India has done well to pay back Donald Trump in his own coin. Responding to the unilateral slapping of tariffs on the import of Indian steel and aluminum items of 25 per cent and ten per cent respectively, India has hiked customs duty on 29 select items imported from the US. Among these are almonds, fresh apples, walnuts, etc. The iconic American motor cycles Harley-Davidsons have been spared, though if it really wanted to hurt the US President, it should have gone and slapped a prohibitively high duty since Trump personally interceded on its behalf with Prime Minister Modi.
Also, India has kept the World Trade Organization duly in the loop, keeping it posted about the arbitrary nature of the Trump tariffs. The proposed hike by India is strictly meant to compensate for the loss likely to result from the increased duties on steel and aluminum imports by the US. Why Trump seems bent on disrupting the multilateral free trade order in such a cavalier manner is beyond anyone’s comprehension. Behaving like a bull in a China shop, from the time he was elected the leader of the free world, he has gone about destabilising it with his words and actions. Pandering to the baser instincts of his base, he has sought to clamp down on imports, on immigration, on the US troops in various troubled spots around the world, in paring down contributions to the UN, in shutting down various US missions and winding down humanitarian aid, etc, etc. In his zeal to prove that his predecessors wasted money recklessly in policing the world, he has scaled down the US role in various hot spots in the world, particularly in the Middle East, and has made common cause with the Israelis and the Saudis, the latter desperately seeking to become the sole hegemony in the Islamic world to the chagrin of Iran, Syria and other Muslim entities.
But in seeking to revive jobs and businesses at home, Trump might be actually damaging the US interests, including those of domestic industries dependent on relatively cheap imports of steel and aluminum items. For instance, the automobile and building construction sectors are bound to feel the pinch of higher duties on steel and aluminum. Again, it is a bad strategy to simultaneously alienate all major members of the WTO. Trump has riled everyone from China to Europe to Canada, slapping duties on imports without engaging them in any conversation on the matter. Maybe the Europeans would have agreed to an increase in duties on automobiles, given that there is a two per cent duty currently, while Europe imposes ten per cent or more on import of American cars. But the manner in which Trump has gone about threatening twenty per cent duty on automobiles from Europe, it is bound to create much bitterness and recriminations. Already, the European nations have threatened to respond with tit-for-tat tariffs on US imports. Ditto for China. India has already put the US on notice in this regard. It is ironical that the US should be in the lead in wrecking the multilateral free trade global order in the creation of which it had played a stellar role.
The very arguments for free movement of goods and services, which underpinned the WTO, are now being defied by the US. Protectionism ultimately is a job and income destroyer, not creator. Goods and services moving freely between national borders better lives and result in price and quality improvements through sheer competition. For instance, Indian consumers are by far the greatest beneficiaries of lower tariff barriers on the import of electronic goods. Domestic producers of the hitherto shoddily produced goods had to per force improve their act or go out of business. Now, several domestic brands compete on both quality and pricing with popular foreign brands, thanks to the free trade in these items. Trump should realise that unilateral levies on imports can ultimately hurt the US consumer. The US is sill the leader by some distance in intellectual property and instead of protecting those rights imposing tariffs on everyday items does not help it — even as it forces its allies and enemies on one platform. As the leader of the free world, Trump must desist going down this slippery protectionist slope.
