Who Benefits from the Ongoing Trade Qar...? Certainly Not the End Consumer...!
CERTAINLY NOT THE END CONSUMER…!
In March this year, 24 of the biggest retailers in the US, including Walmart, Target, Best Buy, Macy’s, Abercrombie & Fitch Co, American Eagle Outfitters, JCPenney and Kohl’s Department Stores signed a letter sent to the US President Donald Trump, requesting him not to impose heavy tariffs on China, as it would not only affect business, but also cripple the average American for whom prices on household basics like clothing, shoes, electronics, and home goods would jump manifold. The President however, seems to have turned a deaf ear to the pleas and is going ahead with his tariff agenda. “We’re like the piggybank that everybody is robbing,” Trump said, addressing a press conference in Canada at the conclusion of the G7 summit.
In a tweet earlier this year, Trump categorically justified his crack down on what he calls ‘unfair’ trade – “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down US $ 100 billion with a certain country and they get cute, don’t trade anymore – we win big.
It’s easy!” Trump is equating higher tariffs to lower imports and hence more jobs coming back to the US.
Yet, most economists are convinced that the ongoing trade war is a tactical mistake that will benefit no one. Even many Republicans, who are pro-trade are unhappy and have openly expressed their disagreement about this direction. Trump had campaigned on the strong plank of job creation, and two years down the line, he argues that the tariffs are going to save jobs and even bring jobs back from overseas. But there are few takers for this argument among both economists and business leaders, who have warned that though a few jobs may be created, many more jobs are likely to be lost, an angle that Trump is not considering at the moment.
In a recent release, The Tax Foundation predicts 48,585 job losses from the tariffs Trump has already enacted on imports of washing machines, solar panels, steel, aluminium and US $ 50 billion on Chinese products. The Foundation claims that the job loss figure would soar to over 2,50,000 if Trump moves forward with tariffs on another US $ 200 billion worth of Chinese products. The crackdown is not only on China, but also on political allies like Japan, Canada and Germany. This month, the first impact on jobs was felt when 60 workers at Mid-Continent Nail, America’s largest nail manufacturer in Missouri, were given the pink slip. The company has stated that the figure could go up to 500 workers, if the tariffs imposed on steel are not reduced. The trigger came at the end of May when Trump administration put a substantial 25 per cent tariff on steel imports from Mexico, Canada and the EU, the main source of steel for the United States.
Experts argue that world trade is very interconnected and one product/ item cannot be seen as an individual identity. Some products are raw materials for final products made within the country, hence the price of final product will increase, affecting end consumers. In other cases, even if the products, like clothes and jewellery are end products, since the products are highly price-competitive, creating a domestic alternate will take time, and in-between, the common shopper will suffer. Also, trade war is mutual and no country will accept enhanced tariffs without retaliating, affecting people around the world. As expected, China has retaliated and in response has taxed agricultural and
industrial products, from soybeans, pork and cotton to aeroplanes, cars and steel pipes that are imported from the US. The fear is that going forward, China could also tax US tech companies like Apple, which could force the company to raise its retail prices to compensate. In reality, if the global trade war escalates, it can hurt consumers around the world by making it harder for all companies to operate, forcing them to push higher prices onto their customers.
The discussion on whether the tariffs are good or bad for America is currently raging not only around the world, but also with the US. Don Boudreaux, Professor of Economics at George Mason University, in a recent forum, strongly reminded the country that the case against tariffs is not for the sake of the world, but begins at home, to quote him: “When a Government obstructs its citizens’ access to goods and services that these citizens wish to purchase with their own money, that Government makes its citizens, as a group, poorer. And the fact that the goods and services in question happen to be offered for sale by foreigners does absolutely nothing to alter this reality”. As of now, the trade war looks to be getting fiercer, and countries like India that have been sitting on the side-lines can see the signals changing. The US trade deficit with India has become a sore point for the Trump administration, which wants full reciprocity in trade relations with all countries. Any move to levy retaliatory tariffs on India will badly hit small and medium enterprises in sectors like textiles, gems and jewellery, automotive, organic chemicals and pharmaceuticals. Garment exporters already struggling for competitiveness, could be hit very hard.
In the past few weeks, Trump has on many occasions publicly highlighted that he is unhappy with India’s tariff policy and has time and again pointed out that India imposes prohibitive duties of 100% on some products, which is unacceptable.
This stand has left little doubt about US intention. Experts stress that the easy access that Indian exports have traditionally enjoyed in the US market could be a thing of the past soon, if the Modi Government does not properly handle Trump’s demand on reciprocity in bilateral trade relations.
THE TAX FOUNDATION PREDICTS 48,585 JOB LOSSES FROM THE TARIFFS TRUMP HAS ALREADY ENACTED ON IMPORTS OF
WASHING MACHINES, SOLAR PANELS, STEEL, ALUMINIUM AND US $ 50 BILLION
ON CHINESE PRODUCTS.