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Journalism of Courage
As US President Donald Trump brings the curtains down on the age of globalisation, India will have to unlearn much of its approach to international trade developed since the early 1990s.
Prime Minister Narendra Modi’s visit to Washington in February, the government’s intense trade talks with the Trump Administration over the last few days, and its cautious response to the imposition of 27 per cent tariffs on Indian imports underline Delhi’s recognition of the dramatic shift in America’s domestic politics on trade, the historic turn in the evolution of the global economic order and the need for a prudent handling of the current moment.
At the White House Rose Garden ceremony announcing a sweeping tariff war against America’s trade partners Wednesday (April 2), Trump was not the only one who spoke. Trump invited Brian Pannebecker, a retired auto worker from Detroit, once the heart of the world’s car production, to speak up.
Pannebecker had brought along a group of 20 comrades from the United Auto Workers Union, dressed in green jackets and hard hats. Expressing full support for Trump’s tariff war, Pannebecker recalled the tragic movement of auto factories out of Detroit and how a thriving industrial hub had been turned into a rust belt. He was confident that Trump’s tariffs would begin to produce positive results in the next few months.
The political setting for Trump’s “Liberation Day” speech was clear–he is mobilising the American workers to back him up against the massive attack on his tariff strategy from the old establishment. Trump said Brian “knows this business much better than economists”. It remains to be seen if Trump’s calculus on the trade war and Brian’s optimism will prevail over the gloom and doom on Wall Street and the fury of conventional wisdom.
Trump and his advisors appear confident that the inevitable short-term pain from the tariff war is necessary to restore manufacturing jobs for American workers and end the “loot and pillage” of America by its friends and foes alike over the last several decades. Unlike his predecessors in the White House and the so-called “globalist” establishment, Trump does not see virtue in ceding the US market in the name of either international leadership or alliance stability. He is not willing to pay the domestic costs of a $1-trillion trade deficit today. It is this fundamental domestic change that America’s friends and partners are unable to grasp.
Trump’s tariff war has not dropped out of the blue. Opposition to free trade has been one of Trump’s core political convictions for the last four decades. He has campaigned against globalisation through his three presidential campaigns in 2016, 2020, and 2024.
His success in turning the Republican Party, traditionally the champion of free trade and the interests of the wealthy, into a guardian of the American working class has been a near political miracle.
Cracks in Trump’s dominance of the Republican Party, however, have begun to show. A handful of Republicans in the Senate joined hands this week with the Democrats to oppose the president’s emergency tariffs against Canada. Managing the domestic turbulence unleashed by his trade war might be harder than dealing with the reactions from the rest of the world.
Trump’s confidence, misplaced or not, in calling for a tariff war is rooted in the bet that America’s partners, most of whom enjoy trade surpluses with the US, have more to lose. Despite the brave talk of retaliation in some quarters, some countries have promised to bring down tariffs on US goods.
Canada and Mexico are already engaged in complex bargaining with President Trump. The European Union, which enjoys a trade surplus of $200 billion, is angry but open to negotiations. China, which enjoys a surplus of nearly $300 billion, is defiant.
Many in the world hope to see China pick up the mantle of global economic leadership from the US. The current crisis in global trade is, at least, partly triggered by the concentration of global manufacturing in China and Beijing’s massive and persistent trade surpluses with most major economies.
If America is turning from one of the most open economies into a closed one, there is no evidence yet of China opening its doors for goods from the rest of the world. In the near term at least, those hoping to see China replace the US as the main destination for the world’s exports will be disappointed.
Meanwhile, China has a challenge of its own in dealing with Trump tariffs now amounting to more than 60 per cent (exactly the level that Trump had promised during his election campaign). While experts disagree on the scale of the impact, few doubt that the negative effects of Trump’s tariffs on the Chinese economy will be significant.
Many Asian countries that benefited from rerouting Chinese-manufactured goods into the US are now likely to run into US trade barriers. South East Asia is now likely to be squeezed by growing Chinese dumping of manufactured goods and the rising US tariff walls.
As the world enters the post-globalisation era, the challenge for India is to look beyond the multilateral mantras of the last few decades, negotiate bilateral trade deals with major economies like the US, Europe, and UK where India enjoys trade surpluses, and press for greater market access in China that accounts for most of India’s trade deficit.
Trump just shredded the old maps of globalisation. The road ahead for everyone is uncharted and tricky to navigate. India will also need a new wave of major internal reform.
