American Neo-protectionism devastating for global trade

By Sumantra Maitra
0 Comment(s)Print E-mail, April 4, 2016
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Another gamesmanship [By Zhai Haijun/]

A scary wind of protectionism is blowing across the United States; it is the wind of mercantilist protectionism. When Mitt Romney attacked Donald Trump for his economic policies, his main argument was against Trump's protectionism. Many economists agree that the new protectionism in US policies could lead to a global recession and start a trade war not just with China, but also Japan. Trump's mercantile theory is that other countries, especially China and Japan, are taking advantage of generous US trade policies, and therefore the solution is to levy extreme tariffs on imports. "There's only one thing you can really do - I mean you can devalue, but you can do something else which I think is probably much better than devaluing - you can charge surtax or you can charge a tax for products that they sell in the United States," Trump said. "I have great relationships and business relationships with China, and even those people say they can't believe what they're getting away with."

Without going into how incredulous this trade theory is, it is capable of igniting a trade war not seen since before WWI, during the heydays of mercantilism. If there is a trade war between the two largest economies in the world right now, it could damage the world economy while also devastating the US itself. It will hurt the poor by ramping up prices and would hurt the manufacturing sector tremendously by raising prices on production inputs.

Trump isn't the only one who supports this policy. Democrats are equally vocal about protectionism in their trade policies. Bernie Sanders opposes every free trade pact, including TPP, TTIP and NAFTA, and promises to end the Permanent Trade Relations with China, which, again, would be a disaster for US consumers, considering their growing dependence on Chinese goods.

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