It is essential to move towards a third alternative of a new economic model which is sustainable for Mother Earth for peace and prosperity for the entire mankind. This is what has been contemplated in the Integral Humanism of Pt. Dindayal Upadhyay and in the philosophy of the Third Way of Dattopant Thengadi.  — Dhanpat Ram Agarwal

The World is passing through certain chronic problems of climate change, geo-politics, economic inequality and trade policy uncertaintiesleading to challenges for global peace and prosperity. The priorities of Nations are changing from globalisations to ‘Nation First’. There areconflictson the issue relating to de -globalisation.de dollarisation and de carbonisation which needs to be more democratic and lay the foundation for a decentralised economic system for sustainable development.

The World economy seems to have succumbed under the pulls and pressures of overstretched forces of globalisation and technological imbalances leading to huge trade deficit and unsustainable national debts.  

In the above aggravatedsituation, Trump 2.0 is moving aggressively to trigger a trade war with imposition of across-the-Board customs duties of a minimum 10% and much more on a progressive reciprocal import duty on all the imports from allthe 60 countries including China, Europe and India. The new Duty structure has already been announced on 2nd April 2025 through the Executive Order which was earlier sought to be implemented from 5-9th April 2025 (Now put on hold). He has also announced an import duty on automobiles from Mexico and Canada @25% on the modified NAFTA considerations or USMCA.

There was an average lower average tariff of 2.5% for all the imports in USA in Pre- Trump era and it had been around 28-29 percent in 1900 and raised again after the Great Depression in 1929. 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 of Manroe Doctrine of isolationism and had raised the average tariffs by 20 percent.

Trump 2.0 is raising it to around 24% on average basis. 

On April 2, 2025, President Donald Trump signed an executive order imposing a baseline 10% tariff on all imported goods, with higher rates targeting specific countries: 

• China: 34%  (Now raised upto 145%)
• Taiwan: 32% 
• Vietnam: 46%
• European Union: 20% 
• South Korea: 25% 
• Japan: 24%
• India: 26% 
• Switzerland: 31% 
• United Kingdom: 10%

Additionally, a 25% tariff has been imposed on all foreign-made vehicles. President Trump has called this initiative the “Liberation Day,” aiming to address trade imbalances and bolster domestic industries. It is a matter of fact that US is running a huge trade deficit of US$ 1.2 trillion and the mounting debt burden of US$ 35.47 trillion as on 30 September, 2024 and which is projected to be US$ 46.70 Trillion in 2029 as per the forecast of government Net Debt (Source: ceicdata.com). 

However the sudden and abrupt increase in the tariff has exploded a trade war and a turmoil in the global economy. The investors in the stock market has lost trillions of dollars and as per some estimates the decline in S&P and Nasdaq has resulted in loss of about US$ 6 trillion in the last two days on the 3-4 April and it is said if the losses are considered from December 2024, it amounts to almost US$10 trillion. The experts have a feeling that the increase in import duty will not only lead to inflation but may also lead to recession in US. The affected countries are taking up retaliatory measures. China had been imposed 20% immediately after Trump’s oath taking on 20th January and additional 34% aggregating to 54% which has forced China to impose 34% duties on all imports from US. A few countries have also decided to make appeals in the WTO for violating the international trade rules by USA.

It may result into a large numbers of trade disputes and the retaliation from rest of the world on ‘nation first’ theory. This kind of trade war may affect the overall economic activities around the world and it is estimated that the global GDP will decline by at least one percent and trigger de globalisation. In the meantime,Trump Administration has issued 90 days pause onreciprocal tariff on all the countriesexcepton China which has imposed retaliatory tariff of 125% as against the import tariff 145% by USA on China.The trade war is fiercely going on within USA and China. There is a contemplation that China may sell out US treasury bills which may have a repercussion on the US Bond market and it may have the impact of increase in the interest rate. There is already huge interest burden on US budget which has exceededits defense budget and if the rate is increased further, the US fiscal deficit will increase substantially. 

Globalisation has been a natural phenomenon since the beginning of the global trade even in the medieval era and it was much more deeper in those days. There was no restriction on the movement of labour, goods, services, capital and technology and 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 or until the beginning of the second World War.

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. 

The rising Trade deficit in US coupled with huge fiscal deficits and the huge debt burden with annual interest burden which equals its defence budget and declining manufacturing jobs is a matter of concern. Trump has promised to its voters to bring a drastic change in the existing economic policies and has uttered in his speech on 2nd April that the factories are more important than the Wall Street indices. He has clearly stated that he will withdraw from the Paris Agreement on Climate Change as he did in his first term and for him the only target is to make America Great Again (MAGA) He is bent upon reducing the Government Expenditure through his newly opened Department of Government efficiency (DOGE) which is headed by Elan Musk. Chinese share in the international trade has increased tremendously and it’s trade surplus has crossed US$ 1 trillion. Therefore basically the trade war is between these two big economic powers.

China is emerging as a great economic power and in fact if we consider purchasing power parity 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 two position with its GDP of US$ 27.36 trillion and India at the top three with its GDP in PPP terms US$ 14.54 trillion. It is worth noting that although on the nominal value of the exchange rate with US$ India’s GDP is about US$ 4 trillion and of US about US$ 30 trillion and China about US$ 20 trillion and thus US is seven times and China five times greater than India but on the purchasing power India is number three biggest economy in the World and US is just twice the size of Indian economy. It would be a matter of time when Indian technology will be competitive enough to manufacture all the goods to meet its domestic demand and become self sufficient in its energy requirements when the value of rupee will appreciate and would reach near its purchasing power. This will be possible by spending more on research and development and giving priority to invention and innovation by filing more patents and developing a strong IPR regime. 

Trumponomics may turn out to open a Pandora box of complexities on bilateral trade agreements across several countries as multilateralism is going to be irrelevant and WTO becoming defunct. It will raise innumerable problems for exchange of information and technology based services particularly when artificial intelligence and other methods of cross border supply of services can move across the world in fractions of seconds and it is difficult to block them through regulations and legal provisions.

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 particularly when WTO is in limbo. We should give a fresh look at the present global economic system. 

Global shift of power has already started. 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 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 2024, 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.

It is important to note that the burden of total cumulative foreign capital in the country has been increasing and as per the latest official published sources, the cumulative FDI is US$ 1 trillion as per PIB dated 12/12/2024, Ministry of Commerce, the cumulative FPI as per NSDL is US$ 1 trillion as on 31/10/2024 and Foreign Debt US$ 663.8 Billion as per RBI which aggregated to US$ 2.664 trillion against Forex Reserve as on 31/01/2025 as per RBI US$ 630 Billion. This situation coupled with rising trade account deficit of around US$ 250 billion every year is an area of serious concern.

It is therefore likely 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 for peace and prosperity for the entire mankind. This is what has been contemplated in the Integral Humanism of Pt. Dindayal Upadhyay and in the philosophy of the Third Way of Dattopant Thengadi.