The hidden rationale of Trump Tariffs to China

Readers you probably know who Donald Trump is. He is the President of the currently not so great America. He desperately wants America to become a great country. To make this transformation, he recently introduced stringent tariffs across the world that shook the nations, stock exchanges, both rich and poor and even the Penguins in Heart Island and McDonald. He didn’t even spare them and slapped with a minimum or base 10% tariff.

I went to Professor’s residence in the evening, just the day after new Tarif’s were announced. I wanted to gossip about Trump and his “irrational” tariffs with Professor. But Professor had other plans and was ready to go out.

“Dr Modak, you just came on time. I have been invited for cocktails at a friend’s house on Carmichael Road. Why don’t you come along? “ He said this while putting on his jacket.

(For those who don’t know Carmichael road, it is one the areas in Mumbai on a hill where some of the richest people and diplomats live. Only last week, a 4500 square meter of a wooded plot was sold for 1700 million Rs (close to 20 million USD) in this area).

I initially hesitated as I wasn’t well dressed for such a high end party but then decided to join Professor as I knew that this party was going to be the best place to gossip about Mr Donald Trump and his tariffs.

The host ushered us to the terrace where several Page 2 and Page 3 personalities were around. I went to the bar to get a drink and bumped into a retired bureaucrat from Ministry of Finance. I had earlier seen his photo as one of the contestants for the position of the Governor of the Reserve Bank of India.

“Hi, he said”. I too said “Hi”.

“You look quite familiar, were you at the negotiation meeting we had last year at the WTO in Zurich”. He quipped.

I politely said, “No Sir”.

He liked me addressing him Sir.

He said “Doesn’t matter really. But why don’t you join us with a glass of wine. We are all discussing Tariffs of Donald Trump”.

I looked for the Professor.  I found him talking to an elegant woman wearing gold rimmed spectacles.

So, I joined this group.

Man from Ministry of Finance introduced me as Professor’s Friend. That seemed to be enough.

A stocky man, who resembled an investor, was speaking. After explaining a lot, he said that Donald Trump’s advisors used a wrong formula to calculate the tariffs. It should have been “this”, “that” and “this”.

“Oh”, said a woman with earrings studded with 2 carat diamond stones. “ This is shocking. Quite an inside information and  I must talk about this in our Rotary meeting tomorrow”. She was happy that she picked up something intellectual to gossip.

The diplomat from Chinese embassy was listening. Although he was under strict instruction on not to speak in public, he said that Chinese used the correct formula in retaliation”. That was comforting to many who frequented to the Golden Dragon restaurant at the Taj hotel near Gateway of India. Some said, India should also follow China but use Indian formula.

There was a man in thick glasses and wearing an expensive a kurta stitched by Adivasi women in Odisha. He was having a single malt on the rocks. He asked a question full of concern as most activists do.

“But does anyone know the real reason why Trump announced this Trade War in the first place?”

People were waiting just for this question. So, several spoke with their own interpretations – but of course adding that this was something confidential and was not to be shared. Here were some of the interpretations

“It’s all Elon Musk’s game and poor Trump has fallen in the trap. He is actually an innocent guy basically grown up as (wall) street kid”. Ex-Chairman of a multinational group said. He had a Green card.

“Trump is intentionally “crashing” the market to force the US Federal Reserve to lower interest rates while making stocks more affordable”. A retired senior official from SEBI said as an insider information. SEBI knows, I said to myself.

“It is his plan to divert world’s attention. While all affected countries will discuss and keep discussing, he will take Greenland, Russia will take over Ukraine and China will occupy the islands of Taiwan”. Said a retired army brigadier who often speaks on TV channels with anguish. Somebody added “But no one will take Somalia. And Bangladesh will also be safe”.

“Trump actually wants to liberate the world. He now feels “spiritual” and “Godly” after surviving the shooting” Said a Trustee at the Cathedral in Bandra.

“Trump is doing all this because he got bitten by a dog”  Now I don’t remember who exactly said this. But many seemed to agree with this possibility.

But despite several speculations, no one could figure out what is the real reason behind.

Finally, the host said that it may be a good idea now to ask the Professor. Some said that since Elon Musk had done internship with Professor, he may know the real story.  So all of us reached where Professor was chatting. Initially, Professor refused but when coaxed by all of us, he agreed to speak. He lighted his cigar. Everybody in the terrace had now flocked around. The woman with gold rimmed spectacles pushed a sphinx headed ash tray on his side.

Professor spoke

“You all know that a large share of consumer electronics, toys, furniture, clothing, and household appliances in American homes are still made in China. Example: Over 60% of U.S. toy imports and 30–40% of electronics still come from China. Even U.S.-based brands often assemble or source parts in China. About 30% of furniture and 30–40% of textiles/apparel sold in the U.S. are made in China.

Today, Chinese goods are partly a reason for unsustainable consumption in America. Low-cost Chinese manufacturing enables American retailers to sell products very cheaply. And this leads to a culture of “buy more, use less, throw away faster.”. Imagine $5 T-shirts that last 4 washes, $20 electronics that don’t function more than a year and  $1 plastic toys are often bought in bulk and disposed of quickly. This fast, cheap production encourages a short product life cycles, fuelling generation of mounting waste, chocking the landfills of America. Actually, Chinese manufactures must pay to the US a heavy landfill tax.”.

The diplomat from Chinese embassy wasn’t happy with this kind of discussion. But he decided to stay quiet this time as per instructions.

Professor continued as he had more points to make

“Remember Chinese factories are often powered by coal and other fossil fuels. So when a U.S. consumer buys a Chinese-made item, the carbon emissions are essentially  “outsourced” to the US by China. And don’t forget to add carbon emissions from shipping across the Pacific Ocean”

Initially, Trump wanted to introduce a Carbon Border Adjustment Mechanism (CBAM) to counter these added carbon emissions but Elon Musk didn’t want to steal this stupidity of EU. His advice was simple and direct – raise tariffs to account for landfill and carbon tax on Chinese imports.

Trump had realized that the real root however lies in the America’s demand model: mass consumerism, lack of circular economy practices, and undervaluing product longevity. So Trump realized that to reduce the untamed and unreasonable demand a three pronged strategy may work. Strategy 1 was to  increase the tariff on Chinese goods charging basically for the use of America’s landfills and account for added carbon emissions. Strategy 2 was to make American’s poorer (analyses indicates that the tariffs could lead to an average tax increase of over $800 per U.S. household in 2025) and Strategy 3 was to raise the inflation, estimated to be up by 1% by early 2025”

Professor summarized saying that this multipronged strategies will make America, sure a Great country. He praised Donald Trump for hitting hard on the nail and show the World how to meet the targets under Sustainable Development Goal 12 : Sustainable Consumption and Production.

Professor extinguished his cigar. All stood in silence. This was a completely new perspective worth gossips.

I walked to the bar and asked the bar tender how many drinks Professor had. As only someone drunk will humourize the consequences of today’s World Trade War by making a satire on sustainability.

So my readers, this was surely not the real reason for Trump’s tariffs to China.

Many times people like Trump need no reason. Do they?