USA’s Trade Barrier

Source-This post on USA’s Trade Barrier has been created based on the article “Biden’s tariffs have dealt free trade a heavy blow” published in “Live mint” on 16 May 2024.

UPSC Syllabus-GS Paper-3- Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth.

Context-The article criticizes the recent move by the US to impose steep tariff hikes on clean-tech imports from China, such as electric vehicles from 27.5% to 102.5% (102.5%), lithium batteries, computer chips, and solar cells. USA’s Trade Barrier

What are the arguments given by the USA to justify its stance?

1) The USA justifies imposition of high tariffs on the ground of national security and to counter China’s “unfair” subsidies.

2) The USA claims that it wants to increase imports from other countries

What are the implications of US trade barriers?

1) Weaponization of Trade -It leads to weaponization of trade. Such protectionist measures go against economic principles, climate concerns, and geo-pacifist recommendations.

2) Impact on Free Trade and Geopolitics -Cutting off trade relations has historically led to war, and the actions of the US further harm free trade. This may have negative geopolitical outcomes.

3) Shifting Away from Global Free Trade Advocacy-Both political parties in the US supporting protectionist tendencies indicates America moving away from being a global advocate for free trade. It has set global trade back with its protectionist measures.

Read more- WTO Reforms and India

What should be India’s response?

1) Balancing Export Ambitions with Economic Reasoning– India should try to grab export opportunities. However, India should exercise caution and base its trade policies on economic reasoning rather than yielding to geopolitical influences.

2) Cautious from Chinese Imports -Cheap Chinese wares, especially in clean-tech markets, could aid India’s economic emergence and climate aims. However, India should remain cautious of potential dumping by Chinese state-subsidized manufacturers.

Question for practice

What are the implications of US Trade Barriers for global trade order?