Context
US President Donald trump after winning the elections came with broader trend of trade weaponisation and trade wars tactics. The entire global landscape has been reshaped massively. All this will for sure be having far reachng effects on several sectors of the economy.
What is a Trade War?
When belligerent countries involve themselves in imposing tariffs and trade barriers against each other for a perceived economic threat or any unfair trade practices.
Example:
U.S.-China Trade War (2018-Present): On the basis of China’s involvement in intellectual property theft, unfair subsidies, and manipulation of currency, the US put heavy tariffs on Chinese products. Moreover, China, too, in retaliation, levied tariffs, which eventually led to the disruption of the global supply chain.
What is Trade Weaponization?
In this, trade policies are used strategically as geopolitical tools instead of economic measures. Also, to show dominance against rival nations, steps like economic sanctions, supply chain restrictions and manipulations of currency are used.
Examples:
– U.S. sanctions on Huawei to curb China’s technological advancements. – Russia’s gas supply cuts to Europe amid geopolitical tensions. – China’s rare earth export controls are to maintain dominance in technology manufacturing. – Recent U.S. tariffs: A 25% tariff on all imports from Canada and Mexico and a 10% levy on Chinese goods.
Major Trade Wars and Trade Weaponization
(A) US-China Trade War: (a) The U.S. imposed tariffs on $550 billion worth of Chinese goods. (b) China, with more aggressiveness, responded and left electronics, automobiles and the agri sector disrupted.
(B) US Sanctions on Russia (2022-Present): (a) During and after Russia’s invasion of Ukraine, the US and EU imposed sanctions on oil, gas and banking transactions.
(C) China’s Economic Coercion Tactics:
(a) Australia: Bans on Australian coal, barley, and wine after it called for a COVID-19 origins investigation.
(b) Taiwan: Banned Taiwanese food imports amid rising political tensions.
(c) Lithuania: Blocked Lithuanian exports after it deepened ties with Taiwan.
| People also view: | |
| List of Top 5 NDA Coaching in India | Sword of Honour – The Most Prestigious Award in Military Training Academies |
Impacts of Trade Wars & Trade Weaponization
Economic Disruptions:
(a) Increment in energy prices, production cost and inflation affect a lot.
(b) Disruptions to global supply chains and trade flows.
(c) Shift of manufacturing away from China (e.g., Apple and Samsung moving production to India and Vietnam).
Weaponization of Commodities:
(a) Energy: Oil and gas as leverage in geopolitical conflicts.
(b) Food: Grain exports are being restricted due to economic pressure.
(c) Technology: AI and semiconductor supply chains becoming battlegrounds.
Shifts in Global Alliances:
(a) Friendshoring: Countries shifting trade towards geopolitical allies.
(b) New Trade Alliances: Now, India is actively engaged in QUAD and IPEF.
(c) Mineral Security Partnership (MSP): Diversification and stabilization of critical mineral supply chains.
Technology Wars:
(a) The U.S.-China chip war over semiconductor dominance.
(b) Rise of alternative payment systems (e.g., Russia’s Mir, India’s rupee-ruble trade).
Strategies and India’s Role in the Trade War Era
India’s Response to the US-China Trade War:
(a) ‘China Plus One’ Strategy: Global firms shifting production to India.
(b) Production-Linked Incentive (PLI) Scheme: It showed enough potential in attracting manufacturers of electronics, pharmaceuticals and semiconductors.
India-Russia Trade Relations Amid Sanctions:
(a) Oil Imports: Increased imports of discounted Russian oil.
(b) Alternative Payment Systems: Exploring RuPay and rupee-ruble trade to bypass SWIFT sanctions.
India’s Strategy Against Chinese Trade Dominance:
(a) Ban on Chinese Apps (2020): Giving the cirtation of national security concerns, more than 200 apps were banned.
(b) Higher Import Duties: Raised tariffs on electronics, solar panels, and chemicals.
(c) Strengthening Domestic Manufacturing: An umbrella initiative ”Atmanirbhar Bharat” aims to reduce reliance on Chinese products.
(d) Trade Diversification: Strengthening ties with ASEAN, Africa, as well as Latin America.
(e) Tariff Adjustments: India has raised the tariffs on Chinese goods, at the same time holding talks of FTAs (free trade agreements) with Australia, UAE, and the EU.
Our Latest Selections:
India’s Path Forward
Strengthening Trade Partnerships: India should go for the expansion of multilateral ties with EU, ASEAN, and Africa.
Investing in Critical Sectors: More heed and investment in sectors like semiconductors, renewable energy. and the Artificial Intelligence industries.
Enhancing Supply Chain Resilience (a) Boosting indigenous manufacturing. (b) To strengthen the national supply chain policy and principles in the Indo-Pacific, India, Australia, and Japan have signed an international agreement named the Supply Chain Resilience Initiative. (SCRI). (c) Establishment of the Indo-Pacific Economic Framework for Prosperity (IPEF) to build cooperation as well as economic integration in the Indo-Pacific. (d) Mineral Security Partnerships (MSP). It will secure supply chains for critical minerals essential for modern technologies and clean energy.
WTO Reform: Also, the need to address challenges posed by unilateral trade actions is there.
Conclusion
The way trade weaponisation is increasing its claws is very detrimental to the global economy. So, by fostering international cooperation, diversifying supply chains, enhancing economic resilience, as well as promoting fair trade practices, nations can mitigate these risks and create a more stable and prosperous future.