A tariff negotiation is like a ping pong game. The more spin and force you use, the more will be the counter actions.

Global trade today is similar to the barter trade between countries. A country imports goods that it cannot make. The same country exports goods that it has in abundance. In olden days it used to be ‘goods for goods’ based on a notional value and that’s how trade had flourished over the centuries. Today tariff on goods of another country is used by countries as a tool to buy their goods.

Let us look at what governments want. They want the best possible landed prices for their products to make them affordable to the consuming public. In a tariff game, you want to import what is not available or could not be made within the country.

A country cannot make a product or produce an agricultural commodity overnight as many factors come into play – raw materials, skilled labour, technology or weather. No company wants to get into that segment that has high dependency on these factors and has a long period of ROI. Businesses weigh pros and cons and take decisions that are viable in their balance sheets. Nationality sentiments do not play any part unless they do business for charity.

If a country does not remain in a comfort zone of imports and exports with another country , it evaluates alternate markets for their country made products or help the local manufacturers to make their products that are competitively priced for exports.

Better sense starts prevailing when the industry bodies caution the governments on tariff rates that impact the local market and purchasing power of people.

Let us not forget that it is the people who finally determine the tariff rates because they only know how much is there in their wallets. Governments must listen to them to keep the vote bank intact.

A news item says ‘ Americans are going to pay each $ 1200 extra annually once the new tariff comes into effect’

#tariffwar

#tradewar