US TARIFF WAR (Global)
Dimension:
1. Why Tariff war
2. Impacts/consequences
3. US China Tariff War
Introduction:
Since Trump’s second term in office, he announced global tariffs on every single state with baseline tariff of
10 %. Then he had added different rates to different rates on different grounds. He also imposed tariffs in
his first term in office between 2017-2020.Initially this tariff war was imposed on China but later became
part of his global campaign.
Global History:
Tariffs have been part of global politics for very long period of time. But most important example comes after
WW I when tariffs caused Great Depression despite Woodrow Wilson’s promotion of free trade. Consequently,
US has historically avoided using tariffs as means of diplomacy. In Post cold war, US championed free trade at
global level through WTO (1995) as part of New World Order.
However, there were certain economic shocks that have gradually changed US mood on tariffs and most
important was 2008 financial crisis. So, Trump in his election campaign in 2016 and again in 2024, had
promised to initiate tariff policies against everyone globally. When he became president, he acted upon it. He
claims to have made US secure by using tariffs.
Why Trump Administration is Imposing Tariffs:
Reasons:
Protectionism
It’s part of right-wing politics which prioritizes nationalism and national interest. They prefer competition
over cooperation. Their argument is that in the wake of globalization and rise of US life standards, the US
economy is a great attraction to everyone. However, no body is willing to open its own market. As a result,
US has become dumping place for global trade. The impact is that local industries are suffering because
they have nothing to produce, as everything comes from outside. This leads to unemployment and poverty
besides reducing governmental revenues. This warrants the protection of US economy.
Fair Trade:
Trump’s philosophy is the fair trade must substitute free trade. It means two things:
Free trade can only work when states adhere to similar rules. The developing economies like China,
India etc. provide massive subsidies to its economy which gives them undue advantage, while US being
a capitalist economy doesn’t provide any such support making its companies vulnerable compared to
China’s and India’s. China deliberately keeping its currency undervalued which helps in exporting
goods/services to other states.
The states do not allow same market access to US as they expect from US: e-g he says, that Canada
doesn’t allow US banks to operate in Canada but expects Canada to sell its farm products in US without
any restrictions. India doesn’t give access to its agriculture but expects US to do for India.
Changing World Order:
This trade war also reflects the US frustration with states moving towards more poles (Multipolarity).
US is trying to regain its primacy in international relations by imposing tariffs.
To Weaken China’s Economy:
As part of US strategy to contain China, US is imposing tariff war with China. Mainly because US is the
largest trading partner of China. Therefore, tariffs are likely to significantly damage China’s growth and
power.
IMPACTS:
US:
Short term impacts:
This might make US some gains: US trade balance could be achieved. Trade deficit can be
reduced. Global investors might be investing in US because of tariffs. It is also likely to increase
inflation in US triggering high policy rates causing economic slowdown.
Long term impacts:
US will likely loose global investor attraction. Inflation is likely to persist until the investment
materializes in the distant future. This tariff war will also mean losing allies globally, and reducing
US influence (Soft power) as well, catalyzing the emergence of Multipolarity.
Global:
Trade war:
Response from many countries is to impose reciprocal tariffs on US specially from China causing major
trade war between US and China. This is likely to have global repercussions impacting global supply
chains and other sectors of economy. This will impact the states that are dependent on these two
economies i-e most of the world.
Recession: Trade wars lead to economic stagnation causing recession fears.
Global Polarization:
This trade war has created polarizations at regional and global levels. US stands alone and the rest of
the states are making alliances to protect themselves. BRICS is increasingly a refuge to states affected
by US trade war, ASEAN is another, RCEP is another etc.
Changing world order:
This tariff war is a symbol as well a catalyst for changing world order. The world is moving away from
US dominated unipolarity to emerging Economic multipolarity. The ultimate beneficiary of this trade
war is China which continues to uphold free trade and globalization ideas attracting many states
including from the west towards itself.
Security impacts:
The last time when global trade war happened, it ultimately led to World War II. In 1929, US
protectionist policies led to Great Depression which caused Fascist regimes to grow in Germany that
triggered World War II. This time too, tariff wars are creating global economic challenges causing
nationalist ideologies to grow stronger potentially causing war fears/threats.
