By Anjan Roy
In the wake of Trump’s tariffs and restrictive trade practices, a global economic warfare has been sparked off, with all major economies working up stringent measures to teach the newly elected US prescient, Donald Trump, a lesson: Tariffs are a two way instrument. If you impose tariffs on others, others can impose similar or worse measures against you.
The result could be rising inflation, falling trade, recession in major economies, loss of income for people at large and high unemployment. The global economy seems set for such an outcome. It is difficult to imagine how the goal economy could avoid a radical contraction as all these measures start crimping production.
As the financial markets opened this Monday, after Trump’s imposition of the so-called “reciprocal” tariffs, there was mayhem all over the global financial markets. The stock market has entered the “bear market” phase, which means that investors would prefer to sell their holdings and keep cash rather than investing in scrip.
Japanese stock market, one of the largest, dropped by 8% on Monday in the wake of tariff warfare. India market dropped by over 2227 point, wiping out stock values of Rs14 lakh crore. Chinese markets too plummeted. European markets went into a tailspin by nearly 10%, resulting in loss of 1.7 trillion euros.
In the midst of the markets crash, the European Union of 29 countries on the continent announced its own set of tariffs in retaliation to Trump’s tariffs of last week. The EU proposed to levy tariffs on imports from US of $28 billion. EU trade commissioner announced the tariffs due to come into effect from April 9.
China, world’s second largest economy and considered enemy number 1 by Trump, had meanwhile announced tariffs on US imports of 34% plus. China is now considering to further increase its tariffs on imports from US and impose other restrictions like on exports of rare earths to the USA.
USA’s reciprocal tariff and other taxes including the basic tax of 10% takes the final tariff on Chinese products into America to over 54%. In fact, almost all countries from EU to China to Canada and Mexico — all major economies — are raising their tariffs on American goods. It will be difficult to imagine how the US can maintain its economy facing such concerted tariff actions against it. Donald Trump is getting a taste of his own bitter medicines.
Facing such rising adverse turn in the affairs, which is pushing up inflation and bringing in its train severe economic hardship, Donald Trump has asked the US people to put up with the inconveniences and difficulties for the time being for a much brighter tomorrow. Trump had thought of tariffs as one-way story, to be imposed by the US alone and accepted meekly by other countries.
Even influential and very conservative American business leaders are now coming out in the open and criticising Donald Trump’s economic policies. Jamie Dimon, chairman and head of the highly influential JP Morgan investment bank, hinted at the adverse impact of the current bunch of policy announcements of Trump second stint.
Dimon has expressed his fear that the USA had enjoyed a “special position’ in the global order based on its economic strength, military power and its “moral values” which included the espousal of freedom —in economics as well as in politics. These would be eroded, he feared, for the current basket of policies and moves take hold.
Dimon in his annual letter to the bank’s shareholders pointed out that the policies pursued by the administration should result in augmented price levels, withdrawals of investment, falling trade, and ultimately hike in the USA unemployment level and recession.
What could be the worst possible result is if the global financial markets take a deep crash. A financial crisis is far more deleterious than some sectoral slow down in industries. Finance is the vital life blood and when that stream clogs up, the entire system is grounded. This is what had happened previously during the global financial meltdown and this is what had happened in the years of Great Depression in the 1930s. We might be set back by a hundred years, for all one fears. But the originator of all these miseries remains impervious to the dangerous ends he was hurling the entire global economic order.
When facing questions from journalists on the crashing financial markets, Donald Trump was on his habitual offensive, described such questions as stupid and reiterating his observations that other countries have fleeced America for years and now his policies were reversing those injustices to America.
Trump claimed that as result of his policies billions of dollars were flowing into USA and shoring up the American economy. Trump took umbrage at Europe, stating that Europe has treated America badly and took American money and investments and then its factories. Now in response to Trumps tariffs they are imposing tariffs on their own. Trump likewise blamed China for its “panicky” reaction and its set of tariffs. He had thought, they all would lie prostrate in front of King Trump facing his uncontrollable ire.
But in his feverish delirium, Trump is blaming everybody else and the global economy is facing a huge earthquake. The future is completely unknown now. (IPA Service)
