Implications of Potential Tariffs on BRICS Countries
KUALA LUMPUR (Reuters) – Malaysia expressed concerns on Thursday about the possible repercussions of the incoming Trump administration imposing tariffs on BRICS countries for exploring new currency options or alternatives to the dollar. This move could have significant impacts on the global semiconductor supply chain, affecting multiple economies worldwide.
The BRICS Grouping
- The BRIC grouping initially included Brazil, Russia, India, and China, later expanding to include other nations.
- Malaysia has applied to join this bloc, which aims to challenge the dominance of Western economies in the global financial landscape.
Potential Trade Disruptions
Trade minister Tengku Zafrul Aziz emphasized that any imposition of 100% tariffs on BRICS members by the United States could disrupt the semiconductor supply chain. Malaysia, being a major hub in the chip testing and packaging sector, relies on trade with the U.S. for its semiconductor industry.
Consequences of Tariffs
- Malaysia considers the United States as its third-largest trade partner, with U.S. firms being significant investors in the semiconductor sector.
- Both parties depend on each other to prevent disruptions in the global supply chain.
De-dollarisation Efforts
While BRICS countries have discussed reducing reliance on traditional trade currencies like the U.S. dollar, there has been no official decision on de-dollarisation efforts. The absence of a common currency within the BRICS grouping complicates these discussions.
Russia’s Response
Following the West’s imposition of sanctions on Russia over the conflict in Ukraine, Russia has expressed its resistance to any U.S. attempts to enforce the use of the dollar in trade. This stance may further fuel discussions among countries to transition to using their national currencies in international trade.
Analysis and Conclusion
The potential imposition of tariffs on BRICS countries by the U.S. could have widespread implications, especially in the semiconductor industry and the global supply chain. Malaysia’s close ties with the U.S. in this sector make it vulnerable to any disruptions caused by such tariffs. Additionally, the ongoing discussions on de-dollarisation within the BRICS grouping highlight the complexities of transitioning away from traditional trade currencies.