Democracy could be the great casualty of Trump's war

For all his grandstanding, barely three months since taking office, US President Donald Trump has virtually reversed his headline-grabbing tariffs, barring the de minimis 10% on all countries and 20-25% on steel, aluminum and automobiles.

- MANOJ PANT

Item-specific tariffs on computers, smartphones and electronic peripherals from China have also been reversed for the moment, with a promise of "more to come!"

It was not too difficult to predict some of these reversals (shorturl.at/AZj8g). It is now well known that financial markets were spooked by a fall in US Treasury bond prices, with their rise in yields indicating a lack of faith in the US economy as buyers of this paper turned sellers. This was huge, as US trade deficits are financed by inflows of foreign capital and exports of services. If capital inflows reverse, Trump's budgetary plans would come under threat, as also the global primacy of the dollar.

At the same time, China has been pushing its yuan as an alternative to the dollar. The prospect of a tariff-led rise in US inflation while interest rates rose made even his own supporters in the field of business vote with their feet against his tariff policy. Yet, he has persisted with one aspect of his agenda, by raising tariffs on China to ridiculous three-digit levels. So, in the end, it boils down to a US versus China game. The question, however, is: Was it only about tariffs or does he (and his trade team led by Peter Navarro) have a long-term plan? Is there any method to this madness? And what is the role of geopolitics in all this?