From Tariffs To Trade Blocs: Why BRICS Now Matters More Than Ever

Trade & Policy

From Tariffs To Trade Blocs: Why BRICS Now Matters More Than Ever

BRICS - now a 10-nation bloc comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the UAE - is emerging as a consequential trade axis for India’s textile and apparel industry. This is no longer peripheral exposure. Today, BRICS markets account for nearly 12.5% of India’s total textile and apparel exports, a share that is strategically significant.

India’s textile and apparel exports to BRICS surged 21.4% to ₹36,535 crore in FY24, before moderating by around 5% to ₹34,647 crore in FY25. The pullback reflects demand volatility, not a structural retreat. Within the bloc, the UAE, China, Brazil, and Egypt have become India’s most important destination markets for textiles and clothing.

At the same time, India’s textile and apparel imports from BRICS rose 6.9% to ₹36,854 crore in FY25, reinforcing the bloc’s dual role as both a market and a sourcing base. China, Indonesia, Brazil, and Egypt remain key suppliers, particularly in yarns, fabrics, and intermediate inputs.

What is accelerating BRICS’ relevance is geopolitics. Washington’s tariff aggression has unintentionally strengthened the bloc, creating a shared incentive among BRICS members to reduce exposure to the U.S., even where political agendas diverge.

The response is already visible. BRICS countries are expanding bilateral trade in national currencies, steadily reducing reliance on the U.S. dollar. In parallel, BRICS central banks have sharply increased gold purchases, a clear signal that de-dollarisation is moving from rhetoric to policy.

Nine ASEAN countries move toward BRICS currency adoption

In 2026, nine ASEAN countries - Brunei, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam - reached a joint understanding to accept a future BRICS currency, even before its formal launch. Growing unease over dollar dominance, sanctions exposure, and U.S. policy unpredictability is driving this alignment.

With Indonesia now a full BRICS member, nearly 19 countries could adopt the BRICS currency for trade. Including 13 BRICS partner countries, the push toward de-dollarisation reflects a broader realignment, one that is quietly but steadily shifting financial influence eastward.

RBI pushes digital de-dollarisation

India is positioning itself at the centre of this shift. The Reserve Bank of India has urged the government to place a proposal to link BRICS central bank digital currencies (CBDCs) on the agenda of the 2026 BRICS summit, to be hosted by India. The plan aims to connect CBDC systems to ease cross-border trade and tourism while reducing dollar dependence, marking the first formal attempt to create a shared BRICS CBDC framework.

While no BRICS nation has fully rolled out a CBDC, all core members are running pilots. India’s e-rupee, launched in December 2022, reportedly has 7 million retail users, supported by offline payments, programmable subsidies, and fintech wallet integration. China, meanwhile, has pledged to expand the digital yuan globally and is reportedly allowing commercial banks to pay interest on digital-yuan holdings.

Why BRICS is moving away from dollar-based trade

BRICS economies are increasingly exposed to U.S. monetary policy and sanctions. Federal Reserve rate hikes and Washington’s tariff decisions transmit shocks across emerging markets. Russia’s post-Ukraine isolation and Iran’s long-standing exclusion from dollar systems demonstrated how swiftly access to SWIFT and dollar liquidity can be weaponised. Reducing dollar dependence has become a question of economic sovereignty.

Dollar-intermediated trade also imposes real costs. Multiple currency conversions add 3–5% per transaction and amplify exchange-rate risk. Direct settlement delivers scale benefits: China–Russia trade has already cut transaction costs by 2–3%, a material saving on nearly US$190 billion in annual trade.

Beyond cost, local-currency trade reduces exposure to dollar volatility and stabilises pricing. Early evidence from China-Russia transactions shows contract price volatility falling by nearly 25% versus dollar-denominated deals. With friction reduced, intra-BRICS trade, currently about US$ 500 billion, has the potential to scale far faster than under dollar-routed systems.

How BRICS local-currency trade works

BRICS is not rushing toward a single currency. Instead, it is advancing de-dollarisation through bilateral currency swap agreements, allowing trade to be settled directly in local currencies. These swaps establish pre-agreed exchange rates and central-bank credit lines, removing the dollar from transactions. China has led this effort; its swap arrangement with Brazil now covers nearly 30% of bilateral trade.

On the infrastructure side, China’s CIPS and Russia’s SPFS provide alternatives to SWIFT. The New Development Bank (NDB) underpins the system by offering liquidity and settlement support, helping members bypass Western-led institutions such as the IMF and World Bank.

Constraints and caution

Local-currency trade within BRICS faces hard structural limits. As one analyst put it bluntly, “These are disparate economies—there’s a long way to go before they can be married.” China’s economic dominance creates asymmetries in liquidity and pricing power. Russia remains resource-centric, India more diversified, while newer members add further complexity. Designing fair exchange mechanisms across such uneven profiles is inherently difficult.

Institutional barriers compound the challenge. Financial systems built around the dollar operate on incompatible standards, regulatory regimes, and settlement timelines. Aligning payment protocols, risk frameworks, and compliance rules requires sustained technical coordination, especially for smaller economies.

BRICS policymakers are acutely aware of the Eurozone’s cautionary tale. As one observer noted, attempts to bind structurally mismatched economies without fiscal integration or shock absorbers were “flawed from the start.” The lesson is clear: avoid premature monetary union.

Instead, BRICS is pursuing a building-blocks strategy. Local-currency trade is the pragmatic starting point, preserving policy autonomy while testing interoperability. As one commentator put it, “Until those foundations exist, debating a BRICS currency is premature.”

The New Development Bank and the BRICS financial playbook

The New Development Bank anchors BRICS’ financial strategy. Launched in 2015 with US$ 100 billion in capital, it was designed not just to fund infrastructure, but to build an alternative financial ecosystem. Beyond lending, the NDB supports local capital markets, payment systems, trade finance, and currency settlement.

Alongside the US$ 100 billion BRICS Contingent Reserve Arrangement, it provides liquidity without IMF-style conditionalities, giving members strategic autonomy. While the dollar still dominates, BRICS local-currency trade represents the first serious post-Bretton Woods effort to construct parallel financial channels. As one analyst observed, “Trump’s response shows how seriously Washington views BRICS de-dollarisation.”

BRICS economies are increasingly exposed to U.S. monetary policy and sanctions. Federal Reserve rate hikes and Washington’s tariff decisions transmit shocks across emerging markets. Russia’s post-Ukraine isolation and Iran’s long-standing exclusion from dollar systems demonstrated how swiftly access to SWIFT and dollar liquidity can be weaponised. Reducing dollar dependence has become a question of economic sovereignty.

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