MAGA Effect Outside the US

Context

Donald Trump’s competitive trade rules, specially the imposition of higher tariffs, have had global economic repercussions.

Key Developments Under Trump’s Economic & Trade Policies

• Tariff Impositions & Trade Wars:

• • • Imposed tariffs on China, the EU, Canada, and Mexico, leading to retaliatory measures.
    • Affected worldwide supply chains, economic growth, and market balance.
    • Increased costs for U.S. Purchasers and businesses, contributing to inflationary pressures.

• Challenges to International Organizations:

• • • Reduced U.S. Contributions to the UN, and NATO.
    • Signed executives orders to withdraw from membership of the World Health Organization (WHO).

• Withdrawal from Global Agreements:

• • • Signed govt order directing U.S. withdrawal from the Paris climate agreement — again.
    • Exited the Trans-Pacific Partnership (TPP), affecting trade alliances in the Indo-Pacific.

• Impact on the U.S. Dollar & Inflation:

• • Higher tariffs raised home expenses, impacting purchasing power.
  • Trade tensions led to fluctuations in global markets, affecting investor confidence.
  • Some countries explored opportunity trade settlements, elevating concerns about the U.S. Dollar’s role as the global reserve forex.

India’s Response

• Since 2016, India has raised tariffs and extended security measures, diverging from its earlier trend of decreasing import duties.
• Despite internal pressure, India maintained higher tariffs but is now reassessing its stance in reaction to Trump’s trade guidelines.
• The Union Budget has decreased customs responsibilities on numerous gadgets, signaling a shift far from securities, aiming for higher trade relations with the U.S.
• Average customs obligations were decreased to 10.66% from 11.66%.
• Duty cuts on items inclusive of bourbon, high-end cars, and bikes are supposed mainly for Washington.
• The tariff cuts aim to address issues over India’s high-tariff economy as global trade barriers upward thrust.

China’s Consumption Push

• To counter the trade warfare with the U.S., China has brought a complete intake growth plan, marking the maximum significant regulations in over 40 years.
• The plan includes raising workers’ income and improving domestic spending to shift from an export-pushed to a consumption-driven financial system.
• China aims to make people extra assured in spending, with the government concentrating on a round 5% boom.
• Analysts anticipate an additional stimulus in 2025 to mitigate the impact of U.S. tariffs.

Europe’s stand 

• European leaders are reacting to the U.S. hazard to withdraw security help, with Germany growing defense spending and putting in a 500-billion-euro infrastructure fund.
• Although the short-term impact on GDP is uncertain, those measures aim to reinforce Europe’s security and economic growth.
• Some European countries are thinking about closer ties with Canada, in all likelihood with Canada joining the EU, as Trump’s policies push Canada away.

Way Ahead

• Expanding FTAs: India has already signed key Free Trade Agreements (FTAs) with UAE, Australia, and ASEAN nations, and is negotiating offers with the United Kingdom, EU, and Canada.
• Boosting Domestic Manufacturing: The Production-Linked Incentive (PLI) scheme must be multiplied to help key sectors like electronics, prescription drugs, and green energy.
• Promoting Agricultural & Service Exports: Strengthening worldwide markets for Indian agriculture, textiles, IT, and prescription drugs.
• Strengthening WTO’s Role: India ought to push for truthful change policies, specially for growing nations in the WTO.
• Championing BRICS & G20 Economic Reforms: India, as a key BRICS and G20 member, must lead discussions on de-dollarization, alternative payment mechanisms, and sustainable finance.
• Reforming IMF & World Bank Voting Rights: Advocating for more illustration of rising economies in financial decision-making.

Source: The Indian Express

UPSC Mains Practice Question

Q. ‘What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem and ambitions’. Explain with suitable examples. (2019)

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