Tariff Wars and the Great Disruption: Trump Must Beware of the 'Columbus Effect'

The world is talking about whether or not the US economy will head into a recession after President Donald Trump imposed a series of tariffs on trading partners across the world. To me, that looks like a minor issue now. The world has seen a few recessions in the past few decades and emerged fine. This time, though, the sweeping changes introduced by the Trump administration are such that our imagination on what could happen should go wider and deeper into realms governed by the laws of unintended consequences. First up, it might be a good idea to take note of strange things that are happening, the latest of which is a tussle between the wealthy Harvard University, which is taking on the powerful Trump despite the threat of him blocking federal contracts and grants that amount to an estimated $9 billion. Illusion of Choice: US' Self Deportation Policy is Political Policing in Guise After the White House imposed high import tariffs on China, Apple arranged special cargo flights to transport 600 tonnes of its popular iPhones – numbering about 1.5 million – to the US from India. That would have been unthinkable a few years ago, when India pitched itself gingerly as an alternative to China’s humongous manufacturing capacities. We know by now that Trump has exempted electronic items like iPhones from his high tariff list, but things may never be the same again. While the downturn in the global economy that happened in the 1930s was called the Great Depression, the prolonged slump that resulted from the collapse of Wall Street’s financial giants in 2008 led to what is called the Great Recession.I would like to describe Trump’s antics that defy many learned political scientists and economists as the Great Disruption.Its ripples may go well beyond the simple logic of conventional social scientists. The US administration’s attempts to reverse some of its measures may not simply restore status-quo-ante, because once-bitten-twice-shy responses from partners and rivals trigger a different kind of thinking – and here is where the law of unintended consequences comes in. The White House has challenged even seasoned trading partners such as the European Union and Japan. US visa restrictions now require even legitimate long-term residents such as H1B visa holders to carry their immigration papers all the time, even as their spouses will be subject to extra checks.A slew of African nations have meanwhile been stripped of USAID grants while the faculty at Harvard University famous for its law school, is suing the US government for cutting back federal grants. Such events can lead to phenomenal outcomes because those affected think of longer-term alternatives. My mind goes back to another event tied to US history – the discovery of America itself. Christopher Columbus, credited with “discovering” the American continents for Europeans, went looking for a new sea route to India and ended up crossing the Atlantic Ocean. The rest, as they say, is history. A fascinating version of this story, popularised by veteran diplomat and politician Mani Shankar Aiyar, goes that were it not for Indian black pepper badly needed by Europeans to digest red meat, there would be no superpower called the United States of America. Columbus was forced to seek a new trade route to India by the Turkish capture of Constantinople, now called Istanbul, in 1453. Six years after Columbus landed in the American isles in 1492, Portuguese explorer Vasco Da Gama discovered the roundabout sea route to India through the South African coastline. But America made separate strides in global life. I am tempted to liken Trump’s strange ways to the Ottoman Turkish conquest of the Byzantine empire – one that might trigger sensational outcomes. The law of unintended consequences says that in complex systems, a chain of events can lead to unexpected and often undesirable results but can also be sometimes beneficial. Popular examples of this law are of unemployment caused by minimum wage laws, bootlegging caused by a ban on alcohol, and the “Cobra Effect” under which incentives to catch harmful cobras may lead to the breeding of cobras!Dear India, Negotiate the Insane Trump Tariffs at Your Own PerilConsequences may not necessarily be immediately related to what is intended by originators but wildly different ones, such as the discovery of America. For example, the creation of “no man’s land” zones, often as a result of military conflict, has led to the preservation of natural wildlife habitats. Some positive examples of the law that I have observed are fascinating. British rulers imposed English as a language of education in India under the so-called "Macaulay system", but the language intended to help imperialists to consolidate power eventually helped India emerge strong more than a century later as an exporter of information technology and software services in the post-colonial computer age. Similarly, the British may have introduced the railways to port away Indian minerals but the same tracks also ushered in a passenger train system that helped India forge national unity during and after imperial rule. Then, there is the fascinating story of Almon Brown Strowger, an undertaker by profession, who thought he was being upstaged by a business rival’s wife who worked as a local telephone operator. Strowger thought she deliberately routed incoming business calls meant for him to her husband. This resulted in his inventing a revolutionary automatic telephone exchange that bypassed manual telephone operators – historically called the Strowger exchange, which he patented in 1891. Direct dialling of telephone numbers happened thanks to a man who used to help funerals. Where does that leave Trump tariffs? You never quite know in the flip-flop, see-saw way global trade and immigration are moving this year. With limited logic, I am tempted to recall a cosy system called the “rupee-rouble trade” that preceded the collapse of the USSR in 1991, which also coincided with a sweeping liberalisation of the economy in India.During the Cold War years, the trade bypassed the US dollar, under which transactions could be settled in each country’s currency.This helped India conserve foreign exchange reserves and import oil and armaments, while the Soviet Russians gained from India-made medicines and consumer goods like leather products made in India. In the 1990s, shopkeepers in Delhi’s Palika Bazar could be seen speaking broken Russian to shopper tourists! Will Trumpnomics generate such new-age arrangements? Or will it lead to new technological innovations? Imagine a new cryptocurrency bypassing the US dollar! Or a Harvard campus relocated somewhere in Asia as an activist suggests. The law of unintended consequences, by definition, hides an element of surprise that defies the obvious. We have to wait and watch. (The writer is a senior journalist and commentator who has worked for Reuters, Economic Times, Business Standard, and Hindustan Times. He can be reached on Twitter @madversity. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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Trump Scripted the 'Great Disruption' but Must Beware of Unintended Plot Twists

The law of unintended consequences says that disruptive events can lead to unexpected and often undesirable results.

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