(Dr Pentapati Pullarao)
Ever since Donald trump was sworn as USA President on January 20, 2025, there has been a storm of confusion across the world. Trump knows that he cannot contest again. Therefore, Trump is rushing to implement biggest un-expected since 1945.
Trump’s claim:
Tamp says that since 1945, after World War 2, the world has taken advantage of the USA. Other countries put high tariffs against the USA and also make the USA spend for their defense. Trump has thrown aside allies of a hundred years like Canada and England.
Trump says that 60years ago, the USA was the largest steel producer, car producer, ship builder. But now, all these big industries have shifted overseas. Trump believes that if he puts high tariffs, then these industries will come back to the USA. But experts say that these industries shifted to other countries because these products could be made cheaper there. Times have changed and the USA cannot produce them cheaply.
Our Indian Kautilya, who lived 2500 years ago, was the world’s first economist. But about 250 years ago, Englishman Adam Smith became the first modern economist, who formulated the International; trade theory, which is still operational. Adam Smith said: “if a foreign country can supply us with a commodity cheaper than we can make it, better buy it “. Now President Trump says that Adam Smith is wrong!!!
Trump is fighting ADAM Smith’s theory of international trade, which all economists have accepted for hundreds of years.
Trump’s plan:
- By putting high tariffs, Trump hopes that some American industry will come back from China, Mexico, Canada and other countries. If that happens, then there will be some new jobs in USA.
- Trump also hopes that by putting high tariffs, other countries will negotiate with him. Trump will lower tariffs to lower levels and USA will get big revenue. That is trump’s hope.
- Trump, like all other American and European politicians, now want to control China. Americans and Europeans feel that China controls their economies. China exports 440 billion dollars to USA and imports only 140 billion dollars. Europe exports 220 billion dollars and imports 530 billion dollars.
- Part of Trump’s economic war against Chanais to control China in international affairs, where China has become the only rival of USA.
- Trump has attacked all other countries and made impossible tariff demands. But Trump is using psychology on other countries to pressurize them to come to agreement. Trump’s bombastic statements de-moralize other countries
Trump and India:
1.Definitely, if Trump’s economics stunts fail, there will be a recession, and it will be bad for India and the world. Trump has caused un-certainty, which is bad for all economies. Due to un-certainty, many software workers in USA are being dismissed.
2. For India, though, the problems that Trump is creating for other countries, may help India. Oil prices are coming down and that for India is the biggest gain. India is the world’s second biggest importer of oil. Just remember that the Russia-Ukraine war benefited India, as India got cheap oil from Russia.
3.If USA and Europe wage economic war against China, India will benefit greatly. Many factories will shift to India, just as India now has 3 APPLE factories.
4. Trump also put high tariffs on Pakistan, Sri Lanka, Bangladesh, Vietnam and other Asian countries. It simply means that our un-friendly neighbors will be suffering greatly due to Trump. China is the biggest problem for India and now China will have to face Europe and USA as economic enemies. India gets relief as our enemies are now fully busy with their own survival! Trump is actually good news for India.
5. India is discussing a Bilateral Trade Agreement with USA. Indian government already said that it wont react to these tariffs of trump, since it will finalize a Trade Agreement, and these problems will be solved.
Chances of Trump’s failure:
- Trump is gambling that other countries will negotiate and there will be an agreement. It looks possible that there will be an agreement with USA by Europe and most countries.
- The most important problem for Trump is China. China has also taken a very aggressive stance to Trump. But China may also come to an agreement, since it does not make sense to have a trade war for China. But if China refuses to negotiate, then Trump will be in trouble.
- The immediate problem for Trump will be that if there is no agreement with other nations, then prices will rise in USA and public will get annoyed. This is the big Trump gamble. Trump is gambling that other countries will negotiate. If China and Europe are stubborn, then there will be trouble for Trump.
For India, it really does not matter what happens. If Donald Trump gets a settlement, then India will gain from economic stability. If Trump fails and there is great instability, then India’s neighbors and enemies like China, Pakistan, Bangladesh will be in greater trouble. India can meet any economic challenge.
(Author is a Political and Economic Analyst)
