to other countries,” believing that the US had a right to bully the global economic markets.
“This is a very reckless statement by Trump, who believes that everything should be about America, in line with his presidential slogan of “Make America great again”. Trump is mistakenly doing what the English call "cutting your nose to spite your face“.
Dumisa mentioned that countries have a right to choose the currency they want to use in trading with other countries and that Trump violated these rights.
“In simple terms, according to Trump, when the original five BRICS members and their new counterparts trade with each other, their transactions must be US dollar-denominated, meaning the USA must benefit from transactions that have nothing to do with the USA.
“On the issue of the "BRICS Currency,” this is spurious and preemptive; BRICS Countries never agreed on any "BRICS Currency"; India is officially on record saying they would never agree with any "BRICS Currency".
He believed that these BRICS countries' different political and economic systems would weaken the BRICS currency.
In an earlier statement, Sonja Boshoff, chairperson of the Parliamentary Select Committee on Economic Development and Trade, expressed concern over the apparent lack of coordination in the BRICS response to Trump’s provocations.
“South Africa and the US need each other as trade partners, and under no circumstances should either side entertain the idea of severing ties,” she cautioned, emphasizing the long-standing relationship characterized by “cordiality, decency, and mutual respect.”
Trump threatened to impose punitive tariffs of up to 100% on BRICS nations if they considered abandoning the US dollar for trade purposes. He claimed these countries were working towards establishing a unified BRICS currency—a notion that sparked a passionate backlash.
Boshoff, however, clarified that the claims stemmed from the BRICS nations’ principled stance on promoting trade among themselves using their currencies, a move they believe would enhance their economic sovereignty.
South Africa’s historic ties with the US continue to play a critical role in its trade policy. “We must not jeopardize these historical ties,” Boshoff said, stressing that South Africa was a significant beneficiary of the African Growth and Opportunity Act (Agoa) and various educational and technological exchange programs.
She further said that, although informal, there had been an unwritten rule that South African presidents maintain cordial relations with their US counterparts. “These relations must endure, bringing mutual benefits to the people of both our countries.”
Professor Kedibone Phago, director in the School of Government Studies, North West University, said there was clearly a mutual expression among the BRICS countries that the use of US dollar for these international trade transactions make US the main beneficiary and dominant global power. This is where most countries believed that their economic sovereignty and independence was undermined as the US dollar was weaponised in ways that undermine economic interests of most of these developing countries.
“As expressed by President-elect Donald Trump, the BRICS currency pose a clear challenge to the US dollar especially in terms of trade volumes. The World Economic Forum provides that these economies account for about 37.3% of global GDP based on purchasing power parity (PPP). The PPP is often used as an indicator to comparing complex issues regarding the countries’ GDP, productivity and individual consumption. It is in this case that the notion of PPP as an economic term provides for measuring of prices of goods and services at different locations. It is through global political economic system that could influence the future direction of global GDP.
“Trump’s concerns are therefore realistic that adopting a BRICS currency as a reserve currency among BRICS countries could displace and even bring about the significant devaluing of the US dollar. It is in this case that having a discussion entertained by the highest incoming office in the US demonstrates that there is a real threat to the hegemony of US dollar. This reaction by the President-elect could generate strong perceptions. Perceptions within the realm of global political economy and governance could impact performance of the markets and therefore value of the dollar, to some degree,” he said.
Phago said while the discussion of de-dollarisation had ardently commenced and even now sponsored by Trump, the conditions of realising BRICS currency would take years to come. This was because it would require some critical independence of the BRICS’s New Development Bank from the influences of the US and its global financial arrangements.
“Trading among BRICS countries using BRICS currency could undermine the US dollar and therefore US economy in the long term. This is probably the real and major threat for the US dollar hegemony which the President-elect is seeking to protect. It is however, necessary to indicate that the use of alternative currencies for trade deals among countries could bring about sudden impact that devalue the US dollar.
“Bilaterals among BRICS countries when undertaking business transactions. We have already seen transactions between India and Russia as reported by Reuters in May that India has successfully used multiple currencies such Indian rupees, United Arab Emirates dirhams and Chinese yuan to purchase oil and gas in Russia.
“It is also necessary to highlight that Russia is one country which is currently under heavy US sanctions. Expanding US sanctions to other BRICS countries similar to the levels of Russia could also disrupt global economic activities in a significant way. This means with a decision of this nature, while it may hurt the intended BRICS countries, it may also backfire on both the US and overall global economy which could easily lead to economic recession,” he said.
However, the implications extend beyond economics; a successful transition from the dollar could alter US economic power and reshuffle international relations, prompting likely diplomatic pushback from Western counterparts.
While the rollout of a shared BRICS currency may still be far from reality, the implications of enhancing intra-BRICS trade using existing currencies are profound as they signal a potential reconfiguration of global power dynamics. Despite the challenges, the momentum towards a more multipolar financial system is palpable.
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