Trump’s Trade War: An Opportunity for the Global South

Context

US President Donald Trump has imposed high tariffs on several countries including India, Brazil and China. This signals an escalation of trade tensions at the global level which will have a huge impact on the global economy.

Reasons for Trump imposing high tariffs

Trump’s policy of appeasement

• Trump is trying to appease the silent majority in the US (and not just the ‘Make America Great Again’ Republicans) that feels cheated by the fundamentals of globalisation, namely- capital accumulation, cheap labour, environmental colonisation and gradual economic decline.
• This neo-liberal status quo has led to unprecedented concentration of wealth and power on the one hand and sharp rise in inequalities on the other.

Domestic Politics and Circumstances

Ignoring the fact that these tariffs are a disguised super-tax on US companies and consumers, they are designed to increase the economic power of the US by extorting money from countries and companies.

Reducing the Dominance of China and Russia

• Trump’s decision is about reversing the alleged de-industrialisation of the US and preventing the dominance of China.
• According to The Washington Post, the tariffs also included provisions to curb China’s strategic influence while advancing US national security goals.
• The increased tariffs on India were reportedly aimed at pressuring Russia to end the war with Ukraine.
• However, high tariffs on India continue despite the US-Russia meeting regarding Ukraine.

Consequences of Trump imposing tariffs

Trade diversion

Higher tariffs on Chinese goods may push US companies to look for alternative suppliers from the Global South (India, Vietnam, Mexico, Bangladesh).

Changes in the manufacturing sector

• Multinational companies may diversify supply chains under a ‘China+1 strategy’ to reduce dependence on China.
• In this scenario, countries with cost competitiveness and trade agreements may attract investments.

Geopolitical realignment

The US can strengthen trade partnerships with democracies in the Global South to counter China’s influence.

Challenges for the Global South

• Capacity shortages in infrastructure, technology and skilled labour
• Protectionist response to rapid growth in exports
• Vulnerability to US policy instability

Opportunities for India

• India should take advantage of this situation to reshape the geo-economic and political structure of the world.
• India should support multipolarity as an alternative to both unipolarity and bipolarity.
• There is a need to promote Make in India and Production Linked Incentive (PLI) schemes to bring about changes in the supply chain.
• Emphasis on strengthening logistics will create more opportunities in this sector.
• There is a need to reduce trade barriers as well as discuss free trade agreements with various countries and groups.
• There is a need to take advantage of service exports (IT, Pharma) along with goods.
• India can also take advantage of this opportunity to enter into a new economic agreement which is equally effective for all countries.

Way forward

• Diversification: Countries of the global south should avoid excessive dependence on the US market.
• Regional cooperation: Forums like BRICS, IPEF, G-20 can be used to shape trade norms.
• Domestic reforms: Emphasis should be laid on improving trade ease, labor laws and green manufacturing.

Conclusion

The government needs to make a concerted effort to restore confidence among economic stakeholders, lead policies that ensure equitable growth (without which India will not be an attractive market for investors) and adopt a bold and innovative vision.