The Policy Response We Require to Address Trump's Disruptions

Fiscal and monetary policy can both work in the same direction to spur economic growth while we wait for the dust to settle

- SUDIPTO MUNDLE

It is nearly a month since US President Donald Trump launched his trade war. Simultaneously, he has continued to wage war against immigration, decimated the US government, attacked liberal universities in America and turned American foreign policy on its head. As the shock waves of these disruptions reverberate across the world, political leaders have been scrambling to craft a response. Not an easy task, since he keeps shifting the goalposts. On the trade policy front, for instance, after his atrocious tariff policy announcements spooked financial markets, he backed off with a partial 90-day pause for all countries except China, the US's principal rival.

These uncertainties notwithstanding, all countries including India need to craft their policy response to contain the impact of the Trump disruption, a flexible one that can be adapted to further changes in his policies. For this, we must note that India will be impacted through two distinct channels: the direct impact of Trump's tariff policy and the indirect impact via the adverse effects of his disruptions across a wide front on US and global growth.