HOW TRUMP’S ‘AMERICA FIRST’ POLICY THREATENS GLOBAL TRADE

Trump's 'America First' policy aims to boost US manufacturing by reducing imports, especially from China, by introducing higher tariffs. This compromises the rules-based global order, disadvantageing smaller nations. The collapse of the WTO could hit the European Union economy four times harder than Trump's tariff hikes.

Last Updated on 24th December, 2024
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Picture Courtesy:  https://www.bbc.com/news/world-us-canada-45415861

Context:

Trump's "America First" policy threatens global trade by compromising multilateral institutions such as the World Trade Organisation and putting smaller nations at a disadvantage.

What does Trump’s ‘America First’ policy aim to achieve?

Trump's 'America First' policy aims to boost US manufacturing by reducing imports, especially from China by introducing higher tariffs on foreign goods, which may result in retaliatory measures from other countries, affecting global trade patterns.

How does Donald Trump’s ‘America First’ policy threaten global trade?

Trump's 'America First' policy directly challenges the multilateral trade system, which is based on internationally recognised rules and institutions such as the World Trade Organisation (WTO). 

Trump advocates for direct negotiations with trading partners, utilising US power for advantage. This approach compromises the foundations of a rules-based global order, resulting in unstable trade relations.

What does Trump’s approach mean for smaller nations?

They face significant risks as a result of Trump's policies. Historically, these countries depended on the WTO's dispute settlement system to protect their trade interests. 

Larger economies can impose their demands without international scrutiny, forcing smaller countries to accept unfavourable terms.

What are the potential consequences of the WTO’s collapse?

According to a study conducted by Germany's Kiel Institute for the World Economy and the Austrian Institute of Economic Research, the collapse of the WTO would hit the European Union economy four times harder than Trump's tariff hikes.    

  • According to the report, the EU's real GDP could fall by 0.5%, with Germany suffering the most and the United States slightly less. China would suffer the steepest losses."

Smaller nations, particularly those with fewer trade partners, may suffer greatly as they rely heavily on multilateral trade rules to protect their interests.

How does the situation affect poverty reduction in developing countries?

Global trade has played an important role in poverty reduction in developing countries. Countries that are more integrated into the global trade system have experienced faster economic growth.

The collapse of the WTO could reverse this trend, particularly for countries in Africa, Latin America, and parts of Asia that have limited trade agreements, leaving them isolated from the benefits of global trade.

How will Trump’s ‘America First’ policy impact Indian businesses?

Trump's 'America First' policy is expected to have mixed effects on Indian businesses.

It may create opportunities in sectors such as information technology, pharmaceuticals, and defence; however, it may also present challenges due to higher tariffs and a stronger US dollar. 

Indian businesses can adapt by diversifying their markets and investing in sectors that align with the US-India partnership, such as defence, technology, and pharmaceuticals.

The 'China+1' strategy, in which businesses shift operations from China, may provide opportunities for India to attract more manufacturing operations.

Way Forward

Although the rules-based system is disintegrating, international trade will continue. Smaller, more exclusive frameworks are likely to emerge, potentially more efficient than the current WTO system. 

While this does not mean the end of globalisation, it will undoubtedly make life more difficult for smaller countries that must adapt to the new dynamics of global trade.

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Source: 

Indian Express

PRACTICE QUESTION

Q.How does Trump's "America First" policy impact the stability of global trade and international trade agreements? (150 words)

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