- The global community must be wringing their hands in exasperation looking at the way Donald Trump’s threats of imposing tariffs on products imported into the USA have finally taken shape with the coming into effect of taxes. Indian thinktanks’ trade negotiation with their US counterparts did not materialize to the latter’s expectations and hence finds itself taxed at 25% and also an additional 25% for procuring Russian oil. From being mutually mentioned as natural allies and strategic partners, the USA-India relationship has headed southwards in a matter of days. Trump expected India to toe his whimsical ways and means, but failed to gauge PM Narendra Modi’s steely resolve in not acceding to the same. Our interests are paramount, you see.
PC: Newstrack
- The moot point to ponder over here is what it entails on the part of the Indian leadership to cushion the tariff fallout on the local exporters facing additional tariffs because of the US’s moves. Needless to mention, the reciprocal tariffs are an economic experiment that will bleed foreign sellers and US buyers before it’s over. Simple. Unfortunately, for an increasingly petulant, illogical, and irrational Trump, it’s the foundation for rebuilding American greatness. While campaigning on the America First plank last year, he claimed that this new American industrialism would create millions and millions of jobs. Has it, or will it? Trump’s 2018 tariffs against China neither raised nor lowered US employment in newly protected sectors. Lessons not learnt.
PC: NewsBytes
- China’s retaliatory tariffs had clear negative employment impacts thereafter. It’s easy to see why. Tariffs are all about beating rival products with a price disadvantage. But no matter how hard Trump tries, making things cheaply in America is difficult. US federal minimum wage is $7.25 per hour, and most states mandate much more. So, 40 hours’ work per week, for four weeks, earns at least $1,160. In California and New York, the minimum shoots up to $2,640, but it’s not enough to make ends meet. At California’s living wage of $28.7 per hour, not enough to make ends meet. At California’s living wage of $28.7 per hour, you need almost $5,000 per month. The minimum wage in Shanghai is only $374 per month. It’s $277 in Delhi for graduate workers, and $189 in Vietnam. How do you bring back low-tech jobs like a $200 per month job where $2,000 doesn’t suffice?
PC: GQ
- Especially when the $200 ecosystem has built up the advantage of scale. Apple CEO Tim Cook announced last week that every iPhone and Apple Watch sold anywhere in the world will now use glass made by Corning in Kentucky. But Corning has 21 plants in China to cater to the other 81% of mobile phones worldwide, plus tablets and other devices. That’s why China’s price advantage on everything from solar panels to lithium batteries and cars – due to scale – is hard to beat. Trump is thrilled by growing tariff revenue and vague investment promises from companies and countries, but costly goods, especially non-discretionary categories like medicines, are going to bite US customers. If India stops buying Russian oil, expect severe inflationary pressure all around.
