Dinesh Kamath's Editorial 'There can be no winner in the global trade war' that was published in Newsband

There can be no winner in the global trade war

Major economies continue to impose tariffs on each other. India is the latest to join the tit-for-tat battle. The first shot in the spiraling trade war was fired by the U.S. in March by US President Trump. U.S. tariffs will now affect Chinese goods. The European Union also joined the trade war this month.

While the India-U.S. tariff tiff could escalate, the amounts being discussed right now are minuscule compared to those under threat in the unfolding U.S.-China situation or even the spat between the U.S. and the EU. For long, global financial markets largely ignored risks of an all-out trade war among major economies, but things are changing quickly.

The fact is that all sides engaged in a trade war eventually lose. The longer it goes on, the greater the cost as growth slows down under the increasing burden of taxes. The only gainers in a trade war will be special interest groups, such as the U.S. steel industry, which also happens to be a major vote bank for Trump. Trump’s rejection of the G-7 communique that endorsed a “rules-based trading system” for the world suggests there may be no offer of truce from his side any time soon.

But one can’t blame US always. When India imposes 100% tariff on American motorcycles it is not global trade war, but when America imposes 10% tariff on Indian steel it suddenly becomes a global trade war. Same with China and America, Japan and America etc. Is it right logic?

Contradictions of capitalism are out in open through the trade wars.  The mutual animosity of nations may lead to mutual destruction and economic collapse besides political rumbling. It is also bad from consumers’ point of view. This tariff war is going to affect the common people of the whole world. It should be an eye opener for the protagonists of globalisation. Is US harbouring hegemonistic dreams?

The trade war started by President Trump is expanding rapidly and endangering the world economy by hitting at the tenets of free trade. China, EU, Canada are retaliating in equal measures and now India has also increased the tariffs on a number of imported goods to offset the US tariffs directed at India. The trade wars would result in reduction in global production and cause unemployment and also aggravate the balance of trade problems. The consumers would be worse off as they will have to pay more. Some US manufacturers may gain but a large part of US population stands to lose from these regressive measures.