It is essential to move towards a third alternative of a new economic model which is sustainable for mother earth and that is Vasudhaiva Kutumbakam or the whole world is a family which can lay the foundation for peace and prosperity for the entire mankind. — Dr. Dhanpat Ram Agarwal

Trump2.0 is likely to trigger a trade war with imposition of across the Board customs duties of 20%on all the imports and 60% for imports from China. It will be a matter of larger numbers of trade disputes and the retaliation from rest of the world on national first theory. China has already started tightening its belt as even during Jio Biden era, many import restrictions were imposed by US on China. Globalisation is a common phenomenon and it has been in existence even in the medieval era and it was more deeper when the movement of labour, goods, services, capital and technology including all the economic activities were integrated even until the beginning of colonialism in the 17-18th century and it was broadly unbridled till the end of the First World War or until the Great Depression of 1929-39 or until the beginning of the second World War. The Smoot-Hawley Tariff Act was passed by US Congress on June 17, 1930, that raised import duties to protect American businesses on the principles and Manroe Doctrine of isolationism and had raised the average tariffs by 20 percent. Therefore what Mr Trump is planning is perhaps rewinding the clock to begin a new era of Mercantilism. This also fructify the fact that the American economy is in great trouble with mounting debt burden of US$ 35.47 trillion as on 30 September, 2024 and which is projected to be US$ 46.70 Trillions in 2029 as per the forecast of government Net Debt (Source: ceicdata.com).

US was the main votary of globalisation in early 1990s through its package of economic reforms in the name of Washington Consensus and now it wants to reverse the gears as the Asia is growing and when China is emerging as a great economic power and in fact if we consider purchasing power party for calculating the GDP, the recent published data by World Bank (Source: data.worldbank.org) says that China is at the top with its GDP of US$ 34.64 trillion in 2023, US at top 2 position with its GDP of US$ 27.36 trillion and India at the top 3 with its GDP GDP in PPP terms US$ 14.54 trillion. It may be interesting to note that on nominal GDP terms US is at the top and China is at top2 and India at top 5 but on the intrinsic purchasing power of the respective home currencies, there is substantial change in the position and Russian federation is the 4th largest economy on PPP basis with US$ 6.4 trillion as against Japan which has US$ 6.2 trillion although Japan is at the 4th position on the nominal value of US Dollar. Germany’s GDP on PPP terms is only US$ 5.8 trillion.

Therefore it is important to understand what would be the global implications when the world is moving towards de globalisation and de dollarisation. Trumponomics may turn out to be rhetorical and less practical as in today’s era of knowledge driven economy, technology is enabling a borderless world and the physical boundaries can have very limited role in restricting the physical movement of goods. E-commerce has already created several challenges for imposition of customs duties and any harsh steps by US administration will have retaliatory actions from the rest of the world and may require drastic changes in the international rules of trade in WTO which is a very lengthy process.

We should give a fresh look at the present global economic system. The share of OECD countries which is a club of the developed countries with high income group, is declining in the global GDP and the share of the Emerging economies of middle income group economies is increasing. The latest Report of World Economic Outlook published in October 2024 by IMF shows that OECD group or the Advanced countries share in the global gdp on PPP basis is gradually declining. OECD shares 40.7 and Emerging market shares 59.3 per cent of the global gdp in 2023 and it further says that the declining trend is continuing since 2017 when share of OECD was 44 and declined to 42.3 in 2021. On the other hand the Emerging market economies share in 2017 was 56 and in 2021 increased to 57.7.

President elect Trump has understood that the present century belongs to Asia. Globalisation is helping the emerging economies and in future with the advancement of technology, the concept of physical boundaries are going to be blurred. It is the Human Resources and the intellectual resources which will take precedence over the capital resources and therefore both China and India are bound to prosper. China has already taken over America in the field of technology. The latest WIPO Report 2024 shows that the share of China in global filing of patents is 47.2% as against USA which is 16.8% and that of Japan, 8.4% out of the total number of applications of 35.52 lakhs. The Artificial Intelligence is another challenge which is going to have different parameters of manufacturing and the services sector. There is no need for physical presence for rendering cross border services. The hegemony of US can be counted in limited number of years as the world is moving towards a new economic order where the digital economy will replace the physical value of US Dollar. In the recently held BRICS meeting in the last week of October, the member countries are contemplating for developing a BRICS currency to replace dollar and the role of US Dollar as an international currency of reserve has started declining as will be evident from the chart presented by IMF team.

In conclusion, it may be said that in coming years the World economy will face several challenges arising out of overspending and as a result overburdened debt situation which has grown to US $315 trillion as per latest IMF data which is 333% of the global GDP of US$ 105 trillion. The other major challenges are growing inequality across nations and across individuals coupled with the increasing problem of global warming and climate change. The geopolitical environment is heating up with wars around several parts causing bottlenecks for logistics and supply chain management and leading to food security and energy security. It is therefore essential to move towards a third alternative of a new economic model which is sustainable for mother earth and that is Vasudhaiva Kutumbakam or the whole world is a family which can lay the foundation for peace and prosperity for the entire mankind.