With promises to overhaul bureaucracy, impose steep tariffs and retreat from climate commitments, Trump’s policies are set to reshape the US and the world
Donald Trump will take over as US President on January, 20 2025 and his pre-election promises would have economic and environmental consequences. On the economic front, countries worldwide would face still stronger dollars sucking money out of emerging markets, high protectionist tariffs imposed and consequent trade war slowing the growth and increasing inflation globally. His regime is not only committed to sacking thousands of bureaucrats and replaced by his supporters but has also announced a new department named the Department of Government Efficiency (DOGE) to be headed by Elon Musk and Vivek Ramaswamy to slash the bureaucracy.
No doubt it would disrupt the continuity of the functioning of government, and it would also lead to job losses. Nationwide federal government employs nearly 3 million people. Trump says Musk and Ramaswamy would dismantle government bureaucracy, slash excess regulations, cut wasteful expenditure and restructure federal agencies. While Musk has announced to cut $2 trillion from the federal budget, Ramaswamy has proposed to eliminate the education department and FBI.
Internal Revenue Service as well as cutting the federal workforce by 75 per cent in a mass layoff. Trump has consistently maintained to levy a 10 per cent tariff on all imports in the US, 60 per cent on imports from China and 100 per cent on cars imported from China. This would mean cutting imports from many countries which may even result in trade wars. Capacities created in countries like China would be rendered unutilised. With limited domestic consumption in China, the country would face a backlash.
If all countries take action to cut on imports, it certainly boomerangs somewhere and exports would be adversely impacted in most cases. A 10 per cent tariff on imports would increase US prices of goods by at least 3 per cent and a continued trade war may even further raise the prices. While domestic producers in the US would welcome it, the consumers will have to pay more. Tariff is not the solution to all problems. Trump’s idea to shift manufacturing back to the US may be hit by supply chain disruption on account of higher tariffs.
The job creation in the US may be impacted. In his first term, Trump increased tariffs on Aluminum and Steel to bring its manufacturing back to the US, but the goal was not achieved. His acceptance of higher prices to be paid by consumers, while protecting producers had also made consumers pay 18 per cent extra on Washing machines in 2018. Later some of Trump’s tariff was increased by Biden too. It went up to 100 per cent on electric vehicles, 50 per cent on solar cells and 25 per cent on batteries from China. It had its impact on climate action too – the transition to cleaner energy was slowed down. Herbert Hoover, a Republican, US President nearly a century ago had similarly announced the imposition of tariffs, which ultimately culminated in the adoption of the Smoot-Hawley Act, of 1930 and increased tariffs by 40 to 60 per cent.
It led to a trade war and the US faced retaliation from its trade partners too. It triggered the great depression and the worst economic crisis humankind has ever experienced. Presently global economy is already facing considerable headwinds, any trade war can have disastrous consequences. US’s technological advancement for decades has placed it as the leading powerhouse in the world.
Its investment in research and development has been quite rewarding as evident from the fact that there have been more Nobel laureates in the last five or six years than the rest of the world put together have produced. With its technological superiority, the rest of the world is dependent on it economically too and the tariff policy would leave them behind in the trade war. So far China’s growth has been manufacturing followed by exports. With the slowdown in exports, it is dealing with the problem of overcapacity of its industries and making efforts to boost domestic consumption. There has been budget constraint in Europe - money is spent on subsidies in several countries, causing growth retardation. Germany, to continue producing in the country has to match the US subsidy offering 900 million euros to Swedish battery makers Northvolt, which is experiencing sluggish growth of the economy. Subsidies continue to slow the growth globally.
As the growth suffers, climate action also suffers. For instance, countries in the African subcontinent have vast potential for solar and wind energy, which has remained untapped so far. China’s interest in Africa is going up through its belt and Road initiatives; it has an eye on the natural resources of the continent. It is to be seen whether Trump 2.0 can counter China in Africa.
In his election speeches, Trump has already sought to restore US manufacturing and has targeted to end the Chinese dominance in sectors like advanced information technology, high-end numerical control machinery, robotics, aviation equipment, maritime engineering technology, sophisticated rail equipment, energy-saving vehicles, electrical equipment, medical devices and agriculture machinery etc.
European business finds it now difficult to continue investing in China and India should try to leverage the churn to its advantage. President-elect has already announced Immigration hardliner Tom Homan for the deposition of illegal immigrants. He said that there is nobody better in policing and controlling US borders and there is no doubt that Homan will do a fantastic job which has been long awaited.
Homan also spoke to the press supporting the deportation of even US-born children of undocumented immigrants. Another Immigration hardliner Stephen Miller has been announced to be deputy Chief of Policy in the new administration. Unprecedented deportation is around the corner, which is bound to impact the labour force. What will happen to manufacturing? Also, his tax cut promise would lead to a fiscal deficit; the US has one of the highest fiscal deficits 22 per cent of GDP, more than four times as high as India.
The country is already under heavy debt and indebtedness would further increase the deficit. Despite a good chemistry between Trump and Modi, India may not be spared of 10 per cent tariff, which may impact our imports. By 2028, when Trump’s term ends, not only the US, but many other countries will be reeling under high inflation and poor growth. UN is also reconciled to accept a cut in US funding in Trump 2.0. A US retreat at the UN is likely to open the door for China, which has been building influence in global diplomacy. The best part of Trump’s promises is that he would stop funding war. The end of war in West Asia and Ukraine is expected soon. The re-election of Trump has cast a shadow on the ongoing world climate summit in Baku, Azerbaijan. His withdrawal from the Paris Agreement in his first term and halting climate funding has slowed down the progress globally.
Trump in his election campaign has vowed to ignore any climate emergency. He has been categorical in his election speeches – abandon climate, drill, baby, drill. He has also joked in speeches that if the sea level rises, we will have more properties facing the sea. In some other speeches, he said that why should we be concerned if the sea level rises by a thousandth of an inch after thousands of years? Global leaders at Baku perceive the inaction and obstructions from the US and debate whether they can afford such inaction for four more years. They must work out the strategy and pursue advanced climate actions and goals. Barbados PM has invited Trump for a face-to-face meeting on climate.
(The writer is retired principal chief conservator of forests -head of Forests Force- Karnataka; views are personal)
