Who wins tariff  war?

What US President Donald Trump hails as a day of liberation for America could, in reality, signal the onset of global economic recession if his administration remains steadfast in pursuing its sweeping "reciprocal tariff" policy. The so-called "reciprocal tariffs"-which reach as high as 50 per cent on goods from nearly all US trading partners, including Bangladesh-have already sent shockwaves throughout the global marketplace. The world now stands on the precipice of a full-blown trade war, and China has already retaliated by imposing a 34 per cent reciprocal tariff on all US imports, effectively matching the tariff rate Washington has set against Beijing. France, Canada, and other nations have vowed to follow suit.

This tit-for-tat tariff escalation in an already sluggish global economy poses significant risks, as the International Monetary Fund (IMF) has warned. The last time the US pursued similar trade policies-during the 1930s-the world plunged into the Great Depression. Adding to the growing concern, investment bank JP Morgan has raised its forecast, predicting a 60 per cent chance of the global economy entering recession by the end of the year due to these aggressive tariff measures.

The stated purpose of the Trump administration's imposition of reciprocal tariffs is to revive US manufacturing by raising the cost of foreign-made goods, thus encouraging investors to bring production back to the United States. But the question is how can the US reinstate industries-particularly labour-intensive sectors like apparel manufacturing-that have long been outsourced to developing nations? While the American public may yearn for the return of high-tech, sustainable jobs, they are unlikely to be thrilled by the prospect of low-skilled, labour-intensive jobs that thrived in countries like Bangladesh.

The imposition of blanket tariffs on goods like ready-made garments-items the US simply cannot produce in bulk-will only drive up prices. The importer is the one who pays the tariff, and that cost inevitably gets passed down to consumers. As a result, inflation will rise significantly in the US, reducing consumer demand and shrinking the domestic market. This price inflation is likely to contract the economy, exacerbating the very problem Trump's policy intends to solve.

Moreover, restoring industries to the US is not something that can be accomplished overnight. It requires time, investment, and a stable policy environment. The long-term success of Trump's tariff policy is jeopardised by the inherent policy uncertainty that plagues his administration. There is a high likelihood that a subsequent US government could reverse these tariff policies, making investors reluctant to commit to long-term domestic production. This volatility could ultimately undermine the intended objectives of the tariff regime, creating further instability in the global market.

For countries like Bangladesh, the repercussions of this policy could be particularly dire. The Trump administration has imposed a 37 per cent tariff on Bangladesh, and the ready-made garment sector-which is the country's key export industry-will bear the brunt of these new measures. Currently, the United States imports between $90 and $100 billion worth of clothing annually, and this could drop to around $60 to $70 billion as a result of the inflation due to the tariff hikes. Bangladesh, which exports approximately $6 to $7 billion in garments to the US each year, is likely to feel the impact.

But Bangladesh is not alone. Other major garment-exporting countries, including China (with a 34 per cent tariff), Vietnam (46 per cent), Indonesia (32 per cent), Cambodia (49 per cent), and India (26 per cent), are also facing these heavy tariffs. All of these nations could be affected by these changes, although stakeholders think it will take time to fully grasp the situation.

As the global trade landscape shifts, Bangladesh must act swiftly and strategically to safeguard its interests. Proactive economic diplomacy will be essential, as engaging in constructive dialogue with the Trump administration could help mitigate some of the damage. Simultaneously, Bangladesh must diversify its export markets to reduce dependence on the US. China, which exports $25 billion worth of garments to the US annually, is likely to shift its focus to other markets, particularly the European Union. Bangladesh holds a 21 per cent share of the EU's ready-made garment market. If China undercuts prices in the EU to remain competitive, Bangladesh could face significant losses in this key market as well. Therefore, navigating this turbulent global trade landscape will require astute and timely policy responses from both the government and the private sector to ensure that the country can weather the economic storm.

aktuhin.fexpress@gmail.com