The BRICS alliance, consisting of India, China, Russia, the UAE, and Saudi Arabia, has launched an initiative to diminish the dominance of the U.S. dollar by utilizing local currencies for cross-border transactions.
Already, BRICS members have begun settling international trade in their respective currencies. China and Russia are actively persuading other developing nations to follow suit.
This move could have devastating consequences for the U.S. economy, as it would become increasingly difficult for America to finance its deficit.
Should the U.S. fail to import the dollar, the currency would circulate back domestically, leading to inflation. This shift could result in skyrocketing prices, rendering housing, rent, and basic daily necessities unaffordable.
The decision to cease using the dollar for international trade settlement could affect a total of five U.S. financial sectors. These sectors include banking, foreign exchange, tourism, production, and technology and fintech.
Below ate the details of these sectors and how they may be affected by BRICS’ departure from the U.S. dollar:
1. Banking and Finance: The banking and financial sector would bear the brunt, as foreign exchanges would begin to decline.
2. Technology and Fintech: BRICS aims to establish its own internet services, reducing dependence on American technology for news and social media.
3. International Trade and Investment: Foreign investors would be inclined to steer clear of the U.S. dollar, given the worsening debt crisis and deficit.
4. Consumer Goods and Retail: If the U.S. dollar returns home, the cost of day-to-day essentials would further escalate.
5. Travel and Tourism: Tourists would increasingly use local currencies for their travels, forsaking the U.S. dollar. China and Singapore have already implemented policies requiring tourists to pay in local currencies within their respective countries.
In conclusion, BRICS has devised various strategies to undermine the prospects of the U.S. dollar. Urgent action from the Biden administration is necessary to counter BRICS’ efforts; otherwise, halting the decline of the dollar could prove significantly more challenging.