Anuradha Chenoy
U.S. President Donald Trump has initiated a global trade war — politely called “reciprocal tariffs.”
Tariffs are taxes that countries levy on imported goods which make them more expensive and unaffordable with the intent of encouraging domestic manufacturing. At the same time, the global economy prospers if some goods are imported from other countries where they are cheaper to produce, and satisfy domestic consumers. In return, the importing country can produce goods or technologies that serve the exporter countries. This becomes a cycle of trade flows and value chains based on comparative or even absolute advantage.
Trump, who won a second term on the slogan “Make America Great Again” (MAGA), has two underlying assumptions behind his economic un-planning.
One, that he can literally kickstart American manufacturing by putting high tariffs on basic goods imported from all countries into the United States. Two, he will use the instrument of reciprocal tariffs; i.e., any country that puts tariffs on U.S. goods will be subject to tariffs in return, whether those goods imported by the U.S. are important for the U.S. consumer or not.
This, he believes, will force countries that import U.S. goods to lower the taxes on them, so they are more affordable in the host country.