Liberation!!!! The word has more than a hint of romance. More than a whiff of history. More than a seed for literature. For a country that got independent in 1776, having a liberation moment and announced with all bells and whistles, 250 years after is definitely less American and more Confucian. And now we have a Liberation day, announced by President TRUMP(eter) from the super select Oval office with the world’s press filling up all the spaces (no doubt led by Fox News).
What happened that kept the world on tenterhooks and heads of countries lose their froth and vim. The tariff thingy happened!!! And what is that you ask? Well now loads of goods and services will have to pay more to cross into the United States. Except Canada and Mexico (they have been dunked before the rest), the rest of the world has been loaded with tariff to cross the border into the US and it does not matter if that goes into making other things or consumed. And the grand term for this is “reciprocal tariffs”. I.e. these are charges levied by the US and this is happening because countries “inimical to the US’ growth” (Trump’s words, not mine) as a manufacturing power have been charging some duties on imports from the US to their countries and this is the tit-for-tat.
So why are we bothered??? Well for one, our heart bleeds for the Americans as they will now pay much more for things they consume (apart from digital content). Because the US is great at soft power things, but horrid at most other. They are, by themselves, energy deficient and need to import loads of crude and electricity and gas from Canada, pretty much everything manufacturing from Asia (mostly China) and feeds off agri produce from pretty much all over the world. So, all these things will now cost more and obviously the importer will not absorb the costs but pass them to the consumer. Prices for the common guy in the US and they will be forced to decrease consuming as much as before. And that hurts the rest of the world.
In an interconnected world there is not much apart from the competitive advantage of nations theory. Whoever makes things better and cheaper gets to do a load of it and the rest of the world enjoys the fruits of that labour. The US makes movies, things of war and software very well and nothing much else (if we don’t see THE DOLLAR as a commodity). And the rest of the world makes everything well and gives to America to use(consume). But with demand softening these goods will be made less and thus the risk of slower growth, globally. And this could spin off to another level because of diminished money flow and increasing interest rates and perhaps a more fragmented world.
In just a few weeks the US has become quite the hated country and even amongst Trump supporters there is a rumbling of discontent. On TRUMP. It remains to be seen how it pans out but rest easy with the thought that the die has been cast. It will create ripples around the world in multiple dimensions before it settles down. But would it settle above or below the earlier equilibrium …. well that is the money making opportunity. There are many who opine India would not be significantly affected but I find that hard to believe. There will be affects much beyond the gems and jewellery, leather, handicrafts – the traditional stuff. Pharmaceuticals and software not so much. But there will be affects.
Keep your fingers crossed. It has happened more as an acceptable event for India at first sight, but the world moves in mysterious ways. I continue to be long positive of equity (India) and Emerging markets.
Well said. Tariff must be lowered and should be rationalised. It is not the US economy that will suffer so as other countries also. This is going to be horrible.
V nicely written 👌🏽
Don’t u think that trump is doing right for his country. As America is the largest consumer of the world and Power ( Dollar) with this arm twisting in six month if he able to make country to adjust their tarrifs …he will win the game second he is putting pressure on China to get tiktok ..
Hi UJJWAL, thanks for the feedback. I dont think it is important what we think. It is what the US President thinks and what the US citizens think on these measures. And it is clear that there is mounting criticism of these steps in their country. Hopefully good sense will prevail.