NICHOLAS SHUBITZ: Trump may need Brics nations to help him fulfil campaign promises

Donald Trump is well known for being somewhat flexible with the truth, and his first weeks in office have done little to change that impression.

Having pledged to radically reduce the US budget deficit, reindustrialise the country and end the war in Ukraine within 24 hours, Trump is struggling to deliver on his promises. He may need help from the Brics bloc to achieve these ambitious goals.

While important progress is being made towards ending the war in Ukraine thanks to the US president’s willingness to engage with the Kremlin, Trump’s domestic policy objectives still face several obstacles that make their success less likely than an eventual settlement with Russia.      

For example, while he has in effect closed the US border, his promised mass deportations have yet to materialise. Only 37,660 individuals were deported during his first month in office, lower than the monthly average of 57,000 under his predecessor, Joe Biden, and the use of military aircraft for deportations has already been shelved due to the high costs involved. 

Trump has repeatedly expressed a desire to achieve a balanced federal budget. However, his Republican controlled House of Representatives has already approved a $4-trillion increase in the US debt ceiling as well as a continuing resolution to maintain spending at 2024 levels through September.

The US government has ended the fiscal year with a budget surplus only four times in the past 50 years and has just posted a record year-to-date deficit. The US budget deficit for the first five months of fiscal 2025 reached a record high of almost $1.2-trillion, including a $307bn deficit in February alone.   

While the new administration has boasted about pursuing reductions in the federal workforce, civilian government employees account for less than 5% of the federal budget. The department of education, which Trump has just ordered shut down, is the smallest cabinet level US government department, employing only about 4,000 staff.

At the same time, savings claimed by Elon Musk’s much-touted department of government efficiency (Doge) have also faced scrutiny. Reports are emerging that Doge has exaggerated savings, counted reductions multiple times and taken credit for programmes that have already expired, including two Coast Guard contracts concluded in 2005 and 2006 under George W Bush.

A substantial portion of federal expenditure (about 75%) is allocated to social security, Medicare, Medicaid, defence, veterans’ benefits, and interest payments on the national debt. Significant cuts to these programmes remain an unlikely prospect for obvious political reasons, limiting the scope for meaningful deficit reduction despite bold rhetoric from the administration.

Perhaps the boldest promise from all three of Trump’s election campaigns was that he would bring high-paying manufacturing jobs back to the US using tariffs. However, this pledge could prove the most difficult to fulfil. Since the beginning of his first term in office in 2016 manufacturing as a share of the US economy has fallen, to just 10% of US GDP.

Tariffs are unlikely to reindustrialise the US. They may even increase production costs by raising inflation, wages and the inputs to manufacturing. Higher interest rates could then make borrowing money to build factories more expensive and lead to a recession, which would reduce domestic demand and remove the incentive to increase domestic production capacity.

Combined with tax incentives and a weaker dollar, a co-ordinated industrial policy could theoretically help partially reshore some industries. However, this re-industrialisation process could take decades and would likely produce other negative economic effects.

Tax cuts for manufacturers could produce larger budget deficits and higher debt servicing costs necessitating more quantitative easing to monetise government debts. This could weaken the dollar, produce more inflation, lower consumption and lead to an economic contraction.

Trump has cast doubt on whether the US would defend Nato states that do not meet their spending commitments and a resurgent Russia plays into his hands. If the US pledged to only defend countries that spend 5% of their GDP on US military equipment this would boost US defence exports by as much as $1-trillion, offsetting most of the trade deficit. 

Trump has frequently condemned Nato members that do not meet the alliance’s 2% of GDP defence spending requirement and has already suggested increasing the mandatory contribution to 5%. That said, only five members, including the US, now exceed 3%, with Poland the only member that allocates more than 4% of GDP to defence.

As long as the US taxpayer funds Europe’s security there is little motivation for EU states to actually hit their Nato spending targets. Meanwhile, a negotiated settlement that leaves Russia in a strong position in Ukraine could encourage America’s Nato allies to purchase more US weapons systems to secure long-term US protection.   

Of course, there is still the issue of the US budget deficit, which could eventually see US spending cuts reach the Pentagon. If Trump is serious about balancing the budget he may need to reach agreements with China and Iran similar to the potential agreements being negotiated with Russia. In other words, agreements with the Brics could hold the key to smaller deficits.    

Trump has already publicly floated the idea of the US and Russia halving their military expenditure after ending what US secretary of state Marco Rubio now openly admits is a proxy war in Ukraine. Putin has expressed enthusiasm for the idea. A similar arrangement could be worked out with Beijing, with China perhaps purchasing more US treasuries and farm produce in exchange for the US lending its support for the reunification of Taiwan with the mainland.   

The Kremlin has also already offered to mediate talks between the US and Iran to restore the nuclear deal and reduce tensions in Asia. While Tehran remains sceptical of Trump’s intentions, removing the threat of a war in the Middle East could go a long way towards reducing the inflationary risks associated with such a conflict. This would certainly make it easier for the US to fund its twin deficits while attempting to reduce them.

• Shubitz is an independent Brics analyst.