Showing posts with label Trump. Show all posts
Showing posts with label Trump. Show all posts

Thursday, June 12, 2025

The world urgently needs a revival of statesmanship

The recent violence in Los Angeles, California, stemming from protests against Immigration and Customs Enforcement (ICE) raids starting June 6, 2025, has evoked strong responses from global communities. The militarized response to what began as localized unrest has triggered a much wider debate, both within the United States and internationally. The deployment of 2,000 National Guard troops and the placement of 700 U.S. Marines on “high alert,” coupled with the use of tear gas, rubber bullets, and curfews, has drawn sharp criticism. This heavy-handed approach is not entirely unexpected, given President Trump’s experience with the 2021 Capitol Hill riot, which underscored his administration’s preference for forceful responses to civil unrest. The ensuing tension between the California state government, led by Governor Gavin Newsom and Mayor Karen Bass, and the federal government has raised further concerns about governance, human rights, and the risk of escalating conflict.

The global response has been swift and critical. The United Nations has called for de-escalation, urging U.S. authorities to avoid “further militarization” of the response to the LA protests and to uphold the right to peaceful assembly. Australian Prime Minister Anthony Albanese expressed concern over the handling of the unrest, particularly the use of rubber bullets. Canada, Ireland, Germany, and the Netherlands have issued travel advisories for their citizens visiting the U.S., citing risks of detention due to aggressive immigration enforcement. Amnesty International USA condemned the deployment of National Guard troops as an “unnecessary militarized reaction” aimed at “crushing dissent” rather than protecting communities. Human Rights Watch (HRW) framed the LA protests as part of a broader fight for human rights in the U.S., noting that ICE raids targeting sensitive locations like courthouses, schools, and workplaces have sparked nationwide demonstrations. The Economist described the U.S. administration’s response as appearing to “create confrontation” and fuel a “cycle of protest, violence, and repression” for political gain, rather than prioritizing order.

Notably, the U.S. is not alone in witnessing violent protests or militarized responses to civic unrest, particularly in recent years. Civilians have faced brutality in active war zones like Israel-Palestine and Russia-Ukraine; in terrorism- and gang-war-infested countries such as Pakistan, Sudan, Somalia, Syria, Lebanon, Colombia, Venezuela, Ecuador, Peru, South Africa, and Kenya; and in nations governed by non-democratic regimes, including Myanmar, Bangladesh, the Democratic Republic of Congo, and Haiti. In India also, ethnic violence and alleged state oppression in Manipur have led to civilian suffering, internet shutdowns, and persistent unrest. These cases highlight a grim reality: the use of force against civilians is a global phenomenon, often exacerbated by weak governance, conflict, or authoritarianism.

Yet, the phenomenon of violent protests and their suppression by force is not confined to the developing world or conflict zones. Developed democracies like Canada, France, the United Kingdom, Germany, the Netherlands, Ireland, Belgium, and Spain have also experienced significant civil unrest in recent years. The Allianz Risk Barometer 2025 identifies France, the UK, Germany, and Spain as global hotspots for protest and riot activity, with over 80,000 incidents recorded in 2024 alone. In France, protests over economic policies and immigration have frequently turned violent, while the UK has seen riots linked to immigration and political polarization. Germany and the Netherlands have faced farmer protests and demonstrations over energy costs, and Ireland has grappled with tensions over immigration policies. These parallels with the U.S. and Canada underscore a troubling trend: even stable democracies are not immune to the forces driving public discontent and violence.

In most cases, the catalysts for violent civilian protests are clear: restrictive immigration policies that limit labor mobility, economic stress inducers, e.g., unemployment, inflation, and unfair taxation, curbs on personal liberties such as religious freedom or reproductive rights, suppression of ethnic or religious minorities, and deepening political polarization. These issues, while diverse, share a common thread: they erode trust between governments and their citizens, creating fertile ground for unrest. The Los Angeles protests, sparked by ICE raids targeting immigrant communities, exemplify how policy decisions can ignite broader social tensions, particularly when met with disproportionate force.

In my view, the primary reason behind the rise in violent tendencies in recent times is the overwhelming dominance of divisive and parochial political agendas across the world. Statesmanship, a hallmark of much of the 20th century, has all but vanished from the global stage. The world once saw leaders like Franklin D. Roosevelt, Winston Churchill, Nelson Mandela, and Nehru, who, despite their flaws, prioritized unity, long-term vision, and humanitarian values over short-term political gains. Today, too many leaders are elected on platforms that amplify division, fear, and narrow self-interest. These leaders often lack a global perspective or a commitment to addressing the root causes of unrest—poverty, inequality, and injustice. Instead, they resort to populist rhetoric or militarized responses, further alienating their citizens and fueling cycles of protest and repression.

The absence of statesmanship is not just a leadership failure; it is a systemic crisis. Global challenges like climate change, migration, and economic inequality require cooperative, forward-thinking solutions, yet many leaders prioritize domestic political survival over collective progress. In the U.S., the LA unrest reflects a failure to bridge divides between immigrant communities and policymakers, exacerbated by a federal response that prioritizes control over dialogue. Similarly, in Europe, protests over immigration and economic policies highlight a disconnect between governments and their increasingly frustrated populations. Even in war-torn regions like Sudan or Myanmar, the lack of visionary leadership perpetuates cycles of violence and displacement.

To break this cycle, the world urgently needs a new generation of statesmen and stateswomen—leaders who can rise above parochial agendas and embrace a humanitarian approach to governance. These leaders must prioritize dialogue over confrontation, addressing the root causes of unrest rather than merely suppressing its symptoms. For instance, immigration policies could focus on integration and economic opportunity rather than punitive enforcement, as seen in the LA raids. Economic reforms could tackle inequality and inflation through inclusive growth, rather than austerity measures that disproportionately harm the vulnerable. Political polarization could be countered by fostering civic engagement and rebuilding trust in institutions, rather than exploiting divisions for electoral gain.

Moreover, the international community has a role to play in fostering statesmanship. The UN, regional organizations, and civil society must hold leaders accountable for human rights abuses and militarized responses, while supporting initiatives that promote peacebuilding and social cohesion. Grassroots movements, empowered by technology and global connectivity, can also pressure governments to prioritize the common good over divisive politics. Education and public discourse must emphasize empathy, critical thinking, and global citizenship, equipping future leaders to navigate an interconnected world.

The violence in Los Angeles, like unrest elsewhere, is a symptom of a deeper malaise: a world led by division rather than vision. The global outcry over the LA protests—whether from the UN, human rights groups, or concerned citizens on platforms like X—signals a shared desire for change. Yet, change will not come without leadership that transcends borders, ideologies, and short-term gains. The world urgently needs statesmen and stateswomen who can heal divides, inspire hope, and forge a path toward a more just and peaceful future. Only then can we move beyond the cycles of protest, violence, and repression that define our time.

Wednesday, May 21, 2025

“Trade” over “War”

After the recent geopolitical escalation between India and Pakistan, the president of the United States (POTUS), Donald J. Trump, has become one of the most hated personalities amongst Indian households. His babbling about facilitating a truce between two neighbors, offering trade deals as incentive, may not have gone well with most Indians; even though the Indian government has officially denied any role of the POTUS and his administration in negotiation with Pakistan. This is perhaps one of the reasons the market discourse has mostly ignored “the strategic economic partnership” signed between U.S. President Donald Trump and Saudi Arabia’s Crown Prince Mohammed bin Salman, last week.

In my view, this renewed strength in the Arab-US relations is very significant, not only for the US economy, but also for a much wider global economic context. Although, it might be speculative on my part, nonetheless I believe that this “strategic economic partnership” deal could potentially result in—

(a)   a material reduction in global geopolitical conflicts and yielding some peace dividend to the global economy;

(b)   strengthening of the USD, reinforcing its position as the primary global reserve currency;

(c)   additional demand for the US treasuries, arresting the yields;

(d)   sustainable reduction in energy inflation, affording good reasons to the US Fed for embarking on a sustained easing path;

(e)   normalization of global trade, especially aiding the growth in export-oriented economies like China;

The US-Arab strategic economic partnership

Last week, the U.S. and Saudi Arabia signed a strategic economic partnership that includes a range of deals. The agreement aims at boosting bilateral economic ties. The white house claimed that the deal entails a total investment commitment of $600 billion by Saudi Arabia into the US, encompassing investments in defense, energy, technology, arts, and zoology. Notably, some sources have claimed that the actual new commitments may be closer to $283 billion, since the US$600bn number includes some projects predating the latest agreement.

The deal reflects Saudi Arabia’s interest in diversifying its economy and the U.S. goal of securing foreign investment. A significant part of the agreement is a $142 billion arms deal, including sales of military equipment to Saudi Arabia, strengthening its defense capabilities and U.S.-Saudi security ties.

The stated part of the deal is significant. However, various sources are alluding to the unstated part, which could be transformative. For example,

(i)    The BoFA Securities strategist believes that this deal implies that the US is abandoning the original plan to boost its oil production to 3mbpd (from the current 1.7mbpd), as it is influencing OPEC+ “to boost oil output in return for lifting Russia sanctions, military support for OPEC nations (Iran deal a further catalyst)”.

(ii)   As per Reuters, Trump has relaxed requirements for Saudi Arabia to normalize relations with Israel as a condition for U.S. support in developing a peaceful nuclear program, signaling a shift in U.S. foreign policy priorities. This could pressurize Israel to stop hostilities against Palestine, ending one of the most brutal conflicts in recent years and paving the way for reconstruction of Gaza and other Palestinian territories.

(iii)  Lifting economic and other sanctions on Syria simultaneously with signing this deal, corroborates this shift. Given Trump’s focus on n U.S. economic and strategic interests, it could be reasonably speculated that lifting of Russian sanctions is on the table, as it aligns with these goals, especially securing energy supply chains for the European Union, and preventing the UE, Russia and Arabs from becoming too close to China. Resumption of US-Russia trade could also open new possibilities of a durable ceasefire between Russia and Ukraine.

(iv)  Saudi Arabia agreeing to retail petrodollar (pricing its crude in USD terms) implies a consistent demand for the USD, and flows into the US treasuries. This could halt the process of de-dollarization, if not completely reverse it.

To sum up, the latest US-Arab deal removes much uncertainty and adds some hope of a peace dividend accruing to the global economy in the next couple of years. Trump promoting “Trade” over “War” is definitely a good sign for the financial markets in particular.

India is reportedly at an advanced stage of trade negotiation with the Trump administration. Hopefully, this deal would be a balanced one and shall remove the uncertainty hanging over the markets for a couple of months.

Wednesday, April 9, 2025

Tariff Tantrums – Where do we stand?

The global markets are shaken by the trade war initiated by the US by announcing arbitrary unilateral tariffs on all of its trade partners. Some large trade partners of the US, like China and EU, have reportedly threatened to join the war with full vigor, making the global market extremely jittery.

Tuesday, April 8, 2025

Tariff Tantrums

Last week, President Trump announced a hike/imposition of tariffs on most of the USA's imports. As per the proposed tariffs that are presently scheduled to come fully into effect from 9th April 2025, the Trump administration has proposed a 10% base tariff on all imports into the US. Over and above the base tariff, higher rates of tariff are applicable on several countries based on the trade deficit of the US with each such country.

The global reaction to the tariff announcement has been varied. Some trade partners like China have responded aggressively by announcing matching higher tariffs; whereas the others, like India, have adopted a wait and watch approach, hoping to find a middle path.

Apparently, the calculation of the proposed indiscriminate tariffs has been done through mindless spreadsheet application, using the recent US trade data. Though President Trump had made tariffs a key issue in his poll campaign, the administration appears mostly unprepared for this. The explanation offered by the US administration for taking steps is not convincing. For example, the arguments presented in an interview of treasury secretary Scott Bessant, remind of an old folklore that goes like this:

“Once a little lamb walked to the river to quench his thirst. At that time the king of the jungle, a Lion, was also drinking water from the river a few meters upstream of the lamb. The smell of this small soft lamb whetted lion’s appetite. He wanted to eat the lamb immediately, but the farce of being a just and kind king, he has perseveringly created over years, prompted him to look for a valid excuse to kill this small creature.

After thinking for a moment, he roared "How dare you make me drink dirty water?”. Not sensing the trouble, the lamb politely replied, my Lord, I am downstream, while you are drinking water upstream. It is me who is drinking your dirty water!”

Determined to kill the lamb, the lion retorted, “but why did you laugh at me last summer when I passed by your abode?". Now sensing some trouble, the lamb meekly replied, "My lord, it could not be me, because I was only born just a couple of months ago”. Unable to control his urge, the lion lamented, “If it was not you, it must be your mother. You must pay for her sins.” Saying this he jumped on the lamb and killed him.”

A career hedge fund manager, who has been feasting on the miseries of others all through his adult life, suddenly speaking the language of Karl Marx, and rooting for the hungry and homeless, would make sense only if he wears the rob of a monk and speaks from a monastery. It sounds even more unconvincing when seen in tandem with the DOGE’s move to end humanitarian aid, in some cases a couple of million dollars, to the world’s most poor and disease prone people.

Listening to President Trump and his team members, I get a vivid impression that Tariff tantrums they are throwing are just an ill-thought excuse being used for a bigger design. This is clearly a fight to stay relevant in the emerging world order. The US economics and demographics do not support its pole position in global geopolitics – a position they have enjoyed and greatly benefitted from for over 80 years now.

The US gained its pole position by dropping “Fat Man” (Nagasaki) and “Little Boy” (Hiroshima), eighty years ago, and has been repeatedly shocking the global community through economic, financial and geopolitical shocks to retain this position. The latest tariff tantrums may just be part of that series.

I do not subscribe to the conspiracy theory doing rounds on social media that this may just be a ploy to push the US yields down, to ease the fiscal pressure and facilitate smooth refinancing of the debt maturing in the next couple of years, for three simple reasons:

(i)    The US mostly borrows in its own currency. A simple quantitative easing (USD printing) would be sufficient to refinance debt.

(ii)   Bond yields are mostly a function of demand and supply for the underlying bonds. Tariff war would certainly weaken the US economy - at least in the short term (2-3years), if not structurally. Besides, it will also trade linkages of the US. Weaker growth (weaker USD) and declining external linkages would invariably result in poor demand for bonds, hence higher yields. To the contrary, a strong economy with contained inflation (cheaper imports) and stronger external linkages is more likely to stimulate higher demand for the US bond and hence lower yields.

(iii)  Approximately, one third of the US public debt (US$8-9 trillion) is owned by the foreign entities. Out of this, Japan (US$1.1 trillion) China (US$800bn) and the UK (US$700bn) are major holders of the US debt (US Treasuries). A full-fledged trade war could result in these holders optimizing their UST holdings and might further reduce demand for the US debt.

There is also a serious disconnect between the immigration policies and the objective to make the US a manufacturing power again. The US wage structure, average US citizen skill levels, the cost of imported raw material and capital goods post tariffs, and a weaker USD may not be conducive for an efficient manufacturing ecosystem. The US would need cheap foreign labor, strong USD, strong trade linkages with suppliers of raw material and engineering goods for at least one decade to relocate manufacturing back to the US.

Notwithstanding the brouhaha over the US$5mn gold card, in the absence of an assurance of a free, liberal, diversified, inclusive and equitable society and stable policy environment, not many investors and highly talented workers may find the US a suitable investment/career/study destination. The European competitors may be happy to host these investors/workers.

In my view, Trump’s tariff tantrums are part of the traditional US ‘shock and awe’ tactics. They will test waters with this sometimes and stage a strategic retreat, if it does not show the desired effects, viz., reinforce the US position as undisputed superpower; achieve fiscal correction without triggering a deeper demand recession, and probability of putting Trump’s face on the Mount Rushmore. However, if it does show the desired results, no one should have any strong reasons for worrying.

In the worst case, if the US stays committed to tariffs and its trade partners prefer to contest rather than yield, we must be prepared for the end of the rule-based global order that has prevailed since the end of WWII. The age of Vikings returns. All powerful nations begin campaigns to acquire territories and resources. The weak nations get subjugated. Poor and starving people are made slaves. Indentured laborers would rebuild empires, before the disease and death destroys it all.

In this context, it is important to listen to the warning of the Prime Minister of Singapore. 

Wednesday, March 26, 2025

Loving silver on my scalp

A friend recently remarked, “I don’t want to be young for the first time in my life”. He was alluding to the challenges Gen Z (born between 1997-2012) and Generation Alpha (born after 2012) children are likely to face in the coming years. I fully agree with him. The silver on my scalp gives me comfort that a relatively well lived life may end as comfortably for me, and many people my age. But young people in their 20s have no such comfort.

Tuesday, March 25, 2025

View from the Mars - 5

Continuing from the last week (View from the Mars – 4)

For a small investor like me, whose investment spectrum is limited to the locally available instruments and opportunities, it is critical to assimilate the impact of the global events on the local economy and markets. A natural follow-up would be to assess if a change in investment strategy and asset allocation plan is required to factor in the impact of the global events.

In most cases, the impact of global events is temporary and does not warrant any change in the investment strategy and/or asset allocation. However, some global events could have a lasting impact on the domestic economy and markets. Such events often require material change in the investment strategy and asset allocation.

It is important to note that in the past three months, the world has not witnessed any event that was not widely anticipated. The shift in the US policy (fiscal and monetary) paradigm was widely anticipated and documented. The response of the trading partners is also more or less on the expected lines. The geopolitical developments, economic growth, currencies, equities, bonds, commodities, etc. are mostly moving in the direction as was widely anticipated. In my post about outlook and investment strategy for the year 2025  (shared in the beginning of 2025), I had shared my anticipation of these events and consequent adjustments in my investment strategy and outlook.

Notwithstanding, let me again note down the important current global events that could have a material impact on the Indian economy and markets. (Please note that I have taken some inputs from AI tool Grok 3 (beta version) in preparing this post.)

Opportunities for India

Supply Chain Shift: Trump’s tariffs are pushing U.S. firms to diversify away from China. There is an potential for India to grab this opportunity. In 2024, India’s electronics exports to the U.S. spiked 22%. The Bilateral Trade Agreement (BTA) framework, as discussed by the Prime Minister and White House during the PM's February visit, could open bilateral trade opportunities worth US$200bn by 2027.

Visa curbs (H-1B denials up to 35%) might force Indian IT to onshore talent, boosting hubs like Hyderabad—Wipro’s hiring 10,000 locally, providing impetus to local economies. Less immigration pressure might also redirect diaspora skills home, powering startups. As per NASSCOM, 1,200 new startups became operational in 2024.

Defense and Tech Edge: Trump’s anti-China could tilt trade balance in favor of the Quad. India has reportedly already moved forward with $5 billion arms deals with the US, since January. COMPACT tech transfers (AI, chips) could leapfrog India’s R&D. India’s premier defense research organization (DRDO) is eyeing U.S. quantum tech.

Energy Stability: Peace in Ukraine and the Middle East, after the US intervention, could steady oil at $70-$75. India, which is 80% oil-import-dependent, saves $10 billion annually if prices don’t spike. LNG from Qatar gets cheaper too.

Trade normalization: A calm Black Sea and Red Sea (Houthi attacks down 40%) unclog shipping, allowing India’s $45 billion EU exports to flow smoothly via Suez. Peace could also revive the International North-South Transport Corridor (INSTC) with Russia-Iran, cutting freight costs 20%. 

China’s Retaliation Opens Doors: China’s counter-tariffs—25% on U.S. autos and tech imports and yuan devaluation (5% drop, PBOC) makes Chinese goods pricier. India’s textiles (now up to 20% cheaper than China’s) and pharma generics (40% of the U.S. market) could take some of the US’s market from the Chinese suppliers.

Investment Inflow: China’s economic slowdown as a consequence to slower exports could reverse the flows of global capital (FDI and FPI) towards India. Though FDI into India hit $70 billion in 2024, up 12% yoy, the rate of growth in FDI flows has been declining for a few years. Weakness in USD and sharp fall in the US treasury yields could turn the global investment flows towards the emerging markets. India being one of the major emerging markets, would certainly stand to benefit.

Cheaper Capital: U.S. 10-year yields dipped to 4.3%, EU’s at 2.1% (ECB). India, having over $400 billion of external debt does benefit directly from the lower yields. Even Rupee bonds could draw more investors if yields keep sliding, easing pressure on domestic banks which are constrained by an adverse credit-deposit ratio for many months.

Export Boost: Falling inflation (U.S. PCE at 2.7%, EU at 2%) lifts disposable income of Americans and Europeans. As per GTRI, India’s consumer goods (handicrafts, apparel) could see a 10% uptick in demand due to lower inflation and a weaker dollar.

Threats for India

Export Pain: India’s $77.5 billion U.S. exports face a $7 billion hit from tariffs. Textiles and gems bleed the most. IT’s $108 billion U.S. revenue stalls if H-1B cuts force wage hikes (Trump’s 50% proposal, per ORF). Remittances (~$10 billion from the U.S.) could be materially affected.

Retaliation Risk: Retaliatory tariffs on India’s exports to the US could potentially dent some of the $45.7 billion trade surplus India enjoys with the US.

Commodity Competition: As peace returns to Russia, Ukraine and the Middle East, India’s petroleum product export and wheat exports in particular, may be adversely affected.

Dumping Threat: If China floods global markets with cheap goods, India’s MSMEs could be adversely impacted. China’s ~$30 billion trade surplus with India could balloon, straining forex reserves.

Border Tension: China’s tariff war might spill into Ladakh and Arunachal Pradesh, straining diplomatic relations and further fueling tension..

Capital Flight Risk: If U.S./EU yields crash further, investments could flow to the developed economy bonds anticipating further gains. China’s stimulus could siphon even more funds.

Demand Softness: Deflationary pressure in the West might cap India’s export growth—gems and jewelry stagnate if wallets tighten.

Conclusion

India could materially benefit from the current global events, especially U.S.-China fallout—supply chains, tech, and peace-driven energy savings could push GDP past 6.5% by 2027. However, we need to see proactive policy response and strong execution to capitalize on this opportunity. A long-term strategy is also needed to mitigate the impact of frequent tariff and VISA threats. China’s countermoves might flood or flank India, and Western yield drops could make capital flows very volatile and unpredictable. Peace helps, but only if India diversifies fast—BRICS, EU, ASEAN—to offset U.S. volatility. Trump’s bluff might crumble by 2026 if China holds firm, amplifying India’s export risks but opening manufacturing doors. A Middle East flare-up could spike oil and ruin it all.

Overall, the situation, as anticipated earlier, is very volatile and unpredictable. For now, it does not warrant any change in the investment strategy, as shared in the beginning of the year:

“2025 may be a far more challenging year for investors as compared to 2024. The volatility and uncertainty may increase materially, requiring investors to focus on capital preservation rather than making some real returns.

I shall maintain a standard allocation in 2025 and engage in active trading in my equity and debt portfolio to optimize return using the benefit of large swings. At the same time, I would continue to look for opportunities in the emerging themes for the next many years and build a long-term portfolio. Returns will not be my primary focus in 2025.”

 

Also read

View from the Mars

View from the Mars - 2

View from the Mars - 3

View from the Mars - 4

Trade war cannot quick-fix

The master failing the first test

Wednesday, March 19, 2025

View from the Mars - 3

About 17 years ago, a global financial crisis (GFC) engulfed the global markets. The impact of the crisis on financial markets was mitigated in a couple of years by collective efforts of the governments and central bankers. However, the social, geo political and economic impacts of the crisis largely remain unmitigated even today.

Tuesday, March 18, 2025

View from the Mars - 2

Continuing from my previous post (View from the Mars)

Thursday, March 13, 2025

View from the Mars

Have you ever wondered why—

Wednesday, March 12, 2025

Trade war cannot quick-fix

In the year 1689, British monarch William of Orange put steep tariffs on French wine. He wanted to encourage the British to drink their own booze - make and drink. It was not a great idea because without wine, Britain turned to the hard stuff - gin. So, for the next 50 years, England was in the grip of the so-called gin craze. And newspapers wrote about the surge in crime and death and unemployment.

In the 18th century, Britain put trade restrictions and taxes on tea being shipped to the colonies. This eventually led to the Boston Tea Party, an iconic event in the American war for independence.

In the 1800s, the Brits were importing a lot of tea from China, and they didn't like the trade deficit, so they started to export opium to China, which caused an opium epidemic in China. China put a tariff on opium and then banned it altogether. This led to the very bloody Sino-British Opium Wars. The Qing lost the war. This defeat is popularly believed to be the first step in the direction of establishing modern day China.

Restrictions on the trade of cotton textile, indigo, salt etc. by the British empire on India inspired many key events in India's war of independence.

Soon after its unification in 1871, Italy turned to protectionism to foster its “infant” industries. It terminated its trade agreement with France in 1886; raised tariffs as high as 60 percent to protect its industries from French competition. The French government responded by passing the highly protectionist Méline Tariff of 1892, which famously signaled the death knell of the country’s flirtation with free trade. This eventually pushed Italy closer to Germany and Austria-Hungary in the years leading up to the First World War.

A famous example of protectionism gone awry is 1930’s Smoot-Hawley Tariff Act—which along with similar protectionist measures enacted around the globe—helped torpedo world trade, killing two third of the global trade, and exacerbate the Great Depression leading to WWII.

In the post WWII era, US trade restrictions on Cuba, Iran, Iraq, Russia, North Korea, Syria etc. have had a significant impact on global strategic balance.

Wider economic sanctions on India in the wake of 1998 nuclear tests, helped India develop indigenous technologies and evolve as a major power in space technology.

There is a strong view that America’s “trade war”, with Japan in the 1980s, was one of the best things that ever happened to American industry and consumers, because American businesspeople rose to the challenge of the time. The "quality movement" spread across the country. Businesspeople, previously outraged by the Japanese “stealing” trade secrets, decided to join the club and took to “benchmarking” on an industrial scale, often with Japanese companies as their targets. The benefits of all that attention to quality were large and durable for US businesses and consumers. In the end, the “war” did not prove to be destructive.

The short points are:

·         Trade wars perhaps as old as the cross-border trade itself.

·         Trade wars have often culminated in larger geopolitical conflicts and resulted in changes in the global maps.

·         Trade wars have been mostly caused by (i) distress in the domestic economy of the aggressor, promising protection and assurance to the local businesses; and/or (ii) eroding credibility of the extant political leadership, resulting in such leadership raising the rhetoric of aggressive-nationalism and external threats to the national integrity to protect its position.

·         There is evidence of trade wars causing structural shifts and paradigm changes in the global economy. However, there is little to suggest that but for trade wars, the world would have been a better place.

In my view, the latest specter of a wider trade war has been unleashed by the US administration to find a quick-fix solution to economic malaise, the US economy is suffering from nearly two decades of fiscal and monetary profligacies.

The US public debt has increased from US$3.41 trillion in the year 2000 (~35% of GDP) to US$29 trillion (~105% of GDP) currently. In this period, the fiscal deficit has risen from a US$236 billion surplus in the 2000 to a deficit of ~US$1.8 trillion currently. This is obviously not sustainable and needs to be corrected.

The moot point is “Whether trade war is a good solution for correcting historical mistakes?”