The BRICS alliance wants its local currency to flow directly to the trading party and not the US dollar. “For every time you do a transaction in the dollar, there is a hidden cost that goes back to the US,” said Sanusha Naidu, a foreign policy analyst at South Africa’s Institute for Global Dialogue.

The analyst explained that BRICS countries are now thinking that using the USD is costing them extra money. “Why must we pay the US that cost?”. The trade transactions are first converted from local currencies to the US dollar. Then the receiver converts the USD to their respective national currency. Both parties risk losing revenue in the conversion exchange rate while the US benefits.

BRICS wants the money to flow directly in local currencies and not lose out on revenue using the US dollar. This puts unruly baggage on both parties as the USD is being forced into their transactions. If the money flow is direct, the cost extracted from the exchange rate is saved. In addition, using local currencies for trade also strengthens their economy, making businesses thrive.

Also Read: BRICS: Indian Railway Explores De-Dollarization, to Swap USD for Franc

BRICS: Local Currency a Must, US Dollar Optional

Danny Bradlow, a professor with the Centre for Advancement of Scholarship at the University of Pretoria, stressed that BRICS could continue pursuing local currency usage and not the US dollar even after Trump’s tenure. The long-term goal is to cut dependency on the greenback and let local currencies rule the roost.

“But even without Trump, many people around the world (BRICS) – even in the West – would say that the role of the US dollar is a problem,” Bradlow argued. “Having a system that’s so heavily dependent on the dollar means vulnerability to US monetary and economic policies.”

He added that BRICS could make the monetary system so diversified that the US dollar plays a lesser dominant role. “Shifting to a system that is more diversified or more internationalized in some way but not subject to one country’s control would be more acceptable to everyone,” he said.