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SHAGUN (S): WHAT KIND OF ECONOMIC DAMAGE AND IMPACT ON GLOBAL TRADE DO YOU FORESEE IN THE COMING DAYS DUE TO TRUMP’S RECIPROCAL TARIFFS AND RETALIATORY ACTIONS BY OTHER COUNTRIES? AMITENDU
PALIT (AP): What is being seen is a major setback to the global rules-based system that is run by the World Trade Organization (WTO). The system abhors unilateral trade protections unless
and until they are justified by very serious circumstances on the part of members. The WTO was able to bring down the cost of trading across borders through progressive reduction in tariffs
and other trade facilitation measures. However, the US tariffs and retaliatory responses will undo the system. The current US trade policy is weaponising the American market for economic and
political objectives. Weaponisation of economic advantages and assets is not new. In recent years, China and Russia have also made similar attempts. But the costs are beginning to show up —
not just economic, but also social and political. Tariffs will mean economic hardships not just for the US economy but for the global economy at large. The impact of tariffs through higher
prices and lower demand might eventually lead to economic contraction. The US is likely to face not only higher prices, but also lower revenues due to diversion in trade to other markets.
The plan might be to compensate consumers by supporting them with funds freed up from administrative reforms that the US government is bringing in — by cutting down the US Agency For
International Development or USAID, compressing the size of the government, squeezing federal funding, cutting federal taxes and higher tariff revenues. So, that is the fiscal logic for
Trump. While he is not talking about a recession, he's talking about a transition.