President Donald Trump launched a world trade war – politely called “reciprocal prices”.
Prices are taxes that countries take imported products that make them more expensive and unaffordable in order to encourage national manufacturing. At the same time, the global economy thrives if certain products are imported from other countries where they are cheaper to produce and satisfy national consumers. In return, the importing country can produce goods or technologies that serve the countries of exporters. This becomes a cycle of trade flows and value chains based on a comparative or even absolute advantage.
Trump, who won a second term on the slogan “Making America Great Again” (Maga), has two underlying hypotheses behind his economic planning.
One, which he can literally launch American manufacturing by putting price On basic products imported from all countries in the United States. Two, he will use the instrument of reciprocal; Ie, any country that puts prices on American products will be subject to prices in return, that goods imported by the United States are important to the American consumer or not.
This, he thinks, will oblige countries that import American goods to reduce taxes about them, so they are more affordable in the host country.
By taking prices, Trump punishes the American consumer for economic policies prior to the United States where manufacturing has been outsourced to cheap-up and easily available raw materials, then imported by the United States.
Very often, the American companies themselves have outsourced such a manufacture and have achieved financial gains. Trump also punishes other countries, especially in the world of South world such as India, Vietnam, Indonesia, China and many others, where cheap workforce allows them to make goods at much cheaper prices than the United States.
This has benefited the American consumer for years.
India, with other countries, is also a target because Trump has imposed a Price 27% on Indian exports to the United States.
The United States is a major destination for Indian exports representing approximately 18% of the trade out of India. THE World Trade OrganizationIncluding the United States is still a part, says imports from developing countries should see less prices to encourage fair growth, but Trump does not care about the multilateral order based on rules and it has little interest in the growth of countries like India.
Trump’s reciprocal rate policy means that India will have to reduce the prices it imposes on goods imported from the United States. These prices were imposed by India to protect its own emerging industries.
Trump specifically stressed that these Indian prices were unfair to the United States. By lowering the prices on American imports under pressure, India could see more American goods on its market, even at the cost of Indian manufacturing products.
The Indian government believes that the lower prices on American electric vehicles (EV) could be a good thing and seems happy to comply. But will the manufacturers of Indian electric vehicles be happy?
In addition, the buyer of Indian luxury cars that requires Toyota, BMW, etc. Will now go to Ford and Chevrolettes? And will the Indian class to drink go from Glens and tapes to American Bourbons?
America’s pricing war will be a setback for developing economies like India which could be forced to cancel their protective tariff obstacles to let American goods enter and initiate a change in their consumption models. Even if it appeals to the United States, this takes away from the strategic and economic autonomy of India.
It is unlikely that Trump’s unilateral prices with global conceptions meet his mercantilist desires.
Professor of international trade economist Sunanda Sen believes That these reciprocal prices can provide a global recession, with several nations (including the United States) under the influence of a contracting spiral of their respective GDPs.
Prices are an old 19th century method to protect economies. However, a post-globalization where value chains have been internationalized, Trump prices will be very disruptive with involuntary consequences that are difficult to predict.
What should countries like India do to avoid being trained in a global recession led by the United States?
India has opened its economy in the United States and Indian companies have struggled and managed to develop comfortable supply chains with the United States. They will now have to diversify. The government must help small and medium -sized enterprises and manufacturing exporters diversify to other countries and markets.
The United States Imports are around 15% of all global markets. This means that other savings receive 85% of world exports. If it is carefully planned, the tariff crisis induced by the United States can be avoided. India has also diversified its main import sectors. India is welcoming Defense of The United States with lucrative profits for the American defense industries.
In addition, Trump pushed India to buy more oil And the hydrocarbons of the United States and India do it. India can take advantage of it for other concessions.
Fortunately, India has appeased the United States, but as these punitive prices show, the United States wants more. The belief that in order to mark with American India could have avoided punitive reciprocal prices turned out to be false. This will not lead to Indian growth or economic stability.
Consequently, India must work to make India large instead of leaning behind for the Maga program.
The Indian government has set up a control room to monitor the price problem. India has enough economists who can show the way so that India does not subordinate its fundamental interests and its growth trajectory to American interests.
Economic autonomy is the key to strategic autonomy, multipolarity and best development for the Indian people.
Originally published under Creative municipalities by 360info™.