Is the China-Brazil Trade Deal a Sign that the US Dollar is On Its Deathbed?

Early in March, Brazil and China announced a trade deal where they would be able to transact in their own currencies. In doing so, the two BRICS member nations are effectively circumventing the dollar. 

Mike Maharrey of Schiff Gold noted that under this new deal, “Brazil and China will carry out trade directly exchanging yuan for reais and vice versa instead of first converting to dollars.”

In a statement, the Brazilian Trade and Investment Promotion Agency (ApexBrasil) revealed that the trade deal would “reduce costs” and ” promote even greater bilateral trade and facilitate investment.”

Brazil is Latin America’s largest economy and China is Brazil’s largest trade partner. Trade between China and Brazil is roughly $150 billion annually. Curiously, China surpassed the US as Brazil’s primary trading partner in 2009.

Over the last year, more countries have been gradually weaning themselves off the US dollar. Saudi Arabia Finance Minister Mohammed Al-Jadaan revealed that the country is receptive towards discussing transacting in currencies outside of the US dollar.

In the last few years, a growing number of countries have taken steps to break their dependence on the US dollar. Trust in the dollar is dropping owing to excessive borrowing, spending, and monetary emission by the US government. The excessive use of sanctions by the US has also made countries scared of exclusively using dollars. 

Overall, the US’s dollar demand on the global stage props up its value. However, its reckless domestic and foreign policies will incentivize other countries to form parallel military and economic blocs to challenge its supremacy. 

At some point, US policymakers will have to recognize that their policies are destroying the dollar’s value both domestically and abroad. If they can’t, the US is destined for a slow yet grueling decline throughout the 21st century.

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