Dinesh Kamath's Editorial 'Trade wars can affect Global economic growth' that was published in Newsband

Trade wars can affect Global economic growth

Trade wars have an effect on economic growth worldwide. A whole range of American goods, from motorbikes and jeans to peanut butter and orange juice, will now face higher taxes when sold in the European Union zone. The trade war between Europe and the U.S. is intensifying. China, Mexico and Canada have joined hands in response to President Donald Trump’s controversial decision.

The first salvo in this ongoing trade war, however, was fired by Mr. Trump in March this year. Workers in America’s manufacturing sector have played a key role in Mr. Trump’s electoral success, so he is protecting their interests. But consumers in America and the rest of the world are likely to suffer

At the end of the day nobody actually wins a destructive trade war. Disadvantaging foreign producers in favour of domestic producers only increase the burden of taxes. This leads to slower global economic growth. The ongoing trade war is a “lose-lose situation” for the warring parties. The only winners will be special interest groups and consumers in countries that do not engage in the tit-for-tat tariff war, but their winnings will come at the cost of global growth.

The US is trying to dominate over world trade and EU is finding it difficult to compete. Hence, EU is finding way out of the clutches of Trump policy. This tariff war if it continues, US might have to face the consequences. If all countries go against US then there will be no end to retaliation and multilateralism will be in doldrums and World Trade Organization (WTO) will be a puppet in future. It is high time countries worldwide came together to promote the cause of free trade.

Global protectionism is the new talk of the town. U.S. is leading the way taking some harsh measures to give boost to domestic economy. IMF's global growth forecast of 3.9% in 2018 shows improving of trade relations between countries. Indian economy is going to grow at about 7.4% in the year 2018-19 according to RBI but protectionism and trade restrictions will hurt our exports. Trade pundits have already talked about the pros and cons, the sooner we realize it, the better it would be. Globalization has linked countries like a web, tangled, entangled and mingled in each other. 1991 reforms lead to a more robust domestic market in india, forex increased, private sector participation increased and all in all standard of living increased. Whatever be the benefits or dangers, indian government should focus on 270 million poor households living below poverty line and give them opportunities to live a decent and healthy life.

Those advocates of GATT, WTO LPG now should realize what is going to happen by centering round tariff war. A trade war is in the offing in new way which will have very bad consequences in the world. US threatens to impose sanctions if India purchases defence equipments from. Russia Made in India is considered as protectionism of India, US accuses. Is US trying to be hegemonistic?

Maybe there will be a positive spin to the trade wars in the form of localization as against globalization. This could lead to paring of the power of corporates and finance sector firms that make huge profits and keep shifting their assets. If it can usher in a collapse of tax havens. Local governments can regain importance and will be forced to wean off consumerism as progress model, thereby giving the Earth a break from all the trash that is being generated because of our current unsustainable life styles. It may lead to the realization that we all have to share the planet and rather than use military driven technology to feed into different sectors of industry, choose instead biotechnology and space engineering to advance newer technologies that will have a more positive impact on Life and the planet.

The US should realize that it could end up losing from this confrontation as well. Every day, low prices at Walmart was made possible by imports from countries like China. China's integration into the global trading order helped keep inflation benign for over a decade. Most reluctantly, major economic powers like the EU are standing up to US unilateralism, on climate change as well. If American businesses have influence over their government, they should lobby against this act of nihilism.