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The financial world is changing, especially with the emergence of the BRICS countries, which are actively trying to reduce their dependence on the US dollar. Their de-dollarization movement is reshaping trade dynamics. The move could also have direct implications for the United States’ national debt.
Impact of BRICS dedollarization on US debt
The de-dollarization strategy adopted by the BRICS aims to reduce their dependence on the US dollar. The BRICS account for more than 40% of the world’s population and about 25% of global GDP. A de-dollarization movement initiated by the alliance could reduce the overall demand for the dollar, thereby negatively affecting the ability of the United States to finance its debt through traditional economic means.
As BRICS expands its influence and adds new members, its preference for an alternative to the dollar is gaining ground. Falling demand for the dollar may cause interest rates on US bonds to rise. This scenario could worsen the already precarious US debt situation.
By reducing their exposure to the dollar, the BRICS countries could force the United States to rethink its debt financing strategies. If the dollar loses its primacy as the world’s reserve currency, it could limit the United States’ access to cheap capital, which is essential to finance its budget deficit and rising debt.
Impact of BRICS trade balances on the US economy
China, an active member of the BRICS bloc, maintains a significant trade surplus with the United States, exacerbating the US trade deficit and indirectly increasing the national debt. This imbalance causes the United States to spend more on Chinese imports than it earns on exports to China. This situation increases the movement of dollars out of the United States and strengthens the Chinese economy at the expense of American debt.
Brazil and India, also in BRICS, have become important trading partners of the United States. Changes in the trade policies or economic conditions of these countries can directly affect the trade deficit of the United States. A deterioration in the US trade balance with these countries could further worsen the US debt.
The rise of the economic and trade power of the BRICS countries is rearranging the currents of world trade. If this trend continues and the United States imports more from these countries than it exports, it could lead to continued growth in its foreign debt. These dynamics are putting pressure on the already heavily indebted US economy and underscoring the urgency of deep structural reforms.
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A graduate of Sciences Po Toulouse and holder of the blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.
DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.