What all this means is all tied to de-dollarization
moves. Simple logic it may seem for a country to diversify its food and
other imports to more countries, which no one can accuse China of doing.
But underneath the surface, the objective is about using less of the
US$ and making use of local currencies between trading partners and even
exchanging oil for consumer products, without having to use the US$ in
cross border trade.
That is making everything cheaper and
settlement faster. Rather than having to convert local currencies into
US$ to settle trade and having to pay a fee for currency conversion to
and from the US$. Those who use credit cards will know, but how many
ever consider how much exchange losses they are incurring? How stupid
the world had been led to follow a system that had screwed them for
decades, benefiting big USA banks.
What is even more satisfying
is that such trade under BRICS setting up its own commodity exchange is
beyond the scrutiny of the USA, as no US$ is being used enabling the
USA's ability to monitor who is trading with whom. And what this will do
to the USA and the West is the inability to cater to demands which they
are unable to monitor and influence the market.
The formation of
BRICS initially was just brushed aside as inconsequential and unable to
do anything to the entrenched US$ hegemony and settlement system. The
development of a BRICS system is now posing a threat to the US$. They
have taken their eyes off BRICS, like taking eyes off China for three
decades, and are now trying to correct a massive mistake that is now
impossible to contain.
Trump said in no uncertain terms that the
USA had ignored the de-dollarization move for years and he is now going
to punish countries that are dumping the US$ with tariffs. Desperation?
It is not going to work. Tariffs work against the implementer or its
own citizens. Nothing more.
Anonymous
Using sanctions do not punish USA citizens. Using tariffs will punish USA citizens, clear and simple. There is no escape from this reality, however Trump and his administration may try to spin it.
ReplyDeleteBut sanctions are not working as proven in Cuba, North Korea, Venezuela and above all in Russia, so a new form of punishment had to be devised. Trying to sanction China is going to backfire even more critically than Russia. Against Russia, only the EU suffered the full brunt of the backfiring. USA's dependence on Russia is not as widespread as China - from consumer goods to critical minerals and refining logistics.