The world’s major emerging economies could end up benefiting from global trade tensions
The bloc of emerging economies known as BRICS have long struggled to establish a unified voice on the international stage, but U.S. President Donald Trump may be providing them with an unlikely boost.
As the leaders of Brazil, Russia, India, China and South Africa gather in Johannesburg on Wednesday for their annual meeting, the issue of trade protectionism is set to dominate talks amid Trump’s proposed tariffs on the European Union and Beijing. If the five-member group plays its cards right, it can use the matter to push forward the nations’ own trade agendas.
BRICS members have an interest in developing a world with multiple countries filling leadership roles, so they will be looking to “take advantage” of tensions to “to build up the profile of BRICS,” said Duncan Innes-Ker, regional director for Asia at The Economist Intelligence Unit.
BRICS has sought to reject the Western dominance of international institutions, but a lack of unity prevents members from coming up with an alternative solution. Now, with Trump’s duties on imported steel and aluminum set to hurt each BRICS member — Beijing, New Delhi and Moscow have already responded with retaliatory duties — the bloc has fresh purpose to rally together.
That’s a positive for Beijing, which is now trying to tout itself as a champion of free global trade and has claimed it was “forced” to fight back against Trump’s measures with reciprocal tariffs.
“Given the failure of the G-20 finance ministers meeting held earlier this week to defuse the threat to world trade from rising protectionism, the BRICS summit is likely to become a key global forum for galvanizing global support for multilateral trade liberalization,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit.
The Trump administration has said it is not advocating protectionism, but rather seeking to even a playing field that has been corrupted by unfair trade practices. Those penalized by Trump’s tariffs, however, have tried to paint the U.S. as no longer interested in free trade, vacating its traditional role on the global stage.
BRICS countries may try to step into that gap, negotiating wide-ranging trade agreements with many countries, Biswas continued.
The volatile global trade backdrop could also benefit emerging markets in more tangible ways.
“China might turn to India, Brazil, Russia … to source products it originally bought from the U.S., such as soy beans, wheat, and meat,” said Alex Capri, visiting senior fellow at the National University of Singapore. “This creates new opportunities for BRICS, at least temporarily.”
American firms may also seek to move some activities to emerging markets that are within existing trading blocs so as to avoid rising tariffs, he noted.
While many are hopeful for the three-day BRICS summit to advance trade liberalization, divergent policies between members could stand in the way.
“The challenge for BRICS has always been what exactly holds them together beyond a cute acronym,” warned Deborah Elms, executive director of the Asian Trade Centre, noting their different domestic structures. “China is outward looking and manufacturing focused. Brazil is increasingly outward focused, but mostly for agriculture, not manufacturing. India is really not open.”
Nyshka ChandranReporter, CNBC Asia-Pacific
