The Brazil-China agreement to ditch the US dollar in their trade is a significant move towards cutting the greenback’s sway worldwide. This agreement reveals that China is roping in more nations to employ the yuan and local currencies in foreign trade.
The weight of this agreement is further bolstered by the stature of both parties, with China holding the position of the world’s second-largest economy, and Brazil being the largest economy in Latin America. The trade value between them clocked around 150 billion dollars in 2022. The matter at hand goes beyond economics and involves other strategic aspects.
The waning of American clout, both economically and politically, is a conspicuous development that pundits concur on. It’s a telling sign of the inception of a new world order. The crux of the matter is how long it will take to construct a fresh global system and what its attributes and dominant players will look like.
It’s plausible that any erstwhile world-dominating global system was fashioned after significant upheavals that influenced its configuration and the influential forces within it, akin to the two world wars.
Nonetheless, the current situation is a singular experience that differs from antecedent historical periods, where the global system is coming together amid indirect clashes, cold wars, and multifaceted crises in non-military domains like the COVID-19 pandemic, the West’s US-led proxy war against Russia in Ukraine, and the rapid ascendancy of China’s economic, technological, and political clout.
It’s an arduous task to foretell how long it will take to establish a post-Ukraine system, contingent on the resolution of conflicts and competitions on numerous fronts. There’s a push to curtail the hegemony of the US dollar, a cut-throat trade war between China and the US to lead the advanced technology sectors, particularly in chips and semiconductors.
There’s an indirect Russian-Atlantic faceoff on Ukrainian land, and a fierce strategic rivalry between significant international powers in Africa and other areas of conflict and influence. The timeframe to fully oust the US from the helm is still a distant prospect.
Economically, we see that roughly 60% of the globe’s economies still cling to the dollar as a currency for financial reserves, while the bulk of global trade is still transacted in dollars.
We must bear in mind that China holds the largest chunk of US dollar reserves, which holds paramount significance concerning how urgently China strives to displace the dollar from its top position as a global currency for financial reserves. This move may not serve Beijing’s interests if it materializes at a time that doesn’t align with China’s calculations in this regard.
The attributes of the prevailing powers in the future world order and the configuration of this order, whether it will be established on bipolarity, multiplicity, or a single preeminent pole, continue to be an unfolding scenario that is hard to envisage, given the ongoing global interactions and the challenge of anticipating their trajectories and outcomes in the upcoming years.
Nonetheless, it’s certain that significant global powers like China, along with the presently dominant pole, the US, occupy two positions on the map of this forthcoming system, at least for a transitory duration. This indicates that the map will take shape with only these two rival poles or with the inclusion of other international poles to create a multipolar system.
Diminishing the impact of the US in diverse arenas like politics, economy, military, and security could accelerate the establishment of a new global system, but the timing and repercussions of these transformations are still uncertain.
Furthermore, the American response to these advancements will rely on their level and extent of influence and their willingness to preserve their power and superiority in the global order.
The author is an UAE political analyst and former Federal National Council candidate