Trump’s Tariff War
– N K Tripathi
Last Thursday US president Trump announced his whimsical, reciprocal import tariffs and called the occasion Liberation Day. He announced 10% general tariff on every country. Some high tariffs imposed are China 54%, Cambodia 49%, Laos 48%, Vietnam 46%, Sri Lanka 44%, Bangladesh 37% and EU 20%. India escaped lightly with 26% tariff with exemption on pharma, cars and its parts. China retaliated and struck back by imposing 34% tariff on America. China has come out swinging in response to Mr Trump’s levies, matching them with extra tariffs on American goods. That has sent markets into a nosedive again, and will only damage, among others , China’s economy further. The trade war has started.
The black Monday was a general mayhem in the world markets. The world markets, including US and India fell appropriately, sending shivers to big and small investors. Trump has inflicted carnage in markets around the world with his tariffs announcement. America may be causing the greatest harm to itself, but everyone else is suffering too.
Many countries and their economists are speculating on the possible course of international trade. Every country is calculating its own losses and the possible measures to deal with the crisis. A few other countries also retaliated like China, but largely most countries are reconciliatory and wait for Trump’s fury to subside. However, the real issue is not the fate of the trade but hovering black clouds of recession. The trade war of this dimension is bound to slow the GDP resulting in recession among the countries. Alarmed with the consequences to American economy, a vast section of American public is protesting. But MAGA fanatics are convinced that Trump is on the right path. They admire that American president will crush Wall Street.
There is no denying that since the second world war, America established a liberal world order of low tariffs, and as a result the world has seen unprecedented growth and prosperity, unknown in the history. America also prospered and eliminated all its rivals, including Germany, Japan and Soviet Union. But the continuous rise of China has unnerved America. The US has shaken China and the world to ensure China’s growth declines in the coming decades. The US wants to retain its supremacy.
The old cliche that every crisis is an opportunity may come true to India. fortunately, India’s trade with America is very small, only 2.2% of its GDP. Indian economy is not dependent on foreign trade. Yet India must strive hard to reach an early negotiation on tariffs with US. At the same time, India should revisit its entire protectionist policies and reduce tariffs. India should quickly negotiate very low tariff trade with East, North and EU. India should in real terms provide ease of doing business and investment by removing tax harassment and Inspector Raj. India has to show political guts for sweeping reforms in its archaic system of land and labour laws and utilise its cheap labour to emerge in the world.
