Trade war theatrics between the US and China are roiling global markets after US president Donald Trump finally imposed tariffs worth $50 billion on Chinese goods with the latter retaliating with its own $34 billion-worth of trade tariffs on US goods. These American tariffs are in addition to the sweeping 25% tariffs on steel and 10% on aluminium. China’s reactionary tariffs are on agricultural products and motor vehicles. It has promised another $16 billion worth of tariffs to follow soon.
Caught in the cross-hairs is India who is evaluating her own $300 million worth of tariffs on American imports.
Donald Trump came to power promising to make America great again. Part of the promise was to reduce dependence on all things foreign. He promised controlling immigrant influx in to the USA, bring back manufacturing jobs from China and services jobs from India.
In Trump’s world view, America had ceded its dominant role in the world economy by giving too many concessions for trade that benefitted corporations more concerned with the bottom-line than concepts such as nationhood. Part of his drive is also to curb big businesses who have distributed supply chains across the world in a manner to exploit favourable tax rates in offshore havens in order to pay least amount of tax. Trump has directly attacked technology giant Amazon for paying ‘little or no tax’.
In Trump’s world, the global supply chain is responsible for a great many ills, from jobs moving offshore, to tax moving offshore. And, much of what he is doing, is to increase the cost of offshoring, and therefore keeping the jobs, and taxes in America.
What may seem like random madness to the rest of the world is part of his worldview. And that worldview is borne out of a sense that American interests have dwindled and American power has diminished in a globalised economy.
Since his surprise victory in November 2014, he has been making good on his promises. Immigration into the United States has been severely tightened. H1-B visas for skilled individuals have virtually dried up. And, now comes the assault on global trade. So far, Trump has announced tariffs on, apart from other products, steel and aluminium. He has announced tariffs on goods from China. He has threatened tariffs on Mexico, Canada, and the European Union.
The world economic order is reeling under the assault of Trump’s personality. It has been a long time since modern world has seen a leader who has scant concern for international diplomacy. There is no trace of diplomacy in Trump’s approach, nor is there any seeming desire to want to negotiate. It is a ‘my way or the highway’ approach. This puts rest of the world in a great dilemma.
The new world order is built on an international system of negotiation and consensus. How do you deal with someone who isn’t interested in any of those? Also, if other nations even try and reason with Trump, they will look like they have bowed down to his excessive machismo making their positions back home untenable.
With the trade war rearing its uglier head in the coming days, it is likely to impact the end consumer -- us. While we may substitute products from other nations, it is the integrated global supply chains where the maximum impact is going to be felt. Tax will be applied on components that go in to making larger products, leading to both profits of corporations getting depressed and prices of goods going up. Inflation is bound to follow.
His personality may blind us to the obvious, but Trump’s policy insofar as immigration, trade, and taxes should not be seen in isolation but as part of a holistic campaign ‘To make America great again’.
That it is not going to achieve those objectives is something that will only be understood after the damage is done.
Harini Calamur works at the intersection of digital content, technology, and audiences.