Trump and Tariff: The Paired Ts

Asoke K Laha, President & MD, InterraIT
 

The letter “T” is used now more often than ever before. Let me share my reasoning. Yes, I had deduced my hypothesis from Trump and Tariff, as both start with the letter “T”. As if to prove my reasoning, the other day President in his inimitable style proclaimed through his one-liner tweat “Trump stands for Tariff”.

Let me come to the point: the significance of Trump and Tariff, the ubiquitous pair of Ts. To put in correct perspective, the United States had accumulated a significant large trade deficit in the last twenty+  years, thanks to a global trade policy which is against American interests.  Under the North American Free Trade Agreement (NAFTA), products manufactured in Canada and Mexico can be imported into the U.S. duty free.  A U.S. Corporation can shut down their factory in Michigan or Indiana, resulting in the loss of manufacturing jobs in the U.S., and set up a factory in Mexico, and import the product into the U.S. without paying any duty, which contributes to large trade deficit with Mexico.  

Thanks to low or no tariffs, the manufacturing jobs started disappearing, unemployment went up significantly and resultantly trade deficit had increased significantly every year. The candidate Donald Trump campaigned vigorously against unfair trade practices and imposition of tariffs in the 2016 Presidential election. It is not surprising that, soon after President Trump took office, he actively started taking steps towards negotiating unfair trade treaties, imposing tariffs, and reducing trade deficit. During the last two years, unemployment is all-time low during the last fifty+ years. The U.S. economy is very healthy at present, and NAFTA has been negotiated to protect the U.S. economic interest. The US prosperity can be attributed directly to President Trump’s economic policies.

Some consider Trump’s penchant for tariffs shook the basis of global economic foundation. It is not alone the businesses mainly in two countries had reacted, but the entire gamut of stakeholders including farmers, common man and the list goes on. Why such things are happening now? Here I will induct a bit of IT.

The other day, Huawei Technologies Co. Ltd’s chief financial officer Meng Wanzhou was detained in Canada. Incidentally, that was at the same time when President Trump and Chinese President Xi Jinping were hammering out a truce on the sidelines of the G-20 meeting in Argentina. At this juncture, it is instructive to see the reasons that led to the detaining of the Huwei executive.  A clear-cut reason is still to emerge.  China has formally asked for the reasons for the detention, which is speculated to be something political. Illegal exports to Iran, technology theft, illegal trading, etc are said to be the reasons behind the arrest.

Another war that has erupted can be traced back to technology. That involves mastering technology and using it for gaining economic advantage over others. Accumulation of the state-of-the-art technology had given certain countries both financial and military muscle power. Undoubtedly, this had led to arrogance and supremacy of these countries over those which could not command such powers due to a variety of reasons, including lack of resources, inadequate research infrastructure, etc. Slowly, this had led to theft of technology, even the high-ended technologies. Though many conventions were brought to the fore and several institutions were created to prevent such thefts, the distortions continued unabated.

The present dilemma of tariff war is mainly due to lack of trust between the U.S. and China in technology and related fields.  The U.S. accuses China of heavy theft of technology. It also feels that major technologies developed in the U.S. laboratories are clandestinely taken away to China. Once they dissect such technologies and minutely examine them, they will be in a position to come out with the same technology, if not a better one. The U.S. claims that most of the technologies, which are being improvised in the laboratories and incubators in China including in the field of Artificial Intelligence and telecom, are all developed and tested by the U.S., including some of the nuclear inventions.

President Trump claims that this was going on for a long time, and the successive governments did turn a blind eye to such happenings to make the whole world know that the U.S. has a magnanimous mind to accommodate everything, including such things that weaken the very foundation of the nation. As a businessman, he swears that he cannot be a moot spectator to these unfortunate happenings. He wants to restore the pristine values and supremacy of the US. The coinage “America First”, unilateral imposition of tariffs, the subsequent trade wars, etc are being triggered by the unsavoury developments that have put the American interest at the bottom.

President Trump has his own supporters in the US. Everyone thought his firm stand and uncompromising views were primarily to focus on the electorate to gain mileage in the electoral process. Once the elections were over and the President receiving a solid setback in the elections, everyone thought, things were getting a little calmer. The late-night dinner with the Chinese President was construed as Trump is waving an olive twig towards the Chinese cowed by the huge pressure being exerted by some corporations and farmers’ lobby. Before the reportedly frugal food both shared away from the glittering lights of the media, the first signs of commotion after a thaw has started showing up with the arrest of the Huwei senior executive. Will that put the pendulum back to where it has started? Only time will be able to tell that. But one thing is clear that Trump has found a new ally in Tariff – an ally he may believe more than the countries in the NATO or trusted people in his own administration. Will it give him another four years in the White House? That is apparently the question being asked by many. Clearly, it eludes a precise answer.