Families in northeastern Afghanistan have been devastated by last Sunday's earthquake. Credit: IOM

By Monica Hirst
RIO DE JANEIRO, Brazil, Sep 4 2025 (IPS)

Since January 2025, Donald Trump’s second presidency has been focused on securing the global supremacy of the United States. It justifies a package of international coercive and intimidatory measures, accompanied by an aggressive, arrogant rhetoric. Right at the outset, the new administration announced a veritable tsunami of tariffs and immediately implemented them as a sign of its new independence.

This demonstrated Washington’s willingness to turn access to the US market into a challenge fraught with uncertainty and protracted bilateral negotiations. This massive blow to the global trading system affects all of the United States’ economic relations – including those with Brazil.

In addition to a general 10 per cent increase in all tariffs on US imports, a differential treatment policy for countries and regions was introduced based on varying and sometimes opaque criteria. The US President interprets the need to combat the American trade deficit as a national emergency that justifies the imposition of counter-tariffs.

By August, 94 countries were already affected by this contentious policy. Some, including Vietnam, South Korea, the United Kingdom and the European Union, managed to reach tariff agreements, but only at the cost of various concessions and often significant losses.

An ideology-driven policy

In the first few months of Trump’s term in office, Brazil kept a safe distance from Washington’s coercive measures. The Lula government managed to continue its active and self-confident foreign policy.

Brasília’s claim to influence, whose voice is heard on issues of global governance, was bolstered by its role as host of high-level multilateral meetings held this year, including the G20 summit, the meeting of BRICS heads of state and government, and, before long, the COP30 world climate conference.

Relations with China, Brazil’s most important trading partner, accounting for 28 per cent of Brazilian foreign trade, also gained new significance; both sides signed 36 agreements on a wide range of economic, technological and cultural issues.

While the Lula administration sought dialogue with the White House to address the consequences and potential damage of the new US tariff policy – as Brazil’s second-largest trading partner, the United States accounts for 12 per cent of the country’s exports – it was only a matter of time before the US administration’s aggressive stance on trade and tariffs would have an impact on Brazil’s economy.

On 18 July, the American government informed President Lula da Silva in a letter that tariffs of 50 per cent would henceforth be levied on imports from Brazil, marking the start of a heated exchange with the Planalto, the seat of the president’s government.

By executive order, Trump imposed an additional 40 per cent tariff on Brazilian imports, supplemented by a list of 700 exceptions.

The justification for increasing tariffs to offset the bilateral trade deficit proved unfounded, as the trade balance has consistently shown a surplus in favour of the United States for more than 15 years.

Additionally, the American president’s letter went beyond trade policy arguments and addressed political issues related to the court proceedings against former President Bolsonaro and the rulings of the Brazilian Supreme Federal Court (STF), which affect the interests of US digital platform companies.

Lula’s government perceived the letter as ‘unacceptable blackmail,’ leading to growing tensions that were exacerbated by repeated public statements by the US president and his staff. Value judgements were made about Brazilian democracy and its institutions, and the priorities of Brazilian foreign policy were called into question, including the organisation of the BRICS, which Brazil currently chairs.

This was followed by an investigation by the Office of the United States Trade Representative (USTR) based on Section 301, which allows unilateral retaliatory measures to protect national interests. By executive order, Trump finally imposed an additional 40 per cent tariff on Brazilian imports, supplemented by a list of 700 exceptions.

The Trump administration also began to question the competitive conditions for North American companies in Brazil, attacking the PIX instant payment system and criticising environmental policy, anti-corruption policy, the handling of digital platforms and the effects of preferential trade agreements with third countries.

Right-wing circles seized the opportunity to blame Lula for the escalation with Washington.

A further boost to this ideologically motivated campaign came from the close ties between individual actors and political organisations on the American and Brazilian far right, particularly between Trumpism and Bolsonarism.

The influence of the United States in Latin America, especially in Brazil, is not a new phenomenon, but in this case it took on a new form: Digital media channels were mobilised in coordination with the ideological crusades of the local right against the institutions of the Brazilian republic — especially the judicial system.

Creating fault lines between Brazil’s political forces, exacerbated by the real economic costs that the tariff shock entailed for Brazilian industries. Right-wing circles seized the opportunity to blame Lula for the escalation with Washington.

The timing of Trump’s tariff shock, coinciding with the court ruling against former President Jair Bolsonaro – for his responsibility in the attempted coup in 2023 – further fuelled the fire. The Magnitsky Act was instrumentalised to sanction STF judges and stylise Bolsonaro as a victim of human rights violations in the eyes of Trumpists.

At the same time, Washington rejected the dispute settlement mechanisms of the World Trade Organisation, justifying this with security policy arguments that increasingly dominate Trump’s narrative.

Trump’s criticism of Brazil’s international policy is also becoming increasingly vocal in this context. The political steadfastness and keen sense of economic opportunity that have characterised Lula’s foreign policy to date will be powerless against the thorny and delicate prospects in the short to medium term.

The country’s right to determine its position in the world autonomously is being called into question. The Planalto’s response to the repeated political coercion of Trump’s tariffs is based on the inseparability of sovereignty, autonomy and the defence of democracy.

Alternative partnerships

The Brazilian government does not see this as a lonely crusade, but is increasingly seeking partners and allies in all directions. Opening the doors to Japan, Indonesia and Vietnam is intended to add further counterweights to the connection with China and better link the Brazilian economy with the dynamic Asian value chains.

At the same time, Brasília is focusing on dialogue with India – a key partner in the BRICS – on issues of global governance, investment, agribusiness and digital technologies. Within the region itself, the aim is to overcome the inertia that has long prevented greater progress in relations between Brazil and Mexico.

The Trump nightmare is a strong incentive to overcome the mutual indifference that has stood in the way of sustainable cooperation between Latin America’s two largest economies. As far as European countries are concerned, Brazil is keen to expand the agenda of common interests at the bilateral and multilateral levels.

The European Union is currently one of Brazil’s most important trading partners, with a trade volume of over nine billion dollars. Of particular note is the Brazilian government’s commitment to concluding the long-delayed EU-Mercosur agreement, driven by the need to expand common interests and opportunities in areas such as energy transition, technology and strengthening multilateralism.

Closer cooperation with the world’s democracies is taking on new significance – as a safeguard for the rule of law in Brazil itself.

So far, the European Union has treated the BRICS and the Global South with palpable scepticism and has avoided acknowledging their contributions to negotiations on international policy issues. Instead of taking note of the neutral and pragmatic positions and initiatives of many states, the EU is dominated by the interpretation – shared by Trump – that these are anti-Western groups.

It would be a mistake not to develop a dialogue with the emerging powers of the South to address issues such as the genocide in Gaza, an understanding with Iran or a just peace between Russia and Ukraine.

Even if this does not reduce the costly strategic dependence on the US in the short term, these steps would enable European governments to engage in inclusive and constructive projects on the changing world stage.

Undoubtedly, the Lula government would be the first to support moving the political game in this direction. Closer cooperation with the world’s democracies thus takes on new significance – as a safeguard for the rule of law in Brazil itself.

Monica Hirst is a research fellow at the National Institute for Science and Technology Studies in Brazil.

Source: International Politics and Society (IPS), Brussels

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The US dollar's supremacy in the international financial system has long been beyond question. But countries like Brazil are attempting to break away.

By Monica Hirst and Juan Gabriel Tokatlian
RIO DE JANEIRO, Brazil / BUENOS AIRES, Argentina, May 17 2023 (IPS)

Half a century ago, the dominance of the United States dollar in the international finance and trade system was indisputable.

By 1977, the US dollar reached a peak of 85 per cent as the prevailing currency in foreign exchange reserves; in 2001, this position was still around 73 per cent. But today, it is at approximately 58 per cent.

The dominance of the dollar and the hegemonic position of the United States have for long been intertwined. And the recent global transformations are affecting American’s ability to sustain this: the gradual movement of the centre of gravity from the West to the East, the unravelling complexities of US domestic politics, the growing muscle of the international projection of China and an international assertiveness among the countries of the Global South have restrained the American dollar’s supremacy and status.

And yet, the currency still holds by far the largest share of global trade, foreign exchange transactions, SWIFT payments and debt issued outside the United States. In fact, Western financial agents, government officials and renowned experts tend to downplay the so-called de-dollarization arguing that a relatively debilitated dollar doesn’t necessarily mean its demise.

Notwithstanding controversial standpoints, it is undeniable that the world system faces more complex, diverse and plural challenges that involve currency competition and new inventive financial pathways.

Resistance against the US Dollar

The so-called de-dollarization in global finance has its landmarks. The launch of the Euro in 1999 was crucial since the European currency, by now, represents 20 per cent of the global foreign exchange reserves. By the dawn of the 21st century, an Asian Currency Unit came to life as well: it represented a salad bowl of 13 currencies from East Asian nations (ASEAN 10 plus Japan, China and South Korea).

Along with the successful spill overs of economic regionalisation, Western-led geopolitics also came to be a source of global financial novelties that affected the US dollar’s pre-eminence.

The growing recourse to a sanction regime against countries such as Iran, especially since 2006, and Russia after the 2014 annexation of Crimea, encouraged alternative currency arrangements. As of today, Washington’s sanctions policy punishes 22 nations.

The invasion of Ukraine by Russia in 2022 and the extension of sanctions hampering the use of the US dollar encouraged even more de-dollarized practices. In response to the decision to disconnect Russia from SWIFT, Moscow advanced bilateral fuel transactions with partial payment in Rubles.

Simultaneously, Russia and a group of African countries initiated talks to establish settlements in national currencies, discontinuing both the US dollar and the Euro. Meanwhile, China is trying to insulate itself from the West and is attempting to internationalise the Renminbi, even though it represents less than 3 per cent of the official reserves worldwide.

Moscow and Beijing are coming closer in terms of financial cooperation, France and Saudi Arabia agreed to use the Renminbi in certain oil and gas deals, while Bangladesh became the 19th country to commerce with India in Rupees.

Last but not least, a gold rush is also picking up. As Ruchir Sharma has recently observed, key buyers are now central banks, which are procuring ‘more tons of gold now than at any time since data begins in 1950 and currently account for a record 33 per cent of monthly global demand for gold […] and 9 of the top 10 are in the developing world.’

Besides, some African nations seem willing to trade in currencies backed by rare-earth metals. In the Global South, in fact, there is a growing perception that de-dollarization is a step towards a multipolar world in which new actors, interests and rules interplay. In that sense, it is becoming evident that a multi-currency trading regime is slowly emerging.

How Brazil ‘de-dollarizes’

De-dollarization has been included in Brazil’s foreign policy strategy. Since the inauguration of his third mandate, President Lula da Silva rapidly disclosed the intention of overcoming his discrepancies with Western rule-setting. An adjourned narrative that contests the Global North’s preponderance in the World Order has resurfaced.

Demands for inclusive reforms in global governance, the condemnation of geopolitical worldviews leading to securitised methods and military escalation, and the questioning of the Dollar’s dominance in international trade and finance have arisen. In the present context of tensions and rivalries between the Great Powers, Brazil strives to speak of an autonomous voice of the Global South.

And thus, Lula has tried to promote peace in Ukraine on the basis of negotiations that recognise the voices of all parties involved in the war.

Lula’s de-dollarization standing has been stimulated by Brazil’s association with the BRICS, as well as its expanded bilateralism with China. The continuously record-breaking Brazilian-Chinese trade relationship reached a peak of $150,5 bn in 2022 (while the Russia-China trade relationship for the same year was $190,2 bn).

As bilateral ties are expanding further, during Lula’s recent state visit to China, novel settlements are being negotiated, aiming to put trade and financial operations on track directly with Chinese Renminbi and Brazilian Reais.

Concurrently, the Brazilian government has decided to use the New Development Bank (NDB), the BRICS’ multilateral bank, as a platform to defend a de-dollarized trade system among its members and with the countries that benefit from NDB credit lines.

By positioning former Brazilian President Dilma Rousseff as the head of the bank, Lula has upgraded the Brazilian political commitment to this frontline. Most certainly, this will become a reiterated pledge in Brazil’s performance in global governance arenas, with mention to its 2024 presidency of the G20.

It is remarkable how the Lula government has sought a prudent strategy balancing its anti-dollar hegemony signals among its BRICS partners with a constructive presence in a dollar-dominating terrain such as the Interamerican Development Bank (IDB).

By holding the presidency of the IDB since last December, supporting the candidacy of Brazilian ex-IMF official Illan Goldfajn, Brazil has stretched its footprint in international finance from Washington to Shanghai.

Beyond Brazil

Brazil has made a first attempt to bring in the de-dollarization card to its South American neighbourhood, particularly together with Argentina. Last February, bilateral talks took off to begin working on a common currency project that could reduce reliance on the US dollar. This could mean ingraining de-dollarization within the MERCOSUR area.

Following Brazil’s example, Argentina has started to consider the use of the Renminbi in its trade with Beijing. For Brazil, these are moves that could, step-by-step, lead to a regional financial terrain with relative distance from US dollar dominance. However, ongoing macroeconomic turbulences in Argentina, together with an extremely low level of foreign exchange reserves, will surely obstruct these plans in the short term.

Besides, more than two will be needed to tango. If a sustained economic recovery of Argentina takes place, Brazil will need to assure the support of extra-regional, heavyweight, non-Western actors, particularly China and India, in investment and trade flows to trigger a renewed insertion of MERCOSUR into the world economy.

De-dollarization could become a part, among others, of a dynamic reconfiguration of financial and productive intersections of Brazil and its neighbours with other regions and economic powerhouses of the global economy. Needless to say, this is a long-term strategy. The key consideration is the role of South America, that, in the near future, may play into the promotion of a multi-currency trading regime.

For now, while a strident flag of Lula’s presidential diplomacy, Brazilian ties with the US Dollar can be reduced but remain of unquestionable relevance. Decision-making in Brazil is conducted by a complex inter-ministerial web responsible for the states’ international sector that cannot avoid the influence of key production segments in the private sector.

Thus, transforming the Brazilian international financial modus operandi will depend on major accommodations that cannot overlook a broad domestic negotiation process, particularly if conjoined with the strengthening of democracy.

Monica Hirst is a research fellow at the National Institute for Science and Technology Studies in Brazil; Juan Gabriel Tokatlian is Provost at the Torcuato Di Tella University, Buenos Aires, Argentina.

Source: International Politics and Society (IPS), published by the Global and European Policy Unit of the Friedrich-Ebert-Stiftung, Hiroshimastrasse 28, D-10785 Berlin.

IPS UN Bureau

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