Indians need to pay close attention to President Donald J. Trump’s imaginary “trade war” with China. The conflict proves international economic power may have already shifted to Beijing.
The President seems to be targeting every country but the People’s Republic of China with his trade policies. The major trade wars Trump have launched have been against the European Union (EU), Mexico, and Canada, Eurasiafuture noted.
Trump targeted those countries because America is far less dependent on trade with them than with China. China is America’s trading partner selling the United States $2.343 billion worth of goods in 2017.
The United States cannot live without those goods because they fuel the nation’s retail industry. The United States Bureau of Labour Statistics estimated that 16.72 million Americans work in retail directly, and 20.314 million work in all retail and wholesale trades. Any successful trade war would eliminate a large percentage of those jobs and anger a lot of American voters.
Smartphones Explain Why Trump Trade War Fizzled
Trump also understands that the voters enjoy all the cheap consumer goods that come from China, particularly electronics. Trump himself is a devotee of one of China’s most popular exports – the smartphone.
Any increase in smartphone prices would do serious political harm because 224.3 million Americas, most of whom presumably vote, own a Smartphone, Statista reported. Smartphone users compose 74% of American households and 67.3% of the population of 327 million.
This gives China leverage over Trump because that country will manufacture 59.3% of the world’s smartphones in 2018, Statista estimated. That percentage will increase to 63.3% in 2019.
Since smartphones have become a necessity for many Americans, including the President. Trump has a strong incentive to keep mobile-phone prices as low as possible by allowing a high level of imports.
This is why Trump’s threat to embargo mobile phone technology from the Chinese firm ZTE was quickly settled in a face-saving agreement. It is also why Trump’s administration was eager to sign new trade agreements with China.
Trump’s Political Trade War
The inability to wage trade war on China puts Trump in a difficult place because he was elected on a get tough on China platform.
The elements in rural America, responsible for Trump’s surprise 2016 electoral victory are the most hostile to China. Those voters also benefit most from the cheap consumer goods the United States imports from China; mostly clothing, and electronics.
American electoral politics partially explain Trump’s trade war, the countries he is targeting produce mostly higher-end goods; that are consumed largely by upper class and urban Americans that did not for the Donald. Raising prices on such goods poises little threat to Trump or his Republican Party.
Electoral also politics seem to be the major motivation behind Trump’s steel tariff. The Donald placed a 25% tax on steel after the Republican Party lost a special election for the U.S. House of Representatives in Pennsylvania’s 18th District in steel country by just 627 votes in March, The New York Times reported. Trump carried the 18th District by 20% in the 2016 presidential election.
Trump’s steel and aluminium tariffs are all about the US Congressional election scheduled for 6 November. To retain control of the US House of Representatives, the Republicans need to win districts in the steel producing states of Ohio and Pennsylvania.
Many observers are predicting that the Republicans will lose control of the Representatives on 6 November. One fear that Trump has is that protectionist working-class voters will punish Republicans because he has not been tough on trade.
A likely scenario is that Trump will announce more measures designed to appease working-class voters before the election. Those measures will be symbolic and target products that have little impact on American consumers.
What India Can Learn from Trump’s Trade War?
The situation President Trump finds himself in should be a cautionary tale to India’s leaders.
The most important lesson India can learn from America’s situation is to not allow any nation to become its major supplier of important or popular consumer goods. America’s president, supposedly the most powerful man on Earth has little leverage with China because of his country’s inability to fill consumer needs.
The other lesson India should learn is that global economic power may have already shifted to Beijing. The People’s Republic might be closer to becoming the world’s dominant power than many people think. India might need to develop a new foreign policy designed to contain China. Learning from America’s mistakes might help India avoid becoming helpless before Chinese economic power.
Developing a new global trading system that prevents any country from amassing the kind of power that China has amassed might be critical to preserving national sovereignty. America might be learning that lesson too late. Hopefully, India can learn from the USA’s mistakes.
