Trump's trade policies: High on disruption and low on benefits

Tariffs could push up the dollar while an attempt to reduce the US trade deficit could squeeze the liquidity needed by others

- NIRANJAN RAJADHYAKSHA

Donald Trump will be sworn in as president of the US for a second time on 20 January 2025. Trump has already used social media to unleash threats of retaliatory tariffs against countries ranging from China to Canada. Even India has not been spared. India is one of the countries that Trump has threatened in case it moves ahead with using currencies other than the US dollar for its international trade.

Is there any method to this madness? One place to look for an answer is a book written by Robert Lighthizer in 2023 that I came across in the weekly newsletter by investment firm Marcellus. Lighthizer was the US trade representative during the first Trump administration. He outlines four principles for US trade policy. First, the US should not let its geopolitical adversaries benefit from easy access to its huge domestic market. Second, access to this US market should be used as leverage in trade negotiations. Third, trade policy should be actively used as a tool to make the kind of US economy that its government wants. Fourth, the US government should act unilaterally when needed rather than bother about the niceties of the multilateral trading system.