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The Global Economic Code vaccines under the effect of protectionist decisions of the United States. While BRICS aims to reduce their dollar addiction, the main shocks could appear. Returning to US customs tariffs could support an increase in green back, which would be threatened with a weakening of developing economies and slowing down their dedollarization efforts. This potential increase in the dollar, far from trivial, could mean a turning point for a global currency balance.
US protectionist measures and the outbreak of the dollar
The United States, led by Donald Trump, revived an aggressive customs customs policy that affected a wide range of imported products. This decision is part of a strategy to re -balance US trade balance and strengthen the dollar status on international markets. According to Goldman Sachs, this protectionist dynamics should have a mechanical impact on the value of the dollar, which would cause more attractive US currency for investors. “Subjects that occupy long positions on the dollar will increase their profits as prices strengthen its attractiveness,” the bank analysts explain.
The consequences of this policy are exceeded by the United States. Mexico and Canada are already undergoing the impact of these price increases, which increases the tension of trade between economic blocks. However, the main victims could be BRIC. For several years, these developing economies have been trying to reduce their dollar addiction in international trade. The depreciation of their relevant currencies in the face of the greenback in full output would complicate this effort, which would make their imports down and weaken their economic systems.
BRICS in difficulty against reinforced dollar
One of the strategic pillars of the BRICS is the diversification of monetary transactions and the establishment of an economic system that is less dependent on the dollar. However, this increase in the greenback can reverse this trend. Too brutal recognition of the dollar would destroy several years of working to dedollarization. Inflation imported to the BRICS block in combination with increased debt denominated in dollars could greatly slow their economic ambitions.
In addition, this situation provides information on the vulnerability of the block in the face of international currency fluctuations. If China and Russia have tried to save Yuan and Rubles as an alternative to the dollar, the recent tensions in the financial markets reveal that the acceptance of these currencies is still limited. Therefore, the too strong increase in the greenback is probably to revive the domination of the US financial system that can reduce the space for maneuvering BRIC in international transactions.
While the dollar increase seems inevitable in the short term, the BRICS will have to speed up its efforts to face this new agreement. The review of their monetary strategy, associated with strengthened cooperation with other developing countries, can be considered a limitation of the impact of this volatility. It remains to be determined whether this explosion will be enough to question the system dominated by the dollar, or whether this new one is to sign the greenback in the world trade.
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A graduate of the Toulouse and the Blockchain Consultant Certification certification holder and I joined the adventure of Cointribuna in 2019. I convinced of the potential of blockchain to transform many economy sectors, committing to raising awareness and informing the general public about how the ecosysty developed. My goal is to allow everyone to better understand blockchain and take the opportunity they offer. I try to provide an objective analysis of messages every day, decrypt trends on the market, hand over the latest technological innovations and introduce the economic and social issues of this revolution.
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The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.