Trump’s way of doing business

On June 2 President Donald Trump imposed across-the-board “reciprocal” tariffs on countries which included US allies as well as its competitors and adversaries. He had been threatening to do so during his election campaign and had reiterated his warning after winning the election and thereafter assuming office. His rationale was that almost all countries had imposed very high tariffs and other non-tariff barriers which effectively made it very difficult for a wide range of US products from entering their markets. On the other hand, the US had an open system which permitted easy entry of foreign goods into the US with very low tariffs being imposed on them. This, he argued, was grossly unfair.

Apart from wanting to expand US exports Trump’s purpose in pursuing the imposition of reciprocal tariffs is to enhance US manufacturing. He believes that many foreign and even US owned companies will move their manufacturing facilities to the US to avoid the enhanced tariffs.

While the Ministry of Commerce has stated that it is examining the impact of Trump’s move of imposing 26% tariffs on Indian exports to the US (there are exceptions though; for instance, Trump has exempted a range of Indian generic drugs which, according to a media report, US imports amounting to $9 billion in value) major exporters to the US such as China, EU and Japan have expressed disappointment and anger at Trump’s moves. They have warned that his step would damage the global economy. China has indicated that it would take counter-measures by both increasing tariffs on US products as well as through banning the export of critical materials such as rare earths which US industry needs. No one knows how the global commerce situation will really unfold in the coming months if the Trump move holds. No one also knows exactly how US consumers will react to the rise in prices of some of the products they use. On their part members of the Trump administration have cautioned the US public that they would need to bear temporary pain for long-term good.

Experts in the fields of international commerce and economy will give their anticipations and assessments of the impact of Trump’s reciprocal tariffs from their respective standpoints. This matter will be discussed thread bare in the boardrooms of companies, big and small, who export goods to the US. On his part this writer wishes to firstly examine this move as part of a trend which began after the end of the Cold War and which has by now become abundantly clear. The advanced world is no longer burdened by the thought that underdevelopment in post-colonial countries was a consequence of colonialism; hence, it was its obligation to ensure that these countries were assisted in the development process, including through encouraging their exports. This thought led to their goods entering advanced countries through low and preferential tariff rates. At the same time, these underdeveloped countries were allowed to protect their agriculture and industry through placing tariff and non-tariff barriers.

Trump represents the embodiment of the view “every man for himself and devil take the hindmost”. This flows from his belief in “America First” and “Making America Great Again”. That a very large number of Americans have bought into these sentiments is obvious from the vast mandate he received in the Presidential election. As an aside, it may be stated, that every US President stood for “America First” but their ideas of how America was to be made “First” widely differed from Trump’s. They thought, for instance, that existential crises facing the planet required the great reduction of carbon emissions and that needed a move away from hydro carbons. They looked upon climate change as an existential challenge. It is true that the did not do enough by way of giving developing countries sufficient financial and technological support to reduce their carbon dependence but, at least, they did not repudiate the role of hydro-carbons in climate change. Trump has done precisely that by encouraging greater exploration of hydro-carbons and their use in the US and indirectly in the world. Thus, Trump has unabashedly declared that his only concern is the immediate welfare of the US and its people. But he is pursuing these objectives selectively as his decision in exempting an increase in tariffs on Indian generic drug and his desire that US should retain foreign students with outstanding talent show.

While Trump is an extraordinary case of showing no sympathy for the difficulties of the developing world—now known as the Global South---the fact is that the advanced countries as a whole but in varying degrees have less and less empathy for the people of the developing world. They do not realise that problems such as migration which have become such huge issues in the US and Europe arise not only out of conflicts in the Global South but also because of lack of development. And, on top of development lagging, extreme weather events caused by climate change are leading to greater difficulties for the Global South.

One other factor which is pertinent in Trump’s action of imposing sanctions against US allies is that it may cause rifts between them which may spill over into the geo-political space. How that will happen is difficult to visualize because geo-strategic cooperation in NATO is fundamental to not only European security but is of great importance to US security too.

The full implications of Trump’s step will take time to unfold.