A Historical Analysis of American Trade policies reshaping the Global Order

There has been a lot of commentary and a data explosion on Trade wars and Trump tariffs which has threatened to disrupt global economics. However, let’s try and make sense of historical trade patterns which have emanated from American history. US Commerce Secretary Howard Lutnick has been ad-nauseam on media channels talking about how America has been ripped apart for last eighty years de-industrialising itself for the global growth. He even talked about that there was no concept of Income Tax in America, which was first introduced in 1913 replacing the old tariffs regime which slowly withered away as American focus shifted to boosting global growth. It has to be borne in mind that the America’s focus post-World War II was how to get global growth back on track while making American finance the dominant power on the global stage. In our earlier piece Yalta 2.0 we had talked about how American finance at the Wall Street rose after World War I as Britain’s empire began to decline due to huge war debt it accumulated and ultimately withered away post-World War II. Is Secretary Lutnick right to blame the world or the globalists for America’s rapid de-industrialisation over last few decades. To understand the current trade disruptions lets deep dive into the past to uncover sequence of events that have led to the current flux in the global trade.

Historical Shifts in US Trade Policies

A Tariffs is a leavy or a tax imposed on the goods and services which are imported into countries from outside. Tariff as a system became the prime source of US Governmental revenues in the 19^th Century. The concept of tariffs are two folds one to shield domestic industry and manufacturing and other to collect revenue from goods and services that flow into a country. This is part of the protectionist measures which induces the factors of production to shift base inside the country. The other intended consequence of trade tariffs is to wall off the domestic economy to international trade thereby protecting domestic industry and manufacturing from foreign competition. The heart of this conflict is between Protectionism and Globalism where two economic ideologies clash with each other. First is the one which advocates for protecting domestic industry by imposing huge tariffs and the later believes in lowering tariffs barriers to augment free movement of goods and services between nations states.

The US Trade Policies historically have been defined in three cycles i.e. 3 Rs, 1) The Revenue Model, 2) The Restriction Model and 3) The Reciprocity Model. First, the Revenue Model talks about levying duties on imports to raise Revenue for the Federal government. Secondly, the Restriction Model believes in restricting imports to protect domestic producers and foreign competition and thirdly, the Reciprocity model is about reducing trade barriers and expand exports. The American trade policies over last 250 years since its independence has shifted many times with various administrations deploying these tools individually and collectively to forward American economic and trade interests. From the time of its Independence in 1776 to the Civil War in 1861, the American trade policies were more focused on the ‘Revenue’ model of trade tariffs. The era post the Civil War i.e. 1865 to 1929 it was the ‘Protectionist Model’ and from Great Depression in 1929 till today it is the ‘Reciprocity’ model of the trade tariffs. The economic and trade policies of America had significant shifts during these periods. The first was the Civil War, which led to a political realignment in favour of the Republicans and a shift from revenue to restriction as the primary goal of trade policy. The second was the Great Depression, which led to a political realignment in favor of the Democrats and a shift from restriction to reciprocity as the primary goal of trade policy.

American Independence & British Free Trade

Just prior to American independence there was a feeling of benign neglect of America’s by the British Empire given it was a British colony. The colonies in America’s got together in October 1774 and denied the British Parliament jurisdiction over its internal affairs specially when it came to foreign trade and taxation. The congress representing the American colonies even requested the British to repeal the laws like Tea Act, Navigation Act and all other such coercive laws that Britain had imposed on its American subjects. Fearing the revolt in the American colonies specially after the famous ‘Boston Tea Party’ incident in 1773 where the tea in the ships of East India Company were thrown from ships, the British decided to retaliate to it militarily. In early 1775, the British government declared Massachusetts to be in a state of rebellion and sent its armed forces to occupy Boston, leading to the clashes at Lexington and Concord. In response to the British military actions, the Congress of colonies decided to ban all exports to Britain and British occupied West Indies. The British Parliament swiftly responded to it by imposing an embargo on trade between American colonies and Britain. This was further accentuated as British Parliament passed Prohibitory Act to prohibit trade between America’s and other British Colonies in bid to quell the rebellion.

On 4^th July 1776, the Congress of American colonies declared independence from Britain and its main grievances as stated in declaration of independence was about British cutting of American trade with the rest of the world specifically Britain and its colonies, imposing levies without the consent on American trade. The trade between two continents collapsed and finally with French military assistance, America won its war of Independence at the Battle of Yorktown in October 1781. It was in the Treaty of Paris, in September 1783 that Britain ceased hostilities and reached an agreement with America on trade while recognising it as sovereign states. However, this peace was limited as Britain’s government collapsed and the new government of Fox-North refused to give trade concessions and rather imposed trade restrictions, shipping bans on United States to trade with West Indies and other British colonies which was subsequently upheld by the privy council as well. Thus, the American economy was mired in a terrible state throughout the 1780s. Exports were crippled by the lack of access to markets in the British Empire, and the monetary drain resulted in persistent deflation.

Post Independence - The Revenue Model

The American trade policies in aftermath of its independence were defined by the Revenue model where the primary focus was to generate revenue for the federal government given the fact that Britain had imposed trade restrictions on America which had virtually ruined its economy and collapsed its trade with Britain and its colonies. It was in the First Congress session in 1789, that Protectionist Tariffs as a concept were mooted by first Secretary of Treasury, Alexander Hamilton. Alexander Hamilton in his publication of “Report of Manufacturers” laid out a strategy to protect nascent American industries against the competition from European giants. Hamilton’s trade policy of imposing tariffs on imports into America as a tool to protect domestic industry influenced American trade policies till the 20^th Century.

From 1790 to 1860, Revenue became the top focus of American federal government and thus it imposed duties on imports where tariffs rose from 20 percent in 1800s to 60 percent in late 1820s. However, these exorbitant tariff hikes by northern states to protect its industry led to a revolt by the southern states. These policies by the northern states sparked a political crisis whereby South Carolina wanted to secede and breakaway from the union due to unfair trade tariffs imposed by the northern states. This ultimately lead to comprise of 1833 which lead to dialling down of tariffs back to 20% until the breakout of the American civil war in 1865.

American Civil War & Restrictive Trade

The American Civil War primarily fought between the Union in the North and the Confederacy in the south was on Slavery issue but trade also played an important role in shaping up the events in those tumultuous years of the American republic. The tug of war during that era was between the Southern Democrats who a favoured a low tariff regime and the Republicans in the north who favoured high tariff and duties structure. The goal of the American trade policies from 1860 till 1934 was about the “Restriction model” which talked about restrictions on imports to save American industries from foreign competition. Resultantly the tariffs on imports into America jumped from 20 percent in 1859 to 50 percent during the civil war and remained so there for decades.

While an internal feud between the Union in the north and confederacy in the south ravaged the American continent it was not free from influence of British free trade radicals in London weighing in on the American civil war. The British Empire at that time favour predatory free trade policies which were aimed to grow British primacy at the cost of the industrial health of its colonies and jurisdictions. The British detested the America’s protectionist trade polices under the Morrill Tariffs Act which wreaked havoc upon the United States’ commercial relations with Her Majesty’s government. The confederacy in the South saw the British support for free trade and lower import duties as a chance to secure European help for its secession and independence from the union in the North. Major newspapers in Britain routinely described the American conflict as a tariff war between the protectionist north and free-trade south, often noting Lincoln’s reluctance to commit to emancipation in the process.

There were many sympathisers in Britain of the Confederates like James Spence a Liverpool merchant who pressed the British Government to recognise the independence of the Southern States forwarding the logic of economic boom given the spectre of free trade with states in the south. It would thus be pertinent for our readers to refer to earlier article on American civil war which explained the geo political context of the battle between American nationalists and the British Free trade radicals. To quote from the said article as follows:

“From Britain, August Belmont, then meeting with the Rothschild bankers, and Thurlow Weed dispatched a plethora of protesting messages to Lincoln and Secretary of State Seward. At a meeting arranged by the Rothschilds with Prime Minister Palmerston and Chancellor of the Exchequer Wil- liam E. Gladstone, Belmont was questioned as to the state of the American nation’s defenses and the popular attitude toward England. Palmerston certainly had his reasons for “disliking” the tariff and the rest of American System policy being implemented. Such a policy on the part of the United States was once again bringing to the fore various international currents which had almost succeeded in destroying British domination at the time of the American Revolution.

Both Germany and Russia began adopting protective systems. The case of Russia is particularly important because it illustrates the point that the protective policy of the U.S. was absolutely not to be equated with isolationism. Leading U.S. protectionists stated time and again that their aim was to enable the United States to become strong enough to rid the world of the odious British System once and for all. During the early part of the Lincoln Administration, U.S. exported to Russia both the blueprints and the technicians for construction of American ironclad ships which provided basis for the modernization of the Russian navy & the brute force development of Russia’s iron industry. It was Henry Carey who, by stating the Tribune’s editorial policy, was responsible in 1856 for U.S. diplomatic support of Russia against England during the Crimean War.

The War Between the States that ravaged this country between 1861 and 1865 was the second military phase of the political battle which raged between Britain and the United States from the time a formal ceasefire was concluded at Yorktown in 1781. The Republican Party of Lincoln was responsible for building the labor industry alliance which won the war. That party’s program has a surprisingly familiar ring to those fighting against the stagnation of the American and world economy under the British System today. The key features were credits for rapid industrialization and realization of new technologies, debt moratoria on certain holdings that were crippling production, and measures to politically sever the U.S. credit generating mechanisms from British control.

The party of Lincoln succeeded in launching the United States of America as the greatest industrial power on earth but the British were not brought to the ground. Through assassinations, divide-and-conquer tactics, and, most importantly, the deceptive offer of an “Anglo-American Imperial Alliance,” the British oligarchs re-established an ever-tightening stranglehold over the U.S. economy and political system. Americans’ perception of their national interest was again viciously distorted and the war against the British System of austerity, deindustrialization, and mutually destructive class warfare conveniently forgotten.”

Post World War I – The Reciprocity Trade

From 1860 to 1913 specially post the American civil war Lincoln’s party united the Union winning the civil war marked the third phase in American trade policies. The tariffs or the import duties imposed during this time generated nearly half of federal government’s revenue and it was only after Income Tax was introduced in 1913 that the share of government revenue from import duties reduced drastically. The average tariffs declined between 1913 to 1933 during World War 1 and then rose again to 60 percent in post WW1 era. There was a marked shift in Washington DC with political power shifting to low tariffs Democrats specially after the great depression. This also marked a shift in American policy on trade to reciprocity of opening American markets to foreign trade and lowering down the tariff barriers. It must also be noted this was also the time when Britain and European powers had heavily borrowed from American finance at the wall street to fund its war efforts.

This era marked a decline in value of British pound as a reserve currency and British Empire’s ability to fund itself as it became more dependent on its colonies to fund its debt laden empire. This is also the era which marked shift of global financial hub from London to New York and Wall Street bankers like JP Morgan, Rockefellers etc taking full advantage of declining British influence and unleashing American banking & finance on the world specially after creation of the Federal Reserve and US Bureau of Investigation which later turned into Department of Justice & FBI. This marked the takeover of American economy and trade by Anglo-American establishment in a pushback against American nationalists in the Republican party. The tug of war on American trade policies continued in the Congress and subsequent presidencies with ‘Reciprocity’ as fulcrum of American trade. The main objective of the Reciprocity policy was of opening American markets to foreign exports and that US would lower its tariff barriers if other countries agreed to do the same.

The American congress was the one who responsible for tariffs measures as legislative agenda and the Presidency had limited powers till this time. The trade policy in America from 1920s thus shifted from protecting industries to protecting agriculture. The Hawley-Smoot tariff Act of 1930 proved to be the most controversial trade legislation. There was a lot of back and forth between Congress and the President during this time on this legislation. Thomas Lamont of J. P. Morgan, an advisor to President Hoover, recalled, “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff. That Act intensified nationalism all over the world.” Secretary of State Henry Stimson is said to have “fought like mad” for two days in an attempt to persuade Hoover to veto the measure. The Wall Street interests fought hard to influence the presidency in not signing the Howley Smoot Tariff Act. But President Hoover reluctantly signed the Act which led to the imposition of tariffs on Canada, Italy, France, Switzerland etc that sparked a wave of Economic nationalism across Europe.

In backdrop of Hawley-Smoot Tariff Act, of 1930 where US Congress law-imposed Tariffs & started a trade war, Joseph M Jones in his book “Tariff Retaliation” (1934) has written as follows:

“Under these conditions when an autonomously determined tariff in the United States can threaten with ruin these specialized industries in foreign countries, when it can arouse the population of Switzerland through an increased duty on watches, when it can arouse the French nation through a proposed increase in the duty on a particular kind of lace, when it can arouse bitterness throughout Spain by an increased duty on cork, throughout Italy by an increased duty on olive oil, throughout Canada by increased duties upon a negligible flow of borderline traffic in foodstuffs and raw products then our tariff assumes in the eyes of foreigners the features of discrimination in fact, if not in form. It seems to be not entirely an accident that the populations of Canada, Argentina, Switzerland, Italy, Spain, Egypt, and France were convinced that the American tariff was directed at their respective economies. Equality of treatment meant nothing to these countries which, having concentrated capital and labor in the manufacture or production of certain articles according to their special abilities, found an important market being closed or restricted by particular rates in the American tariff.”

“The mutilation of the billion dollar market that was Canada may be regarded as the most deplorable and the most costly single fruit of the Hawley-Smoot Tariff. That the Congress of the United States should deliberately antagonize and alienate every element in that Canadian population which purchased in 1929 nearly one billion dollars worth of American products, that Congress should provoke the Canadian people into a fury of economic nationalism, will doubtless rank as one of the greatest economic blunders in American tariff history. It furnishes the most classic example of the shortsighted and sectional manner in which our tariffs are made with absolute disregard for the interests of the nation as a whole”

Great Depression and Collapse of US Trade

The decline in American trade began much before the implementation of tariffs in June 1930. The period between 1929-32 was one of the worst economic catastrophes in American history after the British embargo of 1808-09. During the Great Depression American trade fell by 70 percent. In quantity terms, the volume of exports fell 49 percent, and the volume of imports fell 40 percent over those three years. The drop in trade was much greater than the decline in real GDP, which fell 25 percent over that period. By 1932, exports had shrunk to just 2.7 percent of GDP from 5.0 percent in 1929, while imports fell to 2.0 percent of GDP from 3.8 percent of GDP in 1929. The period from mid-1929 until early 1933 was marked by severe deflation, falling output, and rising unemployment. From August 1929 to March 1933, industrial production fell 55 percent, the wholesale price index slid 37 percent, and farm prices plunged 64 percent. The unemployment rate is estimated to have reached 24.9 percent in 1932, up from 4.6 percent in 1929.

Another issue faced during this era was that most countries at that time held Gold Standard which led to deflationary situation in the global economy. Britain abandoned the gold standard in 1931 and the federal reserve in USA in a bid to prevent run on its gold reserves raised the interest rates which tightened the monetary conditions further leading to more bank failures which made the depression even worse. Cumulatively, the Great Depression made the United States pivot and loosen the protectionist policies when the US Congress gave up its control over the tariff regime and protectionist barriers by passing Reciprocal Trade Agreements Act of 1934 which delegated this power to American president to reduce or hike trade tariffs.

Bretton Woods System – Post War Era

As the World War II raged on in Europe and Asia the Americans were sitting isolated between two oceans while the Wall Street funded the Allied efforts of Britain and France against Nazi Germany. The famous aspect of this funding was the Lend-Lease program started by USA in December 1940. Under Lend-Lease, the US government would purchase military supplies and provide them to the Allies under the fiction that they would be “returned” after the war, thereby eliminating the need for repayment. The Americans were abrest of that fact its failure to help European allies lead to breakout of World War I, and the officials in the State Department did not want to miss the opportunity once again. This was music to the ears Wall Street bankers and the American Military Industrial complex. We have extensively written about the American lend lease program in our book “The New Global Order” (2016).

It was during this time President Franklin D Roosevelt got the British PM Winston Churchill to sign death warrant of its empire as part of “Atlantic Charter of 1941” in exchange for American help for British War efforts. In sum and substance American big finance and corporations started to dominate the global trade as Europe was in ruins and debt due to war. The American war financiers i.e. Wall Street post war devised a global system which is called Bretton Woods system. This agreement was negotiated at Bretten Woods Hotel in New Hampshire. The Bretton Woods agreement called for establishment of US Dollar as a reserve currency backed by Gold and establishment of IMF and World Bank that would cater to Pax Americana empire. This is how pax Americana empire rose from the ashes of Pax Brittanica post-World War II.

The Nixon Shock

The Bretton Woods system pegged US Dollar as reserve currency to gold and by 1960s the shortage of Dollar was replaced by Dollar glut where the supply of dollar outstripped the Gold reserves of America which could make it difficult for it if the central banks across the world demanded gold from US in exchange for their dollar holdings. The US balance sheet went from surplus to deficit with European and Japanese banks concerned about the inflation and started to exchange their American dollars for the gold while being reluctant to revalue their currencies that were pegged to US Dollar. This was viewed by President Nixon in 1971 as an act of betrayal by the American allies whom America had helped re-build with Marshal Plan post-World War II.

On August 15, 1971, President Nixon closed the gold window and de-pegged the US Dollar from Gold in a bid to improve the competitiveness of the US dollar and American manufacturing. This was followed by the Petro-Dollar agreement between America & Saudi Arabia to reinvest oil revenue in US treasuries which gave leverage to US Federal Reserve to print money at will in a low inflationary regime whereby America could rapidly industrialise and compete with Europe and Japan. However, the rising Japanese prowess was a huge stumbling block for the Americans and something had to be done about protectionist barriers the Japanese had imposed on US goods while flooding it with cheap Japanese products that damaged the American industry and manufacturing back home.

Plaza Accord & The Reagan Fair Trade

US Treasury secretary, Baker during the President Ronald Reagen’s Presidency had recalled, “We confronted an overvalued dollar, measured against other currencies, and a trade imbalance that favored the Japanese, Germans, and other trading partners at the expense of US manufacturers and exporters. These two economic problems, in turn, had created a big political problem—a protectionist fever in Congress that grew hotter each time Honda or Mercedes won another customer from the Big Three or another pop economist wrote about the inevitable triumph of Japan, Inc.”

US Treasury secretary, Baker sought to engineer a decline in US dollar by negotiating an international agreement. The result was the Plaza Accord, named for the famous New York hotel where the September 1985 meeting was held. At the meeting, Japanese and European officials agreed to undertake measures that would lift the value of their currencies against the dollar, including coordinated central bank intervention in foreign exchange markets. Although the dollar had actually begun to depreciate in February 1985, it continued to fall against other major currencies over the next four years. Because exchange-rate changes have a lagged effect on trade flows, however, the trade deficit continued to grow for another two years before finally receding.

While announcing the Plaza Accord President Reagan on September 23^rd 1985 unveiled his new trade policy where he portrayed America as the victim of other countries trade policies. He argued that free trade by implication also meant fair trade and when governments subsidise their produce or impose protectionist tariffs it is no more free trade. He wowed to take action on unfair trade practices by nations across the world to protect American workers and their jobs by taking action under American laws as well as international agreements like GATT. This strategy by Reagan Administration meant use of Section 301 of Trade Act of 1974 taking actions on unfair trade practices by South Korean insurance firms, Brazil’s computer software and hardware, Japan’s barriers on tobacco, leather footwear, automobiles and even semi-conductor industry. USTR also began to look into whether Japan’s telecom procurement policies excluded foreign producers from the market.

The US Government initiated a dumping case under Section 301 against Japan putting enormous pressure on it which ultimately resulted in US and Japan reaching a five-year agreement in July 1986 to end dumping and open up Japan’s market leading to Section 301 cases to suspended. In July 1987 after Semi-Conductor agreement was signed, the US gave Japan sixty days to enforce the agreement. America under President Reagan made a stunning retaliatory move in April 1987 imposing 100 percent tariffs on $300 million of computers, televisions, and power tools imported from Japan. This unilateral action, one of the largest retaliations of the postwar period and the first such action against Japan, dramatized the seriousness with which the administration viewed the semiconductor agreement and the trade problem with Japan. The retaliatory tariffs were partially lifted later in the year after Commerce determined that dumping had ceased.

The Rise of China

The biggest events that would shape up world trade is the rise of China. The necessities of Cold War against the Soviet Union meant that USA under Nixon-Kissinger sought to co-opt China in a bid to isolate Soviet Union. The Kissinger doctrine had theorized that America could not collectively fight Soviet Russia & China together. After Mao’s death when Deng Xiaoping took power in 1978, America & China began to co-operate in drawing up the blueprints of modernising the Chinese economy and uplifting it from abject poverty with the help of the World Bank. The American objective of the policy was to co-opt China and try to pivot it from a closed socialist state owned system to a market-oriented economy. This co-operation with China meant US overlooked the human rights abuses in China, the Taiwan and Tibet question and even overlooked the Tiananmen Square massacre as China was helping US in the fight against the soviets in Afghanistan. The policy dictums by the World Bank in the 1980s spurred reforms in China which lead to its economic growth and expansion in its foreign trade over the next two decades. With hundreds of millions of unskilled workers migrating from the rural areas to coastal manufacturing centers, China soon became the world’s largest exporter of labor-intensive goods, particularly apparel, footwear, toys, and sporting goods. China also became the assembly location for the world’s consumer electronics. Within two decades, China made an enormous impact on world markets and trade flows. China’s share of world exports rose from miniscule proportions in 1980 to 5 percent in 2000, reaching 12 percent in 2014.

The rise of China as techno-industrial power was enabled by America and the Wall Street backed Pax Americana global institutions. After the collapse of the Soviet Union, the world in the 90s pivoted towards a unipolar world order where America was the pre-dominant power while Russia’s market economy was struggling under President Yeltsin. China at that stage was still a developing economy and liberal elite in America under Democratic Bill Clinton’s presidency thought that America had won the battle of global supremacy and if they could get CCP ruled China to admit to global trade bodies it will further help democratise China’s policies internally and externally. The U.S.-China bilateral agreement reached on November 15, 1999, paved way for China’s accession to WTO in 2001. We have extensively written on China’s rise as Techno-Industrial power in our book “The New Global Order” (2016) and even off late on out platform Niti Shastra.

While America was busy packing up the pro-soviet regimes in middle east from Iraq to Syria to Libya and engaging in endless war in Afghanistan post 9/11, China quietly continued to build its strength co-opting American corporates and the wall street on one hand and stealing American technology on the other hand. Meanwhile, China’s current account surplus ballooned to 10 percent of GDP in 2007, a magnitude far outside the normal range of experience for a rapidly growing developing country. US exports to China failed to grow at anything close to the pace of imports from China, and the bilateral trade deficit with China grew from $83 billion in 2000 to nearly $260 billion in 2007. The Global financial crisis of 2008-09 further proved to be a pivotal point as America was grappling with recession and financial blowout, on other hand China continued to build itself and firewall its economy with stimulus. Post GFC, China’s trade deficit with US grew from 260 billion $ in 2007 to 315.8 billion $ in 2023.

Trump 2.0 & the American Reset

Arrival of President Xi Jinping in 2013 and his vision to pivot China as a world power was underscored by his launching of vision of Made in China 2025 and China Dream 2049 to make China a techno-industrial powerhouse. The rollout of the Belt & Road Project (BRI), AIIB (Asia Infrastructure Investment Bank) and use of Yuan as a currency to buy commodities threatened America’s hegemony of US Dollar and the Pax Americana system. This prompted the rise of American nationalist right against the globalists projects that started rolling from Brexit in 2016 to election of President Donald Trump in 2017 declaring America first whilst starting a trade war with China and imposing tariffs on it. Republican President Donald called past and prospective trade agreements like NAFTA and TPP as disastrous for destroying jobs and hurting the American middle class, workers alike. Unlike the Japanese trade deficit of 1980s, the China trade deficit was more alarming for America. In the case of Japan products were made in Japan by Japanese producers like Toyota, Honda, Panasonic, Sony that competed directly with American producers. The Chinese exports on the other hand were sourced by American firms themselves and consisted of American name brands footwear by Nike, apparel sold by Walmart, electronic devices by Apple etc.

The unexpected election of Donald Trump in 2016 marked a sharp change in presidential tone on trade policy, and potentially a significant change in the substance of policy as well. Ever since World War II, American presidents had spoken favourably about international trade and supported multilateral and bilateral agreements to reduce trade barriers, often pulling a reluctant Congress along. Now a president was elected who had been openly and harshly critical of such agreements. While President Trump had launched the trade wars including Section 301 Actions in 2017-18 however those actions were short circuited by the Covid pandemic that led to election of Biden Administration in 2021. The Biden Administration however did not enforce the agreements President Trump had made with China in first tenure to correct trade imbalance. However, America launched tech war on China’s growing tech industry barring its access to lithographic chip making technology, semiconductor chips, GPUs and other such hardware. The Chinese have however broken many barriers stunning America by launching its own 7NM Chip by Huawei and deploying AI models based on NVIDIA GPUs secured from Singapore.

Trump Administration 2.0 from its inauguration in January 2025 is going hammer and tongs from the word go imposing Trade Tariffs on China and rest of the world. US Commerce Secretary Howard Lutnick has clearly spoken that America would use tariffs on countries across the world like enforcing 25 percent tariffs on Mexico, Canada and 20 percent tariffs on China. Secretary Lutnick also announced reciprocal tariffs on countries across the world and sectors like Auto, Pharma, Semi-Conductor, Steel & Aluminum and Agriculture to go in effect from 2^nd April 2025. Secretary Lutnick clearly mentioned that he wants the manufacturing in critical sectors to shift back to United States re-industrialising America while asking countries like India, China & European Union to lower their protectionist tariff barriers. Trump Administration is reminiscent of the traditional republican nationalist sentiment which thinks that these globalist policies of free trade post war order have ravaged United States and stolen American jobs and prosperity.

However, path for the Trump Administration 2.0 to reset global trade policies with America First won’t be an easy task as today’s America is indebted with 37 trillion $ of Debt with a 7 trillion $ of debt due to be rolled over in 2H of 2025. The high inflationary impact of Tariffs and diversified supply chains will make the enforcement of these measures even more difficult. Today these products are not imported from one country alone rather its components and sourcing can be from different countries. This is where Trump’s foreign policy gambits of making peace with Russia which is a commodity warehouse and co-opting India to isolate China in Indo-Pacific comes into play. The Trump Administration priorities are very clear i.e. ‘resetting the global trade relationships outside the WTO with bi-lateral trade agreements, enforce trade tariffs to get more access to trade territories for American corporates and its exports, reduce American debt/deficit and re-industrialise America at the cost of the world’. It is akin to redistribution, transfer of wealth and resources but this time between nations.

President Trump’s actions abroad and at home are aimed at securing America from the clutches of Anglo-American oligarchy while aiming to rekindle America as the most advance and powerful nation on planet even if that means letting go of the post war global order that served the American empire. In effect the world is headed for chaotic period as America abandons the current international order, making forceful interventions globally to secure its national interests for whatever be the cost. We are now back to 1930s where Economic Nationalism is taking over parts of the world, trade wars being unleashed, global trade rules and institutions are being made redundant, prospect of a global recession, stagflation, financial crisis and an eventual military conflict. The world specially countries in the East like India & China must get ready to protect its core values and interests as America retreats from the post war ‘Pax Americana’ global order. The ‘Great American Reset’ is now truly upon us!

Notes:

1. American Civil War: The battle between American Nationalists and the British Free Trade Radicals - Niti Shastra

2. American Civil War: The Chronology of Conflicts & Deceit - Niti Shastra

3. The Great American Reset - Niti Shastra

4. Monroe Doctrine: American Exceptionalism upending the Global Order - Niti Shastra

5. Yalta 2.0 - What Comes Next - Niti Shastra

6. Rise of China as Techno-Industrial Power & its impact on Global Order - Niti Shastra

7. Clashing Over Commerce - A History of US Trade Policy - Douglas A Irwin (2017)

8. Tariffs & American Civil war - By Phillips W. Magness

9. Tariff Retaliation - By Joseph M. Jones Jr (1934)

10. The New Global Order (2016)