Trump's tariffs push Brics closer, but India wants to retain strategic autonomy

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Brics is today one of the world's leading blocks that has overtaken the G7 on most indicators. As US President Donald Trump runs amok like a bull in the China shop, Brics countries are brewing a heavy blowback against Trump. Trump has chosen these countries for a special dose of steep tariffs alongside his repeated criticism of the bloc as 'anti-American'. Both the Russian President, Vladimir Putin, and the Brazilian counterpart, Lula da Silva, called up Prime Minister Narendra Modi to discuss options and a coordinated plan. Also, PM Modi is set to visit China later this month for the Shanghai Cooperation Organisation (SCO) summit. His first visit to China in seven years. The Brics nations are uniting to counter Trump's aggressive tariffs and dollar dominance.
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The Global South has been in a diplomatic huddle led by China, India, and Brazil. Russia, the 'expelled' Global North member, is a key pillar of the Brics. Trump has been making vocal attacks on the bloc. Expanded Brics has five new member nations and is forging a stronger alliance that has the economic and political muscle to push back against Trump's daily tariff offensives. Adding to the economic tensions is Trump's changed stance and aggressive push for cryptocurrency and to make the US the world's crypto capital. This is perceived as a counter to the Brics currency aimed at challenging the petrodollar's dominance, as well as an attempt to capitalise on the lucrative digital asset market.
In the wake of Trump's threats, PM Modi reaffirmed India's commitment to deepen the strategic partnership with Putin's Russia. India's National Security Advisor Ajit Doval just met Putin in Moscow. Putin is all set to visit India in a few months.
Brics
The Brics is a forum for cooperation among a group of leading emerging economies. Begun by Brazil, Russia, India, China, and South Africa, the initials of which formed the acronym, it has added Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates to make a group of ten, making it Brics-Plus. The Brics mechanism aims to promote peace, security, development and cooperation. It evolved as a combination of the two forums RIC (Russia, India, and China) and IBSA (India, Brazil, and South Africa). The first summit took place in 2009. Some in the West consider Brics the alternative to the G7. Others describe the grouping with increasing anti-Western and anti-American objectives.
The grouping has implemented competing initiatives such as the New Development Bank, the Brics Contingent Reserve Arrangement, Brics Pay, the Joint Statistical Publication and the basket reserve currency. Brics has established almost 60 intra-group institutions and think tanks to dialogue and cover agendas in 34 subjects. All the original five members and Indonesia are also part of the G20.
Brics has received both praise and criticism from numerous commentators and world leaders. The economic bloc has actively sought to reduce its reliance on the US dollar. China has even pushed for 'de-dollarisation' by promoting its currency, the Yuan, and forming currency swap agreements with other countries.
Trump's erratic approach to tariffs and global agreements has revived doubts about the US' reliability on the world stage and raised long-term concerns about the stability of the dollar. Emerging powers such as China and India have expanded their global influence, and alternative financial systems, including the rise of cryptocurrencies, have gained traction.
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Table by the author
De-Dollarisation
The US dollar is the world's primary reserve currency, and it is also the most widely used currency for trade and other international transactions. As per a JP Morgan report, the US' share in global exports and output has declined, and China's has increased, yet the dollar's transactional dominance is still evident in areas including foreign exchange (FX) volumes and trade invoicing. However, its hegemony has come into question in recent times due to geopolitical and geostrategic shifts. As a result, de-dollarisation has increasingly become a substantive topic of discussion.
Some form of de-dollarisation is unfolding in most central bank FX reserves, where the share of US$ has slid to a two-decade low. The share of foreign ownership in the US Treasury market has fallen over the last 15 years, pointing to reduced reliance on the dollar. De-dollarisation is most visible in commodity markets, where a large and growing proportion of energy is being priced in non-dollar-denominated contracts. The concept of de-dollarisation relates to changes in the structural demand for the dollar that would relate to its status as a reserve currency.
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There are two main factors that could erode the dollar's status. The first is the perceived safety and stability of the currency and the US's overall standing as the world's leading economic, political and military power. The ongoing US tariff policy could also cause investors to lose confidence in American assets.
The second is the positive developments outside the US that boost the credibility of alternative currencies, such as that of rising and stable China. De-dollarisation could shift the balance of power among countries, and this could, in turn, reshape the global economy and markets. The impact would be most acutely felt in the US, where de-dollarisation would likely lead to a broad depreciation and underperformance of US financial assets versus the rest of the world.
Trump's tax legislation, which he recently signed into law, is expected to add $3.4 trillion to the federal deficit. This is fuelling fears about long-term US economic stability, potentially raising borrowing costs that could impact global investors, central banks and everyday consumers.
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Yet, in finance, the foreign exchange market is the biggest and most liquid financial market, with volumes of over $7.5 trillion daily. Among the top currencies remain the US dollar (44 per cent of all forex transactions), the euro (16.5 per cent), the Japanese yen (JPY) (8.4 per cent), the British pound sterling (6.4 per cent), and the Chinese yuan renminbi (CNY) (4.7 per cent).Clearly the USD and EUR have held a steady share over the past two decades. While the share of CNY is increasing in China's global transactions as it moves to conduct bilateral trade in its own currency, it is still relatively low. The main de-dollarisation trend in FX reserves pertains to the growing demand for gold. China, Russia and Turkey have been the largest buyers in the last decade.
Due to Western sanctions, Russian oil products exported to some major countries are being sold in the local currencies of buyers or in the currencies of countries Russia perceives as friendly. Among buyers, India, China and Turkey are all either using or seeking alternatives to the dollar. Saudi Arabia is also considering adding yuan-denominated futures contracts in the pricing model of Saudi Arabian oil. Yuan is gaining ground outside of oil too. Some Indian companies have started paying for Russian coal imports in yuan, even without the involvement of Chinese intermediaries. Bangladesh also recently decided to pay Russia for its 1.4 GW nuclear power plant in Yuan. The de-dollarisation trend in the commodity trade is a boon for countries like India, China, Brazil, Thailand and Indonesia, which can now not only buy oil at a discount but also pay for it with their own local currencies. But de-dollarisation is still far off, and work is in slow progress.
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Brics Approach to Trump Tariffs
Trump tariffs have hit the group badly. Trump has escalated trade tensions by doubling tariffs on Indian goods to 50 per cent, citing India's continued imports of Russian oil, which account for 36 per cent of India's oil imports. Brazil faced a similar 50 per cent tariff increase, linked to Trump's allegations of political persecution of former Brazilian President Jair Bolsonaro. Brazil's Lula rejected Trump's offer for direct trade talks. Russia is under sanctions. After the US revoked Russia's Most Favoured Nation (MFN) status, many Russian goods are subject to around 20 per cent tariffs. In April, when the tariff war between the world's largest trading nations was at its peak, Trump had cranked up blanket tariffs on Chinese imports to 145 per cent, and China had retaliated with 125 per cent duties on US goods. China and South Africa currently face a 30 per cent tariff. Trump has now extended the China tariff deadline by 90 days.
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Trump's rhetoric has been blunt and nasty. He called India and Russia 'dead economies' and accused New Delhi of profiting from reselling refined Russian oil. He further warned that Brics nations aligning against US interests would face an additional 10 per cent tariff. India's Foreign Ministry spokesperson Randhir Jaiswal said India's ties with Russia are 'steady and time-tested' and urged the US not to view these relations through a third-country lens.
Trump's flip, from dismissing Bitcoin as a 'scam' to positioning the US as the global cryptocurrency capital, shows the move might also be aimed at mitigating adverse effects of the potential Brics currency. He has even backed his family's crypto venture, World Liberty Financial (WLF), which has engaged with Pakistan on cryptocurrency.
The large and powerful block is strategising against Trump tariffs. There is talk of increased tariff-free bilateral trade. This would be a significant part of discussions on the sidelines of the SCO meeting in China. Meanwhile, India's RBI has allowed Category-1 banks to open special rupee-vostro accounts for Russian oil companies to invest surplus funds in Indian government securities.
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Capacity to Take on US
Individually, each Brics member wants access to the US market. China has reacted with counter-sanctions, but it has some capacity to push the US for concessions. The leverage with other members to call 'Trump Bluff' is relatively less. The US has held negotiations with many foreign trading partners and managed significant deals with two-thirds of them. Notwithstanding Lula's strong statements, no collective official statement has come out yet from Brics.
India has walked a calibrated path. It has chosen the 'blow hot, blow cold' approach and back-channel diplomacy to find some middle ground. It has made it clear that its relations with Russia remain very important. It has also made clear that India will trade with any country based on bilateral understandings and India's economic interests.
The Chinese ambassador to India, Xu Feihong, issued a tweet on X that stated. 'Give the bully an inch, he will take a mile.' The Chinese envoy also attached a statement from his country's Foreign Minister Wang Yi: 'Using tariffs as a weapon to suppress other countries violates the UN Charter, undermines WTO rules, and is both unpopular and unsustainable.'
PM Modi had said at the Kazan Brics summit that economic cooperation could be strengthened through local currencies rather than relying on the dollar. The Unified Payments Interface (UPI) developed by India is a huge success story and has been adopted in many countries. We can also cooperate with other BRICS countries in this area.
While the dollar continues to dominate international trade, nearly 20 per cent of oil trading is now in non-dollar currencies. This is mainly as India and China are buying significant Russian oil in non-dollar currencies. While India has relied on the dirham for payments, China has opted for the yuan. The US felt threatened and decided on additional tariffs unless they committed to never creating 'a new Brics currency nor backing any other currency to replace the mighty US dollar'. While Trump truly intended to weaken the Brics, his policies are having the opposite effect. The US president is uniting the group at a moment when they were facing significant challenges.
Yet the Brics have never been a completely harmonious group in terms of their international interests and positioning. India and China have a long-standing rivalry in Asia. India has long viewed China's proximity to Pakistan, its primary foe, with suspicion. Brazil, India, and South Africa have consistently sought to maintain a non-aligned stance, refusing to be entirely aligned with Russia in its tensions with the West. The challenges for consensus have increased with Iran joining the group and its views on Palestine and Yemen. Egypt and Ethiopia also have some regional rivalries. Indonesia, Saudi Arabia and the UAE won't let pass anything against the US. There are issues about support for Brics currency.
China is India's second-largest commercial partner, surpassed only by the US. With the new US tariffs, China will gain even more economic influence over India. India has become very conscious of US flip-flops, and it is bound to affect India's purchases and engagement with the US. Will India pause Russian oil purchases as global prices are low and consider offering concessions on agricultural and dairy products to arrive at a deal? Remains a moot question.
Brics Catching Up on G7, but Challenges Remain
The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. They want to maintain global policy leadership, maintain the existing international order, and lead global policy on security, climate change, and global finance.
Brics' priority is to push multi-polarity, challenge the existing Western-dominated global order, and reform the international financial architecture. While historically smaller than the G7 in nominal GDP, Brics has now caught up with the G7 in GDP and is much ahead when measured by purchasing power parity (PPP). Brics is expected to be a major driver of future global economic growth, particularly with the continued expansion of the Brics-plus grouping, while the G7's growth is projected to be slower. More than 40 countries have expressed an interest in Brics membership, including Nato member Turkey.
But Brics faces challenges related to internal conflicts and diverging foreign policies, while the G7 generally maintains greater unity, though US-Canada and US-EU frictions are now more visible. Russia, China and Iran are keen to compete with the dollar as a reserve currency, to circumvent sanctions and to present a counter-model to the West, which is perceived as too dominant.
Countries such as South Africa and Egypt, on the other hand, attach importance to economic diversification and strengthening the voice of the global South without burning all other bridges. China is attempting to dominate the Brics alliance politically.
However, India is growing into another major regional power that is competing with China's ambitions, especially as India is pushing its own model of 'Strategic Autonomy'.
For India, Brics membership is increasingly becoming a balancing act. It is the only country in the group to find itself in open conflict with heavyweight China. India is not in favour of the anti-Western course that China, Russia and Iran would like to see for the Brics. It is a wait-and-watch time for international politics and global order.
The writer is former Director General, Centre for Air Power Studies. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views.