The America-Led G-7 Faces the BRICS
The Group of Seven—comprising Canada, France, Germany, Italy, Japan, the UK and the US—has seen its unity of purpose deepen since Russia’s 2022 invasion of Ukraine. The developed-economy grouping has imposed a price cap on Russian oil, sanctioned its companies and also those that help Russia skirt the restrictions, frozen Russian assets, and poured billions of dollars in aid and loans to Ukraine to fund its war effort. The gloves are off on China, too, with G-7 finance ministers condemning what they called in a joint statement China’s “comprehensive use of non-market practices that undermines our workers, industries and economic resilience.”
But if the G-7 thought the rest of the world would fall in line, it had better think again. The BRICS cluster of emerging economies has found a new lease on life. What started as an acronym for Brazil, Russia, India and China, dreamed up by a Goldman Sachs Group Inc. economist in 2001, has evolved into a real-world club as those nations seek more influence on the global stage—and perhaps protection against the kind of muscle the G-7 has flexed against Russia.
South Africa—the “S” in the acronym—joined in 2010. At last year’s BRICS summit, Iran, the United Arab Emirates, Ethiopia and Egypt joined, and the expansion won’t end there. Saudi Arabia is studying an invitation to sign up, and Nigeria, Malaysia, Thailand and Tunisia are among those that have expressed interest in doing so. Underneath the BRICS umbrella, bilateral tensions—such as border disputes between India and China—remain. This hasn’t halted the push for economic cooperation: India’s latest annual economic survey touts the benefits of attracting Chinese investment to boost manufacturing capabilities.
A Harris victory would likely see the US continue its efforts to shape the global agenda through the G-7 while seeking warmer ties with some BRICS members, such as India, to counter Chinese influence. A second Trump presidency may signal the return to a more transactional approach to foreign policy—something that aligns with the BRICS’ vision that promotes multipolarity and issue-based cooperation while deemphasizing alliances, says Mihaela Papa, director of research and principal research scientist at the Center for International Studies at the Massachusetts Institute of Technology.
The most tangible achievements of the group have been financial. The countries agreed to pool $100 billion of foreign currency reserves, which they can lend to one another during emergencies. Greater integration could be made if the group can develop an international payment mechanism and a grain exchange. But even without those steps, the BRICS’ quicker economic growth rates will spur its generally less democratic and less market-orientated players to make up a growing share of the world economy.
Japan and South Korea Reconsider China
In a rare case of US bipartisanship, China is firmly in both Republicans’ and Democrats’ protectionist crosshairs. This leaves some Japanese and South Korean technology companies with a lot to lose in the way of China sales if they’re forced to comply with ever more stringent controls on chip-related exports the US imposes.Leaders in Japan remember that its own chip industry was hobbled in the 1980s by US demands to limit its exports of semiconductors. In those days, Trump was railing against Japan’s industrial policies rather than China’s.
Korea’s Samsung Electronics Co. and Japan’s Toyota Motor Corp. have stepped up investment in US manufacturing in response to President Joe Biden’s industrial policies. But there are also signs that Japan and Korea are hedging their bets. Their leaders met with Premier Li Qiang, China’s No. 2 official, in May at the first formal three-way summit since 2019, detailing plans to keep trade and investment on track, strengthen cooperation on supply chains and accelerate talks on a free-trade agreement.
Trump as president in 2019 criticized the US alliance with Japan and continues to decry what he sees as an unequal security burden. He’s also denounced the cost of the US alliance with South Korea. If Trump reclaims the White House, leaders in Seoul and Tokyo will find themselves squarely between an increasingly powerful continental neighbor that both count as their top export market and a distant, unpredictable ally. Japan and South Korea will remain close to the US and skeptical of China’s might. But economics will be “fundamental to the direction of travel,” says Richard McGregor, senior fellow for East Asia at the Lowy Institute think tank in Sydney. If the Chinese economy recovers from its current slump and the US falters, the two countries “will face a lot of uncomfortable choices.”
Lula Redux Takes On the Milei Model
When Luiz Inácio Lula da Silva defeated the “Trump of the Tropics” Jair Bolsonaro in late 2022, his return to Brazil’s presidency capped a run of election victories for left-wing candidates in Latin America. Two years later he’s trading jabs with a libertarian newcomer in neighboring Argentina, Javier Milei. Whoever comes out on top could claim ideological leadership of the region, potentially setting the tone for votes in, Bolivia, Chile and Ecuador.
Lula has struggled to recapture the golden years of his two prior terms from 2003 to 2011. He’s feuded with the central bank chief and the state oil company, Petrobras, while the commodities boom he once rode to economic success has faded. With the US-China rivalry sweeping up the rest of the world, Lula has been sitting awkwardly somewhere in the middle. Political polarization is rife. With Lula barely a week in office, Bolsonaro supporters rampaged through Brasília. But Lula received an unexpected lift as Brazil’s economy posted a strong second quarter in 2024. This will ease the pressure on his government to introduce growth-boosting fiscal measures, says Adriana Dupita, who covers Brazil and Argentina for Bloomberg Economics.
Milei, after storming to the presidency in October last year on a platform of slashing the state to tame inflation of almost 300%, has enacted a punishing austerity program. Consumer spending tanked, and unemployment climbed, as real pensions and public wages have been cut. More than half of Argentines now live below the poverty line. Yet he’s continued to poll strongly with voters incensed by decades of economic mismanagement. Monthly inflation, which reached a three-decade high of 25.5% in December when Milei took office, tumbled to 4% in July.
If Argentina could pull off a rebound and Brazil slowed, it could boost Milei’s international profile. “But I don’t see Milei leveraging that to increase trade or economic ties,” Dupita says, noting that he ditched plans to join the BRICS—whose conference Lula will welcome to Brazil in 2025—and snubbed a summit of the Mercosur trade pact. “In that sense, too, he’s the opposite of Lula, who would definitely leverage any international prominence to expand his influence within the global south.”