In recent decisions, President Trump took crucial steps as ‘America First’ initiatives. Special attention was given to trade. In the latest step, he announced steel tariffs will punish car makers and many othe industrial users of steel. And his willingness to take on European nations and also the North America needlessly disappoints its allies.
But alongside his announcement to impose penalties upto the tune of USD60 billion in Chinese imports, Trump has at last targeted a trade policy that is certainly going to make sense in the future.
The state-owned companies belonging to China give a little access to Chinese markets, but exports go on in huge amounts to the United States. The practice of United States to get the trade secrets from the foreign companies for a chance in its markets is nothing short of a shakedown. And also the tolerance for theft of intellectual property makes it a lawless frontier for many international players around the world.
There is definite change going to happen in China with announcement of Trump’s tariffes. This may be to protect industries in the United States.
These tariffs are seen by the free-traders as a part of Trump’s campaign to ‘make America great again’.
These approaches are depended on the power of markets, free enterprise as well as the survival of the fittest companies. The China case is a bit different to US, as a gargantuan party, single party state holds the leverage to dictate terms to privately owned companies.
The working of tariffs is a questionable situation. China will be forced to respond by announcing its own tariffs by focusing on agricultural products and also with a more truculent foreign policy.
Meanwhile, Global stock markets were all spooked by the prospect of a trade war between US and China, for being the two largest national economies. The Dow Jones industrial average fell by about 724 points, or nearly 3%, after the tariffs were announced on Thursday, then they dropped an additional 425 points on Friday.
In order to be effective, these threatened tariffs need to be combined with the U.S. re-entry into the Trans-Pacific Partnership, a proposed trading zone which links 11 nations (not including China) in Asia and the Americas. In fact, if the United States were to take only one action to exert pressure on China, joining the TPP would be the better way for it.
The dispute with China will turn into a multilateral affair with TPP coming into effect. In virtually all efforts to be able to put pressure for a nation to change its ways, a concerted effort by multiple nations is more successful than one nation going it alone.
The road ahead is not going to be easy as it is being perceived.
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