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Photo by Markus Winkler: https://www.pexels.com/photo/trade-and-trade-related-words-on-wooden-table-19891035/ |
The declaration of reciprocal tariff on virtually all nations of the world by the Trump administration of the US heralds the beginning of a global trade war. Make no mistake about it. In so doing Trump has showcased the true extent of American might and proved to the world that it is the latter that needs the former and not the other way round.
The Europeans now understand that they have to fund their own defense and not expect the US to do the heavy lifting for them, even while expecting that the US will treat them with kid gloves with regard to trade and economic matters. Developing nations across the world, benefitted immensely from the US decision to outsource products and services via a globally integrated supply chain generating immense wealth in countries like China, Vietnam, Cambodia, South Korea, Taiwan and India.
Well, the US has yanked the carpet from under the world’s feet. It seeks to return manufacturing to within its own borders, and is busy dismantling the globally integrated world economic order it itself helped put in place. It is doing so, because it no longer suits the US to see a rival like China and others emerge using wealth they generated by trading with the US to rival its power and prestige.
It is at the same time open to signing mutually beneficial trade deals with countries around the world, if it suits its economic and strategic interests. There is perfect sense in what Trump is doing-he wants manufacturing jobs to grow in the United States and their gargantuan national debt to be reduced substantially. The US really does not need to integrate with the wider world in order for its enormous economic engine to chug smoothly. It has enough natural resources to be self- sustaining and really needs to engage extensively only with Canada and Mexico, its immediate neighbours with whom the US already has a substantial trade deal in place.
The US is actually pretty much sorted. It is the rest of the world that has to find its bearings in the fast unravelling global world order. Of all the countries in the world, it is India, a continent sized country blessed with huge natural resources and relatively healthy demographics that is best positioned to ride out the storm. The fact that it hadn’t integrated to the extent that other countries in the Indo-Pacific region had with the global economy will prove to be its biggest insurance in the turbulent times that are yet to come. Rather than try to be an export oriented economy, it can look to its vast domestic market for economic growth, just like the US. It has to at the same time bolster its defense preparedness, against a China, which is going to be increasingly belligerent in its attitude to its perceived strategic rivals in the near future, as the US systematically undermines its economy and its worsening demographics exacerbate its problems.
Europe on the other hand faces existential problems, what with an expansionist and revisionist Russia hell bent on reclaiming the lands in Eastern Europe that were once part of the erstwhile Soviet Union. There is already a trade war on between the West and a totally determined Russian regime, which wants to take the world down with it if need be, in its quest to become a dominant world power, which it feels is its rightful destiny. It does have vast natural resources and a sufficiently large number of people to help fight its fight, at least in the near future. At the same time it is growing its economic and strategic ties with an economically powerful China, allowing it to stay in the game much longer.
With a blistering China seething at America’s attempt to belittle it, one can almost see an economic and military Axis forming between China and Russia, which does not bode well for whatever remains of a stable world order.
In the era of trade wars that is coming the world can forget about the peaceful coexistence of nations, tremendous economic growth and unprecedented advancement of human welfare which occurred over the last six or seven decades. Instead, it will be each nation looking out for the best way to survive and possibly thrive in a world, where global cooperation is dead and deals between nations and regional power blocks will usher in a Darwinian vision where uncertainty will be the only certainty.