The US President Donald Trump ran a fiery election campaign. After assuming office for a second term, Trump made promises to implement energy security, immigration, ending wars, and major economic reforms. However, Trump’s incessant fixation on tariffs and the trade war persists. In his first presidential term, he sparked trade war with China, particularly in the tech industry, accusing Huawei of spying through its equipment on Americans. In the countermeasure of China, the biggest losers of the first trade were, the US tech giants, which were heavily dependent on Chinese consumers. The tariffs affected the global economy as reported by International Monetary Fund, the trade war between US and China slowed down global economic growth by 0.9% resulting in market disruption, infrastructure decline and business shuffles in many countries directly or indirectly associated with US or China.
The stern behavior of Trump undermines the economic competition in the international liberal system
Now Trump is back and his obsession with tariffs doesn’t seem to be less than before. As promised in his campaign, he announced tariffs on Canada, Mexico, China and other countries with a high or less degree. The stern behavior of Trump undermines the economic competition in the international liberal system. The world is now more globalized than ever before. The tariffs will have impact on the under developing economies specially in the Global South due to disruption in supply chain and market flow of goods and raw materials between North and South.
The economic impacts of Covid-19 are nothing but the dark sides of liberal economic structure and globalization which wholly treats all the state economies as a single unit, the “World economy”
The dust of Covid-19 has not settled yet. The pandemic shrunk the global economy by 4.4% in 2020 as estimated by IMF leading to mass unemployment and recession in the world. The economic impacts of Covid-19 are nothing but the dark sides of liberal economic structure and globalization which wholly treats all the state economies as a single unit, the “World economy”. Whether Pandemic or the tariffs, in both ways the economies are interconnected and interdependent. The impacts of tariffs are no less than any global crisis. It makes the freedom of trade stagnant on macro and micro level due to the ideal principles of liberalism which allows individuals to avail equal economic opportunities in the production of goods. Therefore, running the cycle of economic progress contrary to communism, where state becomes the sole competitor and mass producer of goods taking all the load of sanctions.
US sanctions prove major blow to developing economies resulting in lower industrial production, unemployment and economic slowdown
The US and China are the two largest economies of the world. The might of their political power is established in their economic supremacy empowered by the import of raw material and export of refined products to dependent economies in Asia, Africa and South America. Tariffs disrupt the global supply chain by limiting their freedom of trade. US sanctions prove major blow to developing economies resulting in lower industrial production, unemployment and economic slowdown. Vietnamese and Malaysian companies in China faced the heat of first trade war. The companies stopped operating in China to avoid tariffs. This is just one case which shows how tariffs affect dependent economies more than the countries which are in an economic tussle.
The years of globalization successfully established liberal economic order, but the trade war between the US-China affects the dependent economies specially in Global South where a large part of their economies is dependent on US and China for tech, medicine, chemicals and fertilizers for agricultural productions. The repercussions of tariffs will also hunt US economy. A commonly shared opinion by the experts is the fact that the US economy will drive into recession and higher inflation rate in the coming years. Every currency is backed by the dollar, the impacts of tariffs and countermeasures will backfire for the other countries. Because currently the only accepted currency in the international trading system is dollar and a fluctuating dollar will affect the currencies exchangeable with it. The decline of global economy will be inevitable in such a scenario of economic shift down, if international trading currency is unstable.
Developing economies in the Global South have never been treated equally under the Western lead system
Considering the practice of tariffs and sanctions, it can protect domestic economy for some countries, but disrupts the cycle of global supply chain as seen in the first trade war in the case of Malaysian and Vietnamese companies in China. It sounds more like a political tool to exploit developing countries which halt their economic freedom in the contemporary system. Liberalism advocates for equal opportunities, while making decisions and vice versa. Developing economies in the Global South have never been treated equally under the Western lead system. Poverty, unemployment, instability and the plight of Global South remains in the delusion of liberal economic order. The so-called system of equality has served the interests of Global North.
Therefore, tariffs announced by Trump will rip off under developing economies in Asia and Africa which are dependent on Countries enlisted by Trump to remain under tariffs for the protectionism of US industry. Thus the overall impacts of tariffs are uncertain, unstable and reckless for the international economy.
Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.
