Rooted in his ‘America First’ agenda, Trump’s protectionist policies aim to shield American industries and jobs from foreign competiton
Tejeswar Patnaik
Over the last 25 years, globalization has driven economic growth, technological advancements, and market integration across the world. However, despite its benefits, globalization has also faced increasing opposition due to its adverse effects, such as job losses, income inequality, and national security concerns. Many workers in developed economies, particularly in industries like manufacturing and steel, have felt left behind due to competition from cheaper foreign labor. This has fueled political and social unrest, leading to calls for stronger protectionist policies.
Several nations, including India, have implemented trade protectionist measures in their national interest. Trade protectionism refers to government policies designed to restrict imports and shield domestic industries from foreign competition. Common measures include imposing tariffs on imported goods, setting quotas, providing subsidies to domestic industries, and restricting foreign investments in critical sectors.
However, trade protectionism fundamentally contradicts the doctrine of free-market capitalism, which promotes minimal government intervention, free trade, and an open market economy. Capitalism thrives on competition, efficiency, and consumer choice, whereas protectionism disrupts the natural flow of trade by favoring domestic industries at the expense of global economic cooperation.
Protectionist Policies
Donald Trump’s embrace of protectionist policies is deeply rooted in his ‘America First’ agenda, which prioritizes safeguarding American industries and jobs from foreign competition. His trade policies, often described as economic nationalism, aim to curb imports, boost domestic manufacturing, and reduce trade deficits.
After assuming office for his second term, Trump intensified his focus on trade protectionism, using tariffs as a key policy tool. His administration imposed a 25% tariff on all imports from Canada and Mexico, despite the long-standing trade ties between these nations and the U.S. has announced the imposition of a 10% tariff on Chinese goods, escalating tensions with China, one of the largest trading partners of the United States.
Canada and Mexico are expected to suffer the most, as they signed the largest trade pact with the U.S. six years ago. The European Union (EU) is also in Trump’s firing line, as his administration has been critical of EU trade policies and is considering new import tariffs. By imposing tariffs, he aims to generate substantial revenue to compensate for his administration’s trillion-dollar tax cuts for corporations and high-income earners.
The U.S. has historically run trade deficits with multiple nations, and Trump seeks to bridge the gap by making imports more expensive. By making foreign goods costlier, his policies aim to boost domestic production and encourage Americans to buy local products.
The Free Market Economy vs. Protectionism
The negative consequences of protectionism include higher Prices for Consumers. Tariffs make imported goods more expensive, reducing consumer choice and increasing costs for households.
Other nations will retaliate with the imposition of tariffs, hurting American exporters and businesses. For instance, China, Canada, and the EU have already threatened to impose taxes on American goods, impacting industries like agriculture and manufacturing. While some industries benefit from protectionist policies, others suffer. American manufacturers that rely on imported raw materials, such as steel and aluminum, face higher costs, making their products less competitive in global markets.
Trump’s actions amount to a breach of International Trade Agreements. The World Trade Organization (WTO) governs international trade by ensuring fair practices. Protectionist policies undermine WTO agreements, thus inviting trade disputes and economic isolation.
Global Reactions and Emerging Trade Alliances
Trump’s aggressive protectionist policies have triggered global uncertainty, particularly among America’s largest trading partners. Analysts of U.S. foreign policy believe that Trump’s trade war stems from the rise of multilateral trade blocs that exclude the U.S. Some key developments include the expansion of of BRICs bloc comprising Brazil, Russia, India, China, South Africa, Indonesia, etc which represent nearly half the world’s population.
With eight more nations in line to join, this economic alliance is emerging as a major challenge to American dominance. It is worthwhile to mention that the six West Asian nations of the GCC have been invited to attend the ASEAN summit in May this year in Malaysia, to strengthen trade ties across Asia.
Britain’s Entry into the Trans-Pacific Trade Bloc which includes Australia, Canada, Japan, New Zealand, and other countries, is gaining momentum. Britain’s plan to join this group further shifts the balance of global trade power.
At the core of these changes is the meteoric rise of China as the major economic superpower which poses a direct challenge to U.S. trade interests. Meanwhile, India has also surpassed Britain to become the world’s fifth-largest economy and has refused to comply with Western sanctions by continuing to purchase Russian oil at lower prices.
India’s Response
In this rapidly evolving global trade landscape, India must tread cautiously. Recognizing the changing dynamics, India’s Finance Minister announced a reduction in import tariffs on a variety of products, including electronics and textiles, while presenting the 2025–26 budget. The government‘s such move serves multiple purposes like Strengthening trade ties with the U.S. as lower tariffs send a positive signal to American businesses. Secondly, Indian companies that rely on imports for raw materials will benefit from reduced tariffs. By adopting selective trade liberalization, India can strike a balance between protecting its industries and maintaining strong international partnerships.
While Trump’s trade protectionism is driven by economic nationalism, its long-term consequences could disrupt global trade stability. By prioritizing domestic industries over international cooperation, his policies will lead to fueling retaliatory trade wars, hurting American businesses, and violating WTO trade agreements.
The world is witnessing a shift toward regional trade alliances that may diminish America’s economic influence in the coming years.
India, aware of these changes, has taken a calculated approach by reducing import tariffs, and sending the right signals to global trade partners while ensuring domestic economic growth. As trade protectionism contradicts the principles of free-market capitalism, its long-term impact on the global economy remains a matter of concern.
(The writer is a former Dy General Manager of Bank of India. Views expressed are personal.)
