'Trump Has Been Threatening India'

'Many of these issues will be resolved within 6 months because the US economy has started unravelling.'

Donald Trump's second term started with another trade war, precisely on February 1, 2025.

A trade war involving the US and Canada began with Donald Trump signing orders imposing 25% tariffs on all imports from Canada except oil and energy, which would be taxed at 10%.

Then Canadian prime minister Justin Trudeau hit back with 25% tariffs on C$30 billion ($20.7 billion) worth of US imports including orange juice, peanut butter, wine, spirits, beer, coffee, appliances and motorcycles.

Trudeau said Canada would impose tariffs on another C$125 billion of US goods like motor vehicles, steel, aircraft, beef and pork.

The Trump administration then imposed 20% tariffs on China, and in retaliation, the Chinese government imposed 15% tariffs on the United States.

What are the implications of this trade war on the global economy? Where will this lead to?

"When things are unravelling both externally and internally, within 6 months, circumstances will force Trump to make policy and viewpoint changes," Ajay Srivastava, Founder, Global Trade Research Initiative, tells Rediff.com's Shobha Warrier in the concluding segment of a two-part interview.

• Part 1 of the Interview: 'China To Gain Most From Trade Wars'

In what way will it change the world order? Do you expect the global trade route changing and China's dominance increasing in the coming days?

70% of the world trade takes place through global value chain.

Take the case of a shirt. India makes the yarn, and the yarn goes to China which is made into fabric, and the fabric moves to Spain where it is dyed. Then, it goes to Bangladesh or Vietnam where the final product, the garment is made. From there, it is exported to various countries.

Now, if tariffs are charged on any of these countries, the whole of manufacturing set up will be disrupted.

And people may stop using this global value chain, and new trade routes may emerge where tariffs are the least across the way.

Which new trade routes do you see emerging?

Right now, tariffs are there only for Canada and China. Trump says he will impose tariffs on most other countries from the 2nd of April.

So, we will get a good idea only after that.

Learning from the last experience, when he imposed tariffs on China, the direct line from China stopped but indirect lines via Mexico, Vietnam, etc came into place.

Same thing is going to happen this time also because China is the manufacturing capital of the world.

No country can match China in manufacturing. They will continue to produce more things.

The only difference will be how they will be distributed and through which countries.

The trade route will be restructured a bit to take care of Trump's tariffs.

In a globalised world, goods are supposed to travel freely from one country to another. Are we moving towards protectionism again?

The world was always protectionist.

In fact, Europe is the most protectionist. Their tariffs are low, but they have so many regulations, standards and other requirements that exporting goods without meeting those requirements is very tough.

From January next year, they are introducing more environmental regulations too which will tax the imports very heavily.

So, Europe will be going into full protectionist mode.

The US also is in full protectionist mode.

And these are the two largest markets.

China is a credit exporter, but they import only what they really need.

I would say the world is already protectionist.

Does that mean there is no globalised world?

Globalised world exists for many industrial products but not agricultural products.

Every country, big or small wants to protect its agriculture for right reasons. For example, for India, agriculture is not a trade issue but a livelihood issue where more than 20 crores depend on it.

How will this trade war affect India's economy?

So far, there has been no action against India except steel and aluminium tariffs which have been imposed on the entire world.

Trump has only been threatening India. We can talk about the impact only when he takes any action against India.

How long do you think it will take for the current situation to go back to normalcy?

My guess is, many of these issues will be resolved within 6 months because the US economy has started unravelling, and the stock market also is unravelling.

Externally, Trump is losing many friends.

When things are unravelling both externally and internally, within 6 months, circumstances will force Trump to make policy and viewpoint changes.

IMAGE: Ajay Srivastava

You mean, in a globalised world, the kind of protectionism Trump is bringing in, will not work?

He is basically catering to his vote bank, and we have to understand the psychology of the vote bank.

There were these hardworking people who were making things in the US. Then, the US decided to outsource manufacturing to China in the 1970s and the 1980s so that their corporates could earn more profits as China was and is cheap labour.

The result was, the corporates became richer in the US but jobs disappeared. And the living standards of the middle class came down.

The software revolution that happened later on benefitted only the upper and the educated class, and not the middle level educated class. They were hurt again because of the offshoring of jobs.

So, they felt the leaders were not doing enough for them.

Trump promised jobs and better life for them, and they voted for him the second time also.

But Trump's recipes for bringing back jobs and manufacturing are not going to work.

These recipes did not work in the last trade war. They will not work in this trade war also.

But it will take time for people to realise this.

By then, Trump's term will be over!

Feature Presentation: Aslam Hunani/Rediff.com