The rationale behind Trump’s move on tariff imposition is to revive his aim of Make America Great Again- which aimed to protect its economy and to create a replicating field of job opportunities and secondly to bridge the trade deficit that US has from their trade partners as according to a report from Global Trade and Research Institute (GTRI).
By Andrew Tayenjam
The present global economic scenario has been marked by Western hegemonic economic framework underpinned by the perverted trading system that favours the west in its’ profit guided trade. And because of the shift in the global economic paradigm, the relevance and the decisiveness of international financial institution–World Trade Organization (in particular) has come into question, encompassing with various allegations whether WTO is merely a puppeteer of West to serve their self-economic interests or really an effective forum to regulate certain global trade rules which ensures smooth trade flows among all nations predictably and to provide protection to those developing nations from unfair tariffs.
The question of concern over the changing multilateral global trade regime could be exemplified with the recent economic moves by US President Trump wherein he imposed tariffs on countries-Japan, Indonesia, India, EU, Philippines on various sectors- automobiles, textiles, handlooms, food products etc with India experiencing the ghastly economic downfall. According to some experts, the rationale behind Trump’s move on tariff imposition is to revive his aim of Make America Great Again- which aimed to protect its economy and to create a replicating field of job opportunities and secondly to bridge the trade deficit that US has from their trade partners as according to a report from Global Trade and Research Institute (GTRI). US’s trade deficit in 2024 surged to $ 918.4 billion and Trump sought to bridge these deficits through imposition of tariffs.
Here comes the supposed role of WTO that when there is any apprehension in the course of regulating trade between countries, the WTO Dispute Settlement Body arbitrates and negotiates through dialogues, proceedings, mutual agreements and so on. But this seems to be replaced by compensation in the from of Bilateral trade Agreements (BTAs) which US is employing. On the pretext of reducing tariffs, US proposed trade deals to those countries where they impose tariffs. For instance, US and Japan signed a deal where Japan would invest $ 50 billion in US which would create ample job opportunities in US; Japan would also open up their agriculture, automobile industry sector to US market and Us would also agree to reduce the rate of tariffs from 25% to 15%. In the case of Indonesia, Indonesia would remove tariffs of 99% on US and hinge Indonesia to purchase crude oil, LNG, Aircraft etc and US agreed to reduce tariffs from the imposed 32% to 19%.
This goes for India as well urging India to open up their market of agriculture- Wheat, Rice, Soybeans, GM Maize etc, Dairy sector, and even easing of FDI inflows into the Indian market. But India didn’t node to the proposed deal alleging that if India opens up its’ agriculture sector, then it would lead to dismantling of those who rely on agriculture for their livelihood and would impede the rural income. Production might proliferate but many farmers would lose their jobs since India cannot compete with those Agri-products of US being produced with high yielding seeds, fertilizers. On the other hand, the entry of GM Maize would also have a genetical as well as environmental problem.
Perhaps, US again imposed another additional 25% tariff on India, making it 50% on the pretension that India purchases oil from Russia alleging that India implicitly supports in favour of Russia in the Russia-Ukraine conflict. With this additional 25% imposition, there has been a worst economic downfall in sectors such as Organic Chemicals, Diamonds, Gems and
Jewellery, Steel and Aluminium, Leather and Footwear, etc. It is obvious that the additional tariff was the denial of obliging to the trade deal proposed by US, because US is not imposing tariffs on their other competitor countries- Bangladesh, Vietnam, China.
In this way, the changing global economic trajectory could be explicated from three different landscapes. Firstly, with all such regressive imposition of tariffs by US to developing Asian states, it has seemed to be undermining the provisions of WTO like Generalized Special Preferences (GSP), which emanates to offer reduced tariffs or zero tariffs to Least developed Countries (LDCs) or developing countries. Former US Trade Representative under Trump (2017-21), Robert Lifghtzer boasted in 2019 that he got India removed from GSP. Secondly, the replacement of BTAs undermine the Dispute Settlement Mechanism Body to arbitrate into the issue of trade disputes. Thirdly, the provisions in those proposed trade deal, be it to Indonesia, Japan or India undermines various protective measures laid down by WTO such as Special and Differential Treatment (S&D) provisions which lays out preferential treatment in sensitive areas, giving longer time periods for trade agreements, protectionist policies etc. The case of GM Maize is also another concern of the provision of Sanitary and Phytosanitary measures where every state would not be prevented from protecting the plant and human health.
India’s Stand
At this economically embroiling point, India is at its’ endeavour to diversify their markets across Africa and Asia. India sought to diversify their gems and jewellery export to Saudi Arabia where Saudi Arabia’s jewellery market is expected to grow from $ 4.56 billion in 2024 to $ 8.34 billion by 2030. India is also exporting their pharmaceuticals to African states like Nigeria, Egypt which sought to enhance a sound healthcare system for Africa thereby strengthening South-South partnerships. Moreover, in the recent UN General Assembly debate on the edge of UN turning 80 years old Universal Multipurpose Inter-Governmental Organizations, External Minister Dr. Jaishankar highlighted how unfair trade practices and tariff shocks have created instability in the world. He therefore urged for UN reforms based on rules based multilateral system, respect for sovereignty and adhering to fair trade practices.
(Andrew Tayenjam is pursuing a Master’s Degree in International Politics at Pondicherry University)