THE TROUBLE AND TURMOIL OF TRUMP'S TARIFF POLICY.

 TARRIFS

Trade or tariff war refers to an economic conflict  usually emanating from extreme protectionism in which states erect tariff walls and other non tariff barriers against each other in  response to trade barriers created by o8ther country.Theoretically trade policy of any country can be generally classified in to two types -Free Trade and Protection.According to  eminent international economist Professor Jagdish Bhagawati who always advocated free trade charecterised by absence of tarrifs quota,exchange restrictions ,taxes and subsidies on production .The advantages of free trade are listed as maximiation output, technological development  high factor income, optimum utilisation of resources, prevention of monopolies and unfair trade practices etc.In contrast protection refers to the measures taken in order to protect domestic industry from foreign competition. Protective measures varies from imposing tariff on imported goods to  non tariff barriers like import quota  restrictions and even banning trade or imposing sanctions against countries in certain cases.The case for protection is attributed to infant industry argument, ante dumping, diversification, bargaining or retaliation policy or balance of Payments argument etc.Generally protective measures imposed by countries tend to persist due to pressure tactics followed by vested  interest groups. 

TARIFF WAR DURING GREAT DEPRESSION 

Trade wars often starts when the country's Government believes that another country is engaging in unfair tIn effect the trade war is a political and economic conflict between countries which can aggravate unemployment, poverty and inequality in  countries imposing protectionist trade policies against one another in the form of tariff barriers and non tariff barriers. It may be recalled during the 1920s USA experienced significant economic growth due to emergence of new industries and innovative technologies such as cars,radios and consumer appliances. However economic historians and economists observed that the Smoot Hawley Tariff Act of 1930 originally intended to serve American farmers eventually distorted global economy.Tariffs of more than 20000 imported goods led to retaliatory  tarrifs imposed by other countries in action During the great depression of  1930s the retaliatory  tarrifs imposed by US's trading partners were major factor responsible in the reduction of Amercan exports and imports by 67 percent .In other words tarrifs eventually had a detrimentalr to purchase American goods due to tariff induced price hike and bank failures,panics and shrinking of money supply deepened the depression. 

TRUMP AND TRADE WAR 

It appears that Tariff is the music to the ears of President Trump and he firmly believes that the impact of imposing tariffs will make every Americans rich ,Donald Trump's election promise included reducing trade deficit with countries like China, Mexico, Canada and European Union by imposing high tarrifs and even 100% tariff on BRICS countries resorting to Dedolarisation and development of alternative global BRICS currency. President Trump's policy objectives included stringent immigration control and deportation of illegal immigrants.restoring national pride,security abolition of drug trafficking in  countries like Mexico and Canada In order to  reduce increasing trade deficit with countries like China, Mexico,Canada and eventually European Union high tariffs were to be imposed to regain  lost glory of country's development.High tariffs are expected to increase revenue to US government  along with discouraging  imports from other countries and reducing trade deficit But in effect it is turning out to be somewhat like Donald Trump has set the cat among pigeons across the globe. With regard to  deportation of  illegal immigrants already they have suffered from reportedly inhuman  treatment meted out to Indians during deportation despite India being a US friendly country and around 18000 illegal Indian immigrants have been identified to be deported who largely migrated to US via Mexico. 

As per 2024 data merchandise trade between USA and China totalled $ 530 billion wherein Chinese exports to US alone accounted for more than $ 400 billion second largest to Mexico. On the contrary Canada was the top purchaser of US goods in 2023 with $356.5 billion followed byMexico $324.3 billion, China $ 150.4 billion, Japan $ 80.2 billion and UK $ 76.2 billion.As a amatter of fact  the US China trade war started in January 2018 itself when President Donald Trump initiated a series of tariff and non tariff barriers against China with the objective of making due changes to correct what US described as long standing unfair trade practices and infringement of fair intellectual property practices. Correcting so called unfair trade practices are expected to narrow down US China trade deficit and Chinese Government requires transfer of Amercan technology to China. In response Chinese Government  accused Trump administration resorting to protectionist,nationalistic and retaliatory actions.As trade war escalated through 2019 by January 2020 both countries US and China reached very tensed phase and gradually reached some agreement towards the end of Trump's first term in office. 

In the second term along with earlier objectives Trump  is fully determined to block both Dedolarisation attempts and evolving a common global  currency by BRICS nations at any cost.Similarly it is determined to  stop all illegal immigration and thereby  provide jobs to Amercan nationals.USA's  current tariff policy is reportedly an attempt to  tamp down on illegal migrants and illicit drug inflows and presumably incentiviising companies to create more jobs to Americans. US supporters  of US tariff policy believe that foreign countries are more dependent on the US market and will reduce their price to compensate tariff thereby retaining their market share and contributing increased tariff revenue to US treasury from foreigners. In  response to tariff  threat Beijing vowed to file a law suit with the World Trade Organisation (WTO) against US for wrongful and unfair trade practices. On the otherhand when Ottawa and Mexico City planned to take retaliatory tarrifs against USA, that forced white house to agree for a "pause" of  the  tariff action for a month  largely due to Mexico's action to Guard troops to man northern border and Canadian Prime  Minister Justin Trudeau's commitment to work together to combat organised crime, fentanyl and money laundering.  In the cases of tariffs imposed on  Chinese goods also Trump temporarily exempted small value packages imported from China after the US postal services was plunged into chaos while struggling with new regulations. Historical evidence largely indicate that prolonged trade/ tariff wars will not only distort global economy but  ultimately end up with no winners but more losers.It so happens that shortsighted actions of some rulers to gain popularity even without making necessary homework or consulting their own competent experts are bound to create instability and voltatility in the world trade and economy which may consume more time to stabilise. US is also unleashing a new hell on plans towards a common BRICS currency by threatening to impose 100% tariff on supporting countries that have some short run impact. By all means the process of Dedolarisation is irreversible .Moreover the share of trade transactions in local currencies are increasing rapidly as dollar reserves are largely converted into gold by many ccountries.

CONCLUSION

Some experts argue that China being the factory of the world,  US taridff  policy will  increase Chinese determination to work hard and export to more countries and cosequently increase its global  power, stake and presence.Since 1995 World Trad Organisation (WTO) as a multilateral trade Organisation has been actively addressing issues of trade in goods, trade in services ,intellectual property rights through Trade Dispute System. When WTO started delivering dispute settlement both small and large economies got moreover or less equal treatment, and between 1995 and 2022  622 disputes have been brought with more than 493 panel reports. But later the vested interest of USA prevailed and resulted  in undesirable consequences making WTO defunct.India and other trade vulnerable countries must consolidate their energiess for reforming and promoting prompt and judicious multilateral trade dispute mechanism for  fair treatment of both under developing countries and developed countries.It seems that there are more possibilities for at least partially withdrawing from the declared tariff barriers. In any case the declared tariff and non barriers are most likely to decrease both revenue and trade  benefits. In short the trouble and turmoil of Trump's trade policy is likely to continue  especially if mixed further with global head winds like supply chain disruptions, inflation, climate change,political tensions etc.