To understand this topic, one must first understand Trump’s vision. Trump is concerned that the profits of multinational companies are increasing and that America is borrowing heavily from the world, but the wages of American workers are stagnant. Between 2000 and 2023, the profits of American companies have increased from $500 billion to $3500 billion.
This has increased sevenfold. During the same period, the debt taken by America has increased from $5.6 trillion to $33.2 trillion. This has also increased almost sixfold, but during the same period, the average wage of an American worker has only increased from $335 per week to $375 per week. This has increased by only 12 percent.
Trump’s goal is to increase the wages of American workers and reduce the debt taken by America because taking on such a huge amount of debt can cast a cloud of crisis on America’s economic sovereignty. Trump’s increase in import taxes, i.e. tariffs, will increase the prices of imported goods in America. For example, a foreign car that is currently selling for $ 20,000 will sell for $ 25,000 after the import tax is imposed. This may lead to a decline in consumption by American citizens.
A family that was eager to buy a car for $ 20,000 may hesitate to buy the same car for $ 25,000. A recession may occur due to a decrease in consumption in America. JP Morgan Bank has expressed a fear of a recession of up to 60 percent. However, in my opinion, this assessment is not correct. Looking at the other side of the story, as imported cars become more expensive, cars produced in the US will become cheaper. The production of American cars will increase.
Suppose a part worth $1,000 in the production of a $20,000 American car comes from India. Due to Trump’s increase in import duties, this part will now be imported for $1,300. The selling price of the American car will increase from $20,000 to $20,300. In comparison, the imported car will be available for $25,000.
Therefore, paying the increased import duty on parts will be beneficial for American entrepreneurs and production in the US will increase. In addition, the US government will have an income of $300, which will reduce the government’s fiscal deficit and reduce the US debt. However, the second crisis in this is that if other countries increase the retaliatory import duties, American exports will be affected, which will harm the enterprises there. This will definitely happen in some areas, but this loss will be very rare. Entrepreneurs of every country will explore other markets. For example, American manufacturers will increase the production of trucks due to the cost of Toyota trucks in America. With the increase in production in America, the demand for labor will increase there. The final effect of this will be positive. Similarly, domestic production will increase in India instead of goods imported from America.
For example, the use of electrical household appliances will increase instead of electrical appliances imported from America. In this ups and downs, there will be a recession in the market for some time, but the effect will be positive in the long run. The main thing is that increasing tariffs will make it more profitable to produce in the American economy.
With the increase in domestic production, the demand for workers will increase there and the wages of workers will also increase. The collection of excise duty and import duty in America will increase. The profits of domestic companies will increase. They will pay more taxes. All these reasons can have a positive effect on the American economy. Trump’s policy is fundamentally correct. He knows how many countries are posing risks to the American economy by imposing high taxes on American goods. He has imposed the highest tariff on China, while China has also implemented a ‘like for like’ policy by imposing heavy tariffs on American exports, which is also proving effective.
This is the reason why Trump had to give a 90-day reprieve to many countries on high tariffs. India will also get some benefit from this. By the way, Trump has criticized India’s policy of imposing high tariffs on American exports on many occasions, taking its name. He has called India the ‘tariff king’.
The tariff policy will have a short-term negative impact on other countries. For example, the exports of enterprises selling components worth $ 1,000 from India will be affected. There will be an immediate decline in the level of production in India. The pressure on the profits of Indian companies will increase. Similarly, a decrease in production in other countries may lead to a recession in the entire world. How long this recession will last will depend on how quickly other customers become available. For example, it will be possible for Indian enterprises that manufacture car parts to export parts for cars manufactured in Europe or South America. We can divide the current global economy into two parts. One part is the US, which has a share of about 26 percent in the global economy. The other part is the rest of the world, which has a share of 74 percent, and trade between countries with 74 percent economies will now increase. Just as farmers quickly captured other markets after the end of feudalism. This process may take some time, but the recession that will occur due to the disruption of exports to the US will not be long-term. India is in a strong position to deal with this crisis. India’s exports to the US account for just 2.1 percent of our country’s income. Even if these exports were to stop altogether, the 2.1 percent would not have much of an impact because we would be able to export some of these goods to other countries, for example, if milk were to stop being sold.So farmers make a profit and capture another market. However, it will be difficult to leave the American market. We should leave the American-centric world behind and move towards a multi-centric world. The essence of the tariff issue is that increasing tariffs by Trump may be beneficial for American citizens, which will be harmful to the rest of the world in the short term but will prove helpful in building a new world in the long run.
