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More retaliatory action against US

Trade war between China and USA is spiralling out of control as Trump plays havoc

More retaliatory action against US

China has imposed higher tariffs of 25 per cent on imports from the United States worth some $50 billion. This is in response to USA imposing similar tariffs on imports from China of an equal amount.

US had threatened to slap another round of tariffs on Chinese imports running up to imports worth $100 billion. If the US does that, China will have no room for coming with fresh tariffs on imports from US as China does not have imports of that additional amount.

China, then, is likely to come out with a round of restrictions on investments into the country and start squeezing the US companies already doing business in China. Thus, many of the large US corporations which are already having thriving business will stand to lose.

Additionally, the current round of Chinese tariffs is craftily designed. Tariffs have been imposed on imports of farm products like soya beans, corn and automobiles. These would hurt the interests of US farm producers and agriculture lobbies which are powerful segments in the conservative Republican Party bases. Adverse impact on restrictions of imports into China could thus politically hurt Donald Trump in his elections.

The moves and counter-moves of the US and China, slapping trade restrictions in the first place, are complicating economic relations between the two countries. These are spilling over into others areas as well like investment and operations of large multinational corporations. So far, US businesses have been feeling comfortable with Trump because of some changes in tax rules and other sops to corporates. These will start swinging to the other side.

Take for example China's tariffs on automobiles imports from US. This is likely to hurt US automobile companies, particularly Ford, which is a major player and provides large employment. Ford exports its Lincoln limousines to China, which is a major market for this expensive car, and this model will come under the tariff clouds. Ford will thus have to cut down production of Lincolns in turn.

Underlying these trade threats and actions of Donald Trump, there is a broader strategic objective of the US administration as well. China has evolved a new blueprint for its future industrial and economic growth. This is called the Technology Programmes for 2025. The broad plan under this programme is to nurture hardcore technology industries which are the core strength of US industrial economy. These sectors like telecoms, artificial intelligence, computer chip making, semiconductors, pharmaceuticals and high-end chemicals are the sectors where China wants to be world leader.

Just as China had become the "factory for the world" in the earlier decades and thus came to dominate the manufacturing industries and exports, the success of this approach had emboldened China to embark on a similar venture in high-end technology sector. This is also inextricably linked to China's strategic calculations of dominating global geopolitics in the twenty-first century.

A first cut of this competition and nurturing of capabilities was played out in two recent corporate battles in which the US administration and Donald Trump himself were actively involved. In spite of professing by the creed of free-market economics and laissez-faire in business decision-making, the administration interfered in the take-over proposal of a Singapore-based technology company for a US semiconductors major Qualcomm. President Trump stopped the takeover bid right in the middle of the process and the Singapore-based company was thrown out because of its effective links with a Chinese parent body.

The second such battle was over a telecoms company ZTE. The company was black-balled by the US administration and all its dealing with the US corporations frozen, resulting in the Chinese company almost pulling down shutters. Subsequently, at the intervention of President, XI Jinping, the company was sort of pardoned after it was told to pay a fine of no less than $1 billion and a kind of repentance. The company had earlier given false or untrue statements in the course of an enquiry by US official agencies.

In pursuit of his "America First" campaign, Donald Trump has been even more abrasive towards others. He alienated long-time US allies by personally castigating and hurling abuses at other leaders. Immediate neighbour Canada has been rattled, a country which anyway the US takes for granted. He has equally been rash towards Japan and EU, the last of which is not taking this capricious behaviour too kindly. Europe is preparing itself to strike back with tariff measures and some EU leaders did not desist from sermonising against such bad behaviour. More and more reports are now surfacing about Trump intemperance at the G7 meet where he liberally distributed his adversarial observations in US press.

Donald Trump is behaving diplomatically as if the world is his backyard and he can dump anything on it without anyone protesting. This might be because of his mistaken belief in America's lonely strength or it could also be from beneath his mind of a sense of innate inferiority about his dexterity in conducting global diplomacy. Whatever be the invisible springs of his visible actions, these are creating a new global order distinctly different from America itself had crafted for 70 years.

An immediate net gainer in the current situation appears to be Russia, which has become more acceptable now from its erstwhile pariah status after Ukraine invasion and the incidents of murder and attempt to murder its exiled spies and others who are critical of the Kremlin. Russia is getting rehabilitated. In all these developments, there is a lesson for India.

There was a report that India was considering to slap tariffs on certain imports from US in response to recent US tariffs. India is proposing to go to the WTO in seeking remedial actions. This would be injudicious. The more the waters are muddied between US and China and their trade falls, the better is for all other minor players. The extent of our exports to the USA falls into this category and some hurt from US tariffs on a few select items should be let go by. This should be in the longer term interest, both strategic as well as trade-related.

This would be a small price. After all, Donald Trump and this administration have already done a great favour by talking in terms of "Indo-Pacific Region", a change from their earlier lingo, which would not have amused the Chinese mightily, because it has diplomatic significance.

(The views expressed are strictly personal)

Anjan Roy

Anjan Roy

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