Lol I just posted this, I need to check the news comm more before I post.
I’ll just drop my comment here: if the first BRICS transaction without the dollar occurs before the end of 2025, then China has an opportunity to significantly reduce trade with the dollar in retaliation for this war.
This is a major redline that the US is going to overstep, but China probably wouldn’t want to throw the world into a major recession for this since no one would benefit. The US is probably banking on keeping up trade with China should they send their navy into the SCS along with their “allies.”
But this hinges on whether or not China and associated BRICS trade partners can actually carry out transactions without the dollar.
My expectation is that China would just focus on BRICS and trade with developing countries outside the dollar. I don’t really see why China would care all that much whether G7 economies go into recession as result of the US attacking China. In fact, this would likely force at least some G7 members to break with the US or see their economies collapse.
I don’t really see why China would care all that much whether G7 economies go into recession as result of the US attacking China.
Everyone’s economy is connected, when the US went into recession in 2008 the world went down with it. That’s the problem with having a single reserve currency (this is eventually going to change but as for now that’s the reality). If that currency’s respective country shits the bed, then everyone else that relies on it for transaction will shit the bed too.
Obviously China doesn’t want a repeat of 2008 so it’s a toss up on whether they’ll quit trading with the US to pressure them to pull out of the SCS (and hurt the rest of the world in the process) or continue trading so that the world doesn’t enter a recession.
The big question is whether dedollarization is remotely feasible by the time the operation takes place.
Everyone’s economy is connected, however as Russia showed already, it’s entirely possible to decouple for hostile economies. It’s also worth noting that China is very much aware of the dangers here and have been massively diverting their trade away from G7 https://asiatimes.com/2024/05/2-words-explain-china-export-surge-global-south/
If China stops trade in dollars, then other countries will just start using yuan, or perhaps the BRICS currency will go online by then. Either way, this is not an insurmountable problem by any stretch of imagination.
Meanwhile, what ultimately matters is the relative damage to BRICS vs G7 economies. This is also what we’re seeing playing out with the economic war on Russia where G7 economies are coming out worse off and as a result we’re already seeing a lot political instability in Europe.
