Mr.Donald Trump has definitely made headlines in the last week due to Reciprocal Tariffs he imposed on several nations. Many don't get to understand what it is all about but just start complaining on his action. What the world fail to understand is Mr.Trump is a Businessman before being elected as President. So he is trying to reduce the deficit of US by reducing the taxes it is paying right now since he feels countries are not fair to US when it comes to Trade deals. He has a point but my concern is the approach he is taking to address their demand.
Let us break down to lay man example - It is customary for houses to exchange vegetables, fruits, sweets between each other. Assume your house there is plenty of lemons and neighbour house there is plenty of drumstick then one fine day housewife from first house takes lemons in a plastic bag and enter neighbour's house. Pleasantries are exchanged and lemon is just an excuse to recollect Mother in law, Sister in law incidents happened in the recent past. Now in exchange to lemons long drumstick completely covered with newspaper (by that way no one actually gets to know the actual length) is given back. Conversation which started around 11am touched so many topics and both the ladies actually forgot its lunch time. So a Free Trade agreement is made between two ladies unofficially and this augurs well for the relationship too.
One country can have so many Natural resources which other countries may not possess. For example India stands in 4th position on Coal reserves, 7th spot on Iron & manganese ores, 6th largest reserve as far as Lithium., etc. Countries come up with Trade agreements which helps bilateral trade, improves employment, flourishes local community and thereby improves the overall economy. India is the leader as far as Pharma sector is concerned and during Corona India played a vital role supplying vaccines and medicines to the world. On the other hand India imports Crude oil and other petroleum products and with its population there is a huge need to keep importing. India is the only country where Gold reserves with Government is less and Gold is abuntantly available amongst the public and in other countries its the vice versa. If your Export is bigger than Imports then you are good to go whereas if your Imports is more than exports then year after year you start to build on your debts. US has got huge debts and the need of the hour is revolutionary changes like the one that is happening now. NASDAQ, SENSEX and major indices are hit very badly.
Mr.Trump has a point ..no doubt but approach he has undertaken to address this is the main concern:
1) WTO (World Trade Organization) is the governing body and there is a framework in place and he has completely neglected WTO which is not right. If Every country has their own terms and countries what happens to smaller countries like Singapore which will be squeezed and may be neglected.
2) It is not going to be that easy for American companies to switch their manufacturing from other countries back to US. Human Capital, availability of raw materials, skillset and n number of factors has to be taken in account before companies can make a switch.
3) If other countries unite and start to retailiate the tariffs imposed then that is only going to backfire US.
4) If US thinks it can stop China from dominating world market then I am afraid US doesn't realize what China is capable of.
All being said India is quietly watching the proceedings and have a huge opportunity to cash in the ongoing Trade war. If India can work its way to manufacture machinery, Toys, semiconductors, phones and computers then India has a very big change to dominate World Trade. As long as you don't depend on other countries you are good. This is as simple as not depending on your parents Wealth to build your future. The more you depend just brings more disappointment as there is a gap in desire and actuals. Similarly if countries start investing on Education and bring literacy rate up, improve Infrastructure facilities, bring down unemployment rate and start focusing more on manufacturing then automatically economy will boom, GDP rate will improve and we need not worry on Tariff imposed by other nations.
