ORLANDO, Florida, Aug 7 (Reuters) - U.S. President
Donald Trump has the so-called 'BRIC' group of nations directly
in his trade war crosshairs, slapping super-high tariffs on
imports from Brazil and India, and accusing them of pursuing
"anti-American" policies.
Washington's relations with Brasilia and New Delhi have sunk
to new lows. But this belligerence could backfire.
The White House said on Wednesday that it will impose an
additional 25% tariff on goods from India, citing New Delhi's
continued imports of Russian oil. That brings the levy on most
goods to 50%, among the highest rate faced by any U.S. trading
partner.
Brazil also faces 50% tariffs on many of its U.S.-bound
exports, not because of trade imbalances, but because of Trump's
anger at what he calls a "witch hunt" against his ally, Brazil's
former President Jair Bolsonaro, who has been charged with
plotting a coup following his election loss in 2022.
This breakdown in relations could be Trump's intention: push
these countries to the brink so that they'll agree to trade
deals that are heavily lopsided in Washington's favor. That
strategy seemed to work with Japan and the European Union.
But hitting these 'BRICS' economies with eye-watering
tariffs could push them closer together, strengthening the
resolve of a group that appeared to be losing whatever momentum,
purpose and unity it had.
THE 50% CLUB
The original BRIC nations - Brazil, Russia, India and China
- held their first summit in 2009, eight years after former
Goldman Sachs economist Jim O'Neill coined the acronym for this
group of emerging economies he said would challenge the G7 group
of rich countries in the future.
South Africa became the 'S' in BRICS two years later, and
the club now comprises 11 countries including Indonesia, Iran
and Saudi Arabia, as well as a further nine 'partner' countries
including Malaysia, Nigeria, and Thailand.
It was always a disparate group - geographically,
economically, culturally, and politically - meaning its
cohesiveness has always been questionable. Its relations have
sometimes been rocky, particularly among its largest members.
That's why it was so notable when Indian Prime Minister
Narendra Modi on Wednesday announced that he will visit China
for the first time in over seven years. This could be a sign
that rising tensions with Washington are helping to thaw frosty
ties between New Delhi and Beijing.
Also on Wednesday, Brazil's President Luiz Inacio Lula da
Silva told Reuters that he plans to call the leaders of India
and China to discuss a joint BRICS response to Trump's tariffs.
"I'm going to try to discuss with them about how each one is
doing in this situation ... so we can make a decision," Lula
said. "It's important to remember that the BRICS have ten
countries at the G20," he added, referring to the group that
gathers 20 of the world's biggest economies.
UNITED FRONT
While nothing unites like a common enemy, the differences
between the BRICS countries could limit how solid that front can
actually be.
Stephen Jen, CEO and co-CIO of Eurizon SLJ Asset Management
in London, posits that trade links between the five core BRICS
nations - never mind the historical, political and cultural ties
- are weak.
Only 14% of their trade is with each other. Russia and
Brazil may have higher levels of intra-BRICS trade, but only 9%
of China's exports are BRICS-bound, significantly less than the
19% that goes to emerging Asia and 15% destined for the U.S. And
in economic, political and military terms, China matters far
more than the others on the global stage.
"BRICS is more of an alliance on paper, not in reality," Jen
says.
But there are signs that intra-BRICS trade is strengthening.
China-Russia trade was a record $244.8 billion last year, and
China and India are the biggest two buyers of Russian oil. China
is Brazil's largest trading partner, accounting for 28% of
Brazil's exports and 24% of its imports. Roughly 70% of China's
soybean imports are from Brazil.
TENUOUS ALLIANCE
Trump's tariffs could push BRICS countries closer together
in the near term, in areas such as trade, investment, and
currency usage. They may feel it's in their economic interests
and, for some, in their political interests, to present a united
front.
How long that front can hold is anyone's guess. These
countries, particularly India, may resist moving further under
China's influence, and Russia's pariah status could limit
further integration beyond commodity imports.
In the meantime, however, Trump's tariff salvos are
BRICS-bound. How these emerging economies respond could be an
indication of whether we may truly be seeing a reshuffling of
global alliances.
(The opinions expressed here are those of the author, a
columnist for Reuters)