Has US Scored a Self-Goal?

AS DONALD TRUMP scored a self-goal with the tariff games of the past couple of months? Tariffs and strict immigration policy were meant to make America great again — the US would produce more goods and services with their own labor force and be less dependent on the rest of the world.

- MADAN SABNAVIS

With its economic might, this model looked theoretically possible, though not feasible. But the rather pusillanimous approach to tariffs has created a major disruption to the world economy, overwhelming the far more serious political conflicts in Ukraine and Gaza.

From the American point of view, this policy has got a large number of countries to open doors fully for negotiations. Any flexibility shown by countries on tariffs will be a victory for the US; but without bilateral treaties, where tariff rates become generalized, the doors are opened to all countries, raising the threat of dumping. This can be the larger threat of lowering duties on automobiles, engineering goods, food products, chemicals, electronics, etc.

But what will be the impact on the US? To begin with, any concession given by any country on lowering tariffs for American goods will mean higher exports for the US. Will this amount be large enough to offset its existing bilateral deficits? One cannot be sure, given that the US continues to be the largest importer of goods. Therefore, if its new tariff structure is rationalized based on how other countries lower their tariffs, the gains can be only on the exports side.