From fire to fizzle – President Trump has to take a U-Turn in his global Tariff war

Concept of reciprocal tariff will never succeed in the present trade scenario

- BY DR. NILANJAN BANIK

Renowned Nobel laureate economist Robert Solow was once asked if having a trade deficit is bad for any economy. He answered by saying he would always have a trade deficit with his barber and would always run a trade surplus with his students. Such is the nature of the game in the realm of economic transactions. Some countries are always better at producing certain goods and services, which they export, and they gain by importing those they are not as good at producing. Arguing that the US should impose equal reciprocal tariffs is fundamentally flawed. It contradicts the principle of comparative advantage - the very foundation of international trade since the beginning of modern civilization.

If the US were to implement reciprocity in tariffs, it risked a short-term recession and, potentially, a trajectory resembling that of Argentina a once economic miracle at the beginning of the 20th century that that ultimately declined as a result of protectionist measures. Beginning in the 1930s, Argentina imposed restrictions on labor immigration and sharply increased tariffs, resulting in long-term consequences that have contributed to its current status as a struggling and underperforming economy.