China and Brazil have dealt a significant blow to the US dollar’s dominance in international trade by agreeing to conduct bilateral trade in their own respective currencies. The deal, which would have been signed in Beijing this week, has $150 billion in annual trade between the two BRICS countries, and its significance cannot be overstated.
Since the conclusion of World War II, the US dollar has served as the predominant global reserve currency and has established itself as the international trade standard. This was made possible by the implementation of the Bretton Woods monetary management system in 1944 by the US and its allies. The pricing of global commodities is tied to the US dollar, while the concentration of capital in the global financial system has positioned Washington as its epicenter. Consequently, the US has leveraged the dollar’s dominance to wield it as a geopolitical instrument to enforce its influence over other countries, both through direct and indirect means.
The US has used sanctions as a means of unilaterally attempting to impose its will on third-party countries, often with the goal of comprehensively isolating and impoverishing smaller countries, such as Syria, North Korea, and Iran. However, as a result of Washington’s industrial-scale abuse of sanctions as a political weapon, there is growing pushback from other countries that increasingly see the dollar as arbitrary and unreliable.
In light of mounting hostility from the US, China, a formidable trading nation, is placing a high priority on the creation of non-dollar currency and financial systems that operate outside of US jurisdiction. This is particularly important in collaboration with countries that share a vested interest in the pursuit of multipolarity. The rising interest in alternative currency and payment systems is a direct response to the growing politicization and weaponization of the US dollar, which has been employed by the US as a means of exerting control over other nations.
The agreement between China and Brazil is a sign that countries are seeking to move away from using the US currency and diminish Washington’s ability to impose its will on others. Developing alternative payment systems is seen as a sign of defending national sovereignty in an uncertain world increasingly defined by geopolitical competition. These are not just countries designated as “adversaries” by Washington. As President of Indonesia Joko Widodo noted, “offshore settlements and dependence on foreign payment networks such as US Visa or Mastercard will no longer be necessary.”
The move away from the US dollar is a response to the increasing politicization and weaponization of the US currency as a means to control other countries. The US Federal Reserve, through decisions such as interest rate hikes, may also make economic choices that benefit America at the expense of the rest of the world. As a result, many nations increasingly see the US dollar as an obstacle to their own economic sovereignty and development, and this is why nations such as those in BRICS are acting now to de-dollarize their economies.
While the gravity of the dollar will always be strong, the days of it being used to abuse and impoverish others are fading as multipolarity arrives. The move by China and Brazil to conduct bilateral trade in their own respective currencies is a significant moment in the development of alternative payment systems that will diminish Washington’s ability to impose its will on others. It is a sign that countries are seeking to defend their national sovereignty and move away from using the US currency, in direct response to Washington’s abuse of the global reserve currency for its own hegemonic aims.
India has been a strong advocate for the multipolar world order and has been vocal about the need for alternative payment systems. India, which has been a non-aligned nation during the Cold War, has been increasingly asserting its geopolitical interests and aligning with other nations that share similar goals. In this regard, India has been actively engaging with BRICS nations and the Shanghai Cooperation Organization (SCO) to counterbalance the US-led world order.
India has been looking to de-dollarize its economy and has been exploring alternatives such as the use of gold, yuan, and cryptocurrencies. The Reserve Bank of India (RBI) has been exploring the use of a central bank digital currency (CBDC) as a potential alternative to the US dollar. The RBI has also signed currency swap agreements with several nations, including Japan, the UAE, and Sri Lanka, to reduce the dependence on the US dollar.
India’s push for alternative payment systems is also driven by its increasing trade relations with other nations, including China. India and China have been increasing their trade ties, and the two nations have set a target of $100 billion in bilateral trade by 2022. The use of alternative payment systems such as yuan and rupee would not only reduce the dependence on the US dollar but would also facilitate trade between the two nations.
The decision by Brazil and China to conduct bilateral trade in their own currencies is a significant development in the de-dollarization of the global economy. It is a reflection of the growing dissatisfaction with the US dollar as a global reserve currency and the increasing desire for multipolarity. The US dollar has been used as a tool to enforce American hegemony, and the growing pushback against this is a sign of the changing geopolitical landscape.
India, along with other nations, has been actively pursuing alternative payment systems to reduce the dependence on the US dollar. The move towards de-dollarization is not only a political reaction but also an economic one, as many nations see the US dollar as an obstacle to their own economic sovereignty and development. While the gravity of the US dollar will always be strong, the days of it being used to bully and impoverish other nations are fading as multipolarity arrives.