There is something about the series of tariffs unveiled by President Donald Trump on imports from various countries that reminds one of two of America’s famous exports: the Hollywood Western movie and the daily soap opera on television. While his “Liberation Day” trade plan aims at various partners like an angry cowboy shooting in a Texas bar, its consequences are more likely to resemble Californian soap operas that grind slowly from episode to episode showing varying degrees of partnerships and pains – with no clear finish.

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Trumponomics is trying to undo, reverse or transform what the US stood for over the past four decades at least as a champion of globalisation – which is the business of global, often US, companies producing things or services where they are the most efficient/cheap and selling them where they fetch the value/ profit margins. But Trump cannot change things any which way he wants for a variety of reasons, not the least of which is that the US no longer necessarily the global engine of growth, though it is a significant one accounting for about a quarter of the global gross domestic product (GDP).

A lot has changed in the world since the 1980s and 1990s, when the US emerged as a free trade evangelist. US consumers got used to cheap Chinese imports. New-age services based on the Internet and electric vehicles gained ground. Emerging economies like Brazil and India have had a stronger presence.

Besides, increasing automation ushered in by new technologies such as robotics and artificial intelligence (AI) are such that one cannot easily find a correlation between Trump’s intended return of manufacturing glory under his MAGA (Make America Great Again) vision and the creation of jobs for the average American worker that he promises.

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All this means that the shifting sands of geoeconomics and its impact on geopolitics will likely resemble a soap opera. Some episodes will be more engaging, and others will be dull. What is clear is that both America and its trading partners will have to withstand and digest some pain and think of long-term plans to reinvent parts of their economic activity if Trumpism lasts.

A lot depends on Trump’s own political future and how he navigates a complex environment.

A shock for key Trump aide Elon Musk in elections for a seat in the supreme court in the battleground state of Wisconsin is a grim reminder for the US president that political support is a slippery slope in a democracy. Billionaire Musk’s moneybags approach to defeat Susan Crawford in an anti-liberal campaign has fallen flat. Inflationary pressures resulting from Trump’s tariffs and the hard fact that he has been elected to rule for four years, not 14, would put a reality check on his plans. 

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Trump himself seemed to recognise this in spite of all his bluster as he held up a tariff chart at the White House that looked like a Walmart sale offer, with differing degrees of reciprocal tariffs that softened his tit-for-tat bluster. You have to read the fine print beyond the chart that shows China as the biggest bad boy attracting 34% tariffs while Japan at 24%, South Korea (25%) and the European Union (20%) braced for significant trade shocks.

Average tariffs imposed on India stand at 26% but the devil lies in the details. Indian pharmaceuticals have been exempt from the Trump tariffs. Can the US possibly accept the hard fact that India is a major supplier of vital generic drugs that lower healthcare costs for the average American? The US accounts for about 30% of India’s pharmaceutical exports, aided by affordable drugs. Indian medicines are estimated to satisfy about 40% of the US demand for off-patent drugs. Trump spoke of medicines among the things in which the US has to regain manufacturing clout, but both long-term investment and cost issues need careful resolution. A negotiated trade deal with India, with details to be sorted out with the current chart as a negotiating position, is where the buck will stop for both nations. Every product – be it California almonds, Surat diamonds, Chennai automobile parts or Hyderabad’s generic drugs – will have its own dynamic and pain points.

The US has a trade deficit with India, while accounting for 18% of India’s goods exports and 6.22 % in imports. India is unlikely to be a major target, though Trump’s headline-making bluster would make us believe otherwise.

It is also pertinent to remember that on the one hand, India is already and potentially a major US partner and market in cutting-edge fields like software and artificial intelligence (AI). Non-tariff barriers, including visa restrictions and state-supported ventures, form part of the conversation. What matters are details, details and more details. Joint ventures to get a win-win equation seem more likely, though.

Besides, it is not as if various geo-economic entities will reduce things to bilateral talks and solemn compliance to US wishes. From passing on domestic pains within their respective economies to finding new options and opportunities to trade, Trump’s plan will unleash a new alignment of forces implying diplomatic and economic negotiations of various styles and degrees.

However, Trump’s plans could not have been better-timed for America. The US economy is in a solid stage of growth with low unemployment figures, despite the Republican belief that American workers have been hard hit. What we are seeing is a course correction on the deficit side of the US economy, resulting in a return to nationalistic safety from globalistic ambitions. Having seen the US re-emerge strong from the numbing financial crisis of 2018 and the Covid-19 pandemic, talk of a Trump-induced recession in the US can be seen as mild, necessary evil for the country.

Long-term plans, however, need careful calibration worldwide. The global economy will look inward, mimicking the increasingly inward-looking, nationalistic policies on the political side in many countries. What shape the “new normal” takes will depend on a new era of multilateralism emerging from Trump’s tit-for-tat bilateralism. 

Disclaimer: The views of the writer do not represent the views of WION or ZMCL. Nor does WION or ZMCL endorse the views of the writer.