Trump’s first move for pulling USA from TPP and encouraging US big houses to bring back their investments affirm that his election pledge to make America great was not rhetoric. His commitment to reduce corporate tax to 15 percent to 20 percent from 35 percent provided they bring back their productions to USA , or else face the ‘consequences’ for shifting jobs out of USA , reaffirmed his carrot and stick policies . These have worked. Carrier was the first to retain jobs in the USA that were slated to move to Mexico. Ford cancelled its US $ 1.6 billion project in Mexico and said instead it would invest in existing plant in Flat Rock Michigan. In tune to his election campaign pledges, Trump’ assertiveness to stem USA from multilateral trade deals and flex American muscles in US manufacturing premise his prime objectives to promote Make in America.

Trump’s import substitution plus approach through tariff barriers and encouraging domestic production through corporate tax incentives will play hardball for Chinese growth. Trump’s threat to impose 45 per cent tariff on Chinese goods will stir up a trade war between USA and China. China vowed to initiate retaliatory measures.

But, given the trade powers of both countries in their respective economies, it suggests that China will be in a weaker position in arms twisting race. USA shares 18 per cent of China’s export, while China accounts for just 7 percent of American exports. USA is much wealthier and stronger than China. USA has bigger space to withstand China’s retaliation. This means that China will be a looser in terms of export damage, resulting loss of thousand of Chinese jobs, in the retaliatory bout.

Trump’s moves to Make America Great can be viewed similar to Prime Minister Narendra Modi’s Make in India initiatives. On several counts, both leaders are on the same plank, however, with a difference. While Trump’s moves are coercive, India’s moves are economic challenges. Both are pursuing inclusive growth to counter foreign trade power, spearheaded by cheap labour and cheap imports. Trump is to strip off Mexico and China led carnages to USA economy by renegotiating NAFTA and imposing hefty import tariff on Chinese goods.

The forces behind the economic growth for both leaders are job creations, even though the strategies are different. Trump’s America First policy aims to create more jobs for Americans, by protectionism measures and Modi’s Make In India aims for more job creation focusing on expansion of manufacturing in the country. Trump has vowed to take tough immigration policies, curbing US potential for cheap foreign labour, relooking to HI B visa.

Given the Trumpnomics and Modinomics to spearhead the job oriented growth, globalization is poised for down turn. It will lead China to face hard days to retrieve its growth. Trump’s isolationist policy will put globalization in the backburner.

Trump’s import substitution plus approach through tariff barriers and encouraging domestic production through corporate tax incentives will bring back American investors in USA. Similarly, Modi‘s Make in India will reduce dependence on imports from China. Currently, China accounts for biggest share of India’s imports, fuelling wide trade deficit. Both will prove double whammy for the export led Chinese growth, which is already reeling under over-capacity due to stagnation in the global export market

Even though Chinese President Xi Jinping challenged USA for trade war, historically, USA has been a good wager in betting trade war. Japan is a case in point. In 1985, Reagan administration’s Plaza agreement in between USA, France, UK , Germany and Japan to intervene in currency market and devalue US Dollar against Japanese yen to decimate Japan’s vehement export to USA brought Japanese exporters on the table. With Japanese yen skyrocketed, Japanese exports turned expensive, letting American goods insulated from cheap Japanese goods, particularly US automobile industry, in safe net. Japan faced a major damage to its domestic industry, resulting Japanese manufacturing shifting to low cost countries and creating an hollow investment in the country.

China admitted that it is the biggest beneficiary of globalization. This is the prime reason that China has been a big supporter of free trade deal. Anti-globalization will restrict Chinese growth. According to Beijing custom official Huang Songpin, “The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of the trend”. Given the protectionism intensifying in Trump era, fears looms large over Chinese growth

In 2016 China witnessed a three decade slow pace of economic growth. It pinned 6.7 percent growth in 2016 against 6.9 percent in 2015. Beijing warned L-shaped growth, meaning once the downturn ends, growth is unlikely to rebound.

Similar concerns were shrouded on Chinese growth by India’s Make in India initiatives. According to a Chinese daily, China’s manufacturing will rally behind India. It warned China for loosing its competitive edge. Foreign investors are on the spree to dislocate their manufacturing activities to low cost countries. The target countries are India and Vietnam.

Apple’s consideration for setting up manufacturing facilities and Chinese largest telecom company Huawei Technologies Co Ltd to set up smart phone plant in India unnerved Chinese daily. Along with Apple, the daily warned, its production chain Foxconn will shift to India, causing loss of thousands of jobs in China. If Apple expands in India, it may lure other tech giants in India and China is likely to face more transfer of supply chains in India, the Chinese daily apprehended.

The world will witness a turnaround in the global strategy for economic growth – from globalization to inclusive growth. This will reinforce the return of inward oriented growth, leaving behind the globalization plank as the trigger for growth. Given the situation, China needs to spurt its domestic demand to reinvigorate growth, instead of retaliation. (IPA Service)