Prelims

Half Title

Global Tariff War

Title Page

Global Tariff War: Economic, Political and Social Implications

Edited by

Dr Ramesh Chandra Das Vidyasagar University, India

Copyright

Emerald Publishing Limited

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First edition 2021

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Dedication

The book is for the persons who have contributed a lot in building my academic career:

Sadhucharan Das

Basanta Das

Khagendranath Das

Barendranath Das

Kamalakanta Das

Sankar Mahapatra

Chittaranjan Mahapatra

Bibhas Karmakar

Contents

List of Figures

List of Tables

About the Contributors

Ebikabowei Biedomo Aduku is a PhD Student, Department of Economics, Nnamdi Azikwe University, Awka, Nigeria.

Pinki Bera, a PhD Scholar of Department of Economics, Vidyasagar University, Midnapore, India, has received MSc degree from Vidyasagar University in 2017 and MPhil degree in 2019. She has also participated in several national and international seminars.

Mainak Bhattacharjee is presently an Assistant Professor in Economics at Loreto College, Kolkata, India, and formerly in The Heritage College, Kolkata, India. He has obtained MPhil and MA degrees in Economics from the Jadavpur University, Kolkata. He has been working in the areas of macroeconomics and international trade. He has contributed many research articles in reputed journals and chapters in edited volumes with international publications, along with having a number of undergraduate levels text books to his credit.

Abhijit Bhattacharya, PhD in Economics, teaches Economics as an Assistant Professor at Pingla Thana Mahavidyalaya, Maligram, Paschim Medinipur, West Bengal, India. His area of interest includes International Economics, Financial Economics and Development Economics.

Rajib Bhattacharyya is an Associate Professor in Goenka College of Commerce and Business Administration, Kolkata, India. He obtained his bachelor degree in Economics from St Xavier’s College, and his Master degree in Economics from University of Calcutta. He did his MPhil and PhD in Economics, both from the University of Calcutta. His fields of interests are international trade, finance, indian economic development, and women empowerment. He has contributed a good number of articles in reputed national and international journals/books.

Chandrima Chakraborty is presently working as an Assistant Professor in the Department of Economics at Vidyasagar University, India. She has been awarded a PhD in Economics from Jadavpur University. She has attended a number of national and international level seminars and conferences. She has publications in many books and journals of reputation.

Nilendu Chatterjee, PhD, is an Assistant Professor in the Department of Economics, Bankim Sardar College, West Bengal, India. He has research interest in resource economics, general equilibrium, and development economics. He has published a number research articles in several international journals of economics including International Journal of Sustainable Economies Management, Economic Affairs, Foreign Trade Review.

Tonmoy Chatterjee, PhD, is an Assistant Professor in Economics at Ananda Chandra College, West Bengal, India. He has also served as Faculty Member in the Department of Economics of Sidho-KanhoBirsha University, West Bengal. He has worked as Research Assistant in Centre for Studies in Social Sciences, Calcutta, for World Bank project (under CTRPFP). He has obtained Prof M. J. Manohar Rao Award from the Indian Econometric Society for the best research paper in 2012. He has published a number research articles in several international and national journals of economics.

Dipankar Das is a PhD Scholar in Economics at West Bengal State University and obtained his MPhil degree in Economics from this university in 2017. His research areas are financial flows in emerging economies and economics of education.

Ramesh Chandra Das, PhD, is currently an Associate Professor of Economics at Vidyasagar University, West Bengal, India, with more than 20 years of teaching and research experience in different fields of the subject. He has obtained Masters, MPhil, and PhD degrees in Economics from the University of Calcutta. He has contributed several research papers to national and international journals with reputations along with completions of three minor research projects sponsored by UGC, India. He has written text books on microeconomics and macroeconomics for different fields of students and Academicians in Economics and several edited books with international publishers such as IGI Global, Emerald, Springer, and Sage.

Kanchan Datta is presently an Associate Professor of Economics at The University of North Bengal, India. He has many publications in reputed journals on the topic of international trade, development and social indicators.

Hasan Dincer, PhD, is an Associate Professor of Finance at Istanbul Medipol University, Istanbul, Turkey. He has more than 100 scientific articles and some of them are indexed in SSCI. He is also an Editor of many different books published by Springer and IGI Global.

Abhijit Dutta is a Professor of Commerce and Dean of the School of Professional Studies, Sikkim (Central) University, Gangtok, India. He has vast experience in academic and research activities, supervised PhD scholars. He has also published a couple of books.

Ujjal Protim Dutta, PhD, is an Assistant Professor in Rangia College in Assam, India. He previously worked as a Post-Doctoral Fellow in the Department of Humanities and Social Sciences at the India Institute of Technology Guwahati. He obtained his PhD degree from National Institute of Technology Durgapur. He has published papers in journals like Technology in Society, Child Indicators Research, South Asia Economic Journal and Journal of Health Management.

Richardson Kojo Edeme is a Senior Lecturer in the Department of Economics, University of Nigeria, Nsukka and Research Fellow, Institute of Business Research, University of Economics, Ho Chi Minh City.

Dipti Ghosh is currently working as a Junior Research Fellow in Economics at Jadavpur University, Kolkata, India. She did her Masters in Economics from Presidency University, Kolkata, India and received MPhil degree in Economics from Jadavpur University, Kolkata, India. Her research interests lie in macroeconomics and Indian economy. She has been associated with Bijoy Krishna Girls’ College, Howrah, India as a College Contractual Temporary Teacher of Economics along with being Visiting Faculty in the Netaji Subhas Open University, Kolkata, India.

Md Rakibul Hasan is a PhD Scholar in the Department of Economics, Vidyasagar University, Midnapore, India. He has received BSc (Hons) in Economics from University of Calcutta and MSc and MPhil in Economics from Vidyasagar University. He has published two research works and completed a project work of SAP, DRS-I. Participated in several national and international seminars.

Megha Jain is currently teaching as an Assistant Professor at Daulat Ram College, University of Delhi and is under pursual of her research in Management (Economics) from Faculty of Management Studies, University of Delhi. She has corporate/industry exposure of more than 12 years in the field of Finance at MNC Automobile giant. She has many national and international publications with papers presented at IIMs, IITs. She is a Joint Columnist in Financial Express, Firstpost, Pioneer, Hindu Business line, etc. She is felicitated with Best Paper Awards at IIT Bombay Doctoral Consortium, IIT Madras Athenaeum PhD Scholar Conference, and Delhi Technical Campus, Noida for different research papers on contemporary and structural developmental issues.

Anindita Jana is an MPhil student in the Department of Economics at Vidyasagar University, West Bengal, India. She obtained her bachelor’s degree and master degree in Economics from the Department of Economics of Vidyasagar University. She has publications in journals and has also presented papers at both national and international seminars.

Sebak K. Jana, PhD, is currently a Professor in Economics and Head of the Department of Economics with Rural Development, Vidyasagar University, West Bengal, India. His area of research includes environmental and resource economics and economics of education.

Sudipta Jha is an Assistant Professor in the Department of Economics of Vidyasagar University, India, since 2012. She has done her PhD from Jadavpur University. She got bachelor and master degrees in economics with first rank from the University of Kalyani. Her areas of interest are macroeconomic theory, Indian macroeconomy, and open-economy macroeconomics.

Hakan Kalkavan has completed PhD in Economics from Istanbul Medeniyet University in 2018. Since 2015, he has been working at Istanbul Medipol University, Department of Economics and Finance as an Assistant Professor. During the 2019–2020 period, he worked as a TUBITAK postdoctoral researcher at Durham University, UK. His main research topics are: political economy, Islamic economic thought, history of economics, religion–ethics–economic relations and business ethics.

Lipika Kankaria is a Research Scholar in the Department of Humanities and Social Sciences, National Institute of Technology Durgapur, India. She has done her MA from Calcutta University.

Vani Kanojia is an Aspiring Research Scholar at the University of Delhi. She has completed graduation from Hindu BCom (Hons), University of Delhi in 2013 and postgraduation from Delhi School of Economics in 2015. She has recently published a short opinion article at “The Pioneer on Practical implications of Electric Vehicle in India” and another on “Adopt a Sustainable lifestyle for Earth’s Sake” which is highly appreciated by the academicians.

Asim K. Karmakar, PhD, is an Assistant Professor in Economics, School of Professional Studies, Netaji Subhas Open University, Kolkata, India. He is presently the Executive Member of the Indian Economic Association and The Indian Econometric Society.

Napoleon Kurantin is a Senior Lecturer in the GIMPA School of Public Service and Governance, Accra, Ghana. He is also the Head of the Department of Development Policy. He holds a PhD from the University of Guelph, Masters from York University, and MSc from the University of Salzburg.

Shrabanti Maity gained her MSc from the University of Calcutta in the year 2000 in Economics with special paper Statistics and Econometrics. She did her PhD in Economics from Burdwan University. She is an Associate Professor of Economics at Vidyasagar University, India. Her research interest is diversified. She has supervised four PhDs and three MPhil dissertations. A book entitled A Study of Measurement of Efficiency written by her is published by Verlag Dr. Muller (VDM).

Debashis Mazumder has done his MA in Economics from Jadavpur University, Kolkata; MPhil in Economics from Calcutta University; and PhD in Economics from Rabindra Bharati University, Kolkata, India. At present, he is working as a Professor of Economics at The Heritage College, Kolkata. He has written a good number of text books on managerial economics and contributed articles in many national and international journals.

Somnath Mukherjee is presently working as an Assistant Professor of Geography, Department of Geography, Bankura Christian College, Bankura, India. He did his PhD from Visva Bharati, Santiniketan, India. The author has published several research papers in the national and international journals and four books.

Sovik Mukherjee is at present an Assistant Professor in Economics, Faculty of Commerce & Management, St. Xavier’s University, Kolkata, India. His current research interests lie in the areas of applied game theory in industrial organization, economics of criminology and social sustainability and applied growth econometrics.

Debabrata Mukhopadhyay is a Professor in the Department of Economics at the West Bengal State University, India. He has published a number of papers in scholarly national and international journals. He has obtained his PhD degree in quantitative economics from the Indian Statistical Institute in 2008.

Debasish Nandy is an Associate Professor, Department of Political Science, Kazi Nazrul University, Asansol, India. He is the Coordinator of the Centre for Studies of South and South-East Asian Societies at same university. He is the Visiting Faculty in the Department of International Relations, Tajik National University, Dushanbe, Tajikistan. He has published 40 research papers in national and international well-reputed journals. He also contributed 38 books chapters in edited volumes.

Chigozie Nelson Nkalu is a Lecturer and Researcher in the Department of Economics, University of Nigeria, Nsukka. He is also a PhD candidate in Economics Department of Aberdeen Business School, University of Aberdeen, Scotland, UK as well as a Research Fellow in the Centre for European Labour Market Research (CELMR). Nelson has published widely in both local and international journals of repute with diverse research interests in applied macroeconomics, Development, Health, Labour, environmental economics and econometrics.

Bertha Z. Osei-Hwedie is a Professor of International Politics, GIMPA, Accra, Ghana. She was Professor and Chairperson of Centre for Culture and Peace Studies, University of Botswana. She holds PhD from Brandeis University, USA and MA from Carleton University.

Mihir Kumar Pal is a Professor and former Head of the Department of Economics, Vidyasagar University, India. He stood first in the First class in both BA (Hons) and MA in Economics in University of Kalyani and was awarded Gold Medal for the same. He is an approved PhD supervisor and has been supervising research works for last 20 years in Vidyasagar University.

Ataur Rahman is a PhD Scholar in the Department of Economics, Vidyasagar University, Midnapore, since 2018 after completion of his MPhil degree with first class on empirical relationship among money, price, and output in India. He obtained MSc degree with first class in 2014 from Assam University, Silchar.

Manish Kumar Rai is a Student of BA Economics (Hons.) at Department of Economics, Durgapur Government College, West Bengal, India.

Manohar Kumar Rai is a Student of BA Economics (Hons.) at Department of Economics, Durgapur Government College, West Bengal, India.

Akshay Kumar Satsangi MBM, NET, PhD is a Professor in the Department of Management at Dayalbagh Educational Institute (Deemed University) Agra, for the last 21 years, his research interests focus on the HR strategies and practices, leadership, motivation, and marketing practices. He also researches and writes about interdisciplinary researches and doctoral education. He currently serves as Motivational Speaker and Life Coach.

Partha Pratim Sengupta is a Professor of Economics in the Department of Humanities and Social Sciences, National Institute of Technology Durgapur, India. He has been teaching at the institute for 35 years. His areas of research interest include international economics, environmental economics, and entrepreneurship management.

Tarun Sengupta, PhD, is presently working as an Associate Professor of Economics, South Malda College, West Bengal, India. He has published several papers in the national and international journals and also some book chapters in the editorial books.

Begum Sertyesilisik is a Professor in the Department of Architecture at Izmir Democracy University, Turkey. She has been awarded her BSc, MSc, and MBA from the Istanbul Technical University and her PhD from the Middle East Technical University. She has been specialized in the field of construction project management.

Egemen Sertyesilisik is now a Freelance Consultant at Gozuyilmaz Engineering and Marine Industries Ltd, Turkey. He has been awarded his undergraduate degree from the İhsan Doğramacı Bilkent University, MA in the field of Politics and the Mass Media from the University of Liverpool, MBA degree from the Yıldız Technical University, and PhD degree from the Marmara University.

Faize Ali Shah, MBA, MSc (Mathematics), MPhil (Management), is a PhD student of Management Department and Asst. Professor (Facilitator) in the DEI Agra City at Dayalbagh Educational Institute (Deemed University) Agra, for the last eight years where he teaches advance business statistics, business mathematics, and econometrics. His research interests focus on the frugal innovation, fuzzy logic, consumer behavior, modeling, and international business.

Anup Sinha did his MA in Economics with Econometrics as special paper in 2014. He obtained his MPhil degree from Assam University in 2017. Presently, he is the Registered Research Scholar of the Economics Department of Assam University. His area of interest is population aging, economics of crime and development economics. He has published several papers in different international and national journals and edited books.

Madhabendra Sinha is an Assistant Professor at Department of Business Administration, Raiganj University, and having MSc and MPhil in Economics from University of Calcutta, India. He has several publications from Elsevier, Springer, Wiley, Routledge, Sage, Emerald, Inderscience, IGI Global, etc., in the areas of international economics, development economics, and welfare economics.

Nwokoye Ebele Stella is an Associate Professor, Department of Economics, Nnamdi Azikiwe University, Awka, Nigeria.

Gülsüm Sena Uluer is an undergraduate student of Business Administration department in Istanbul Medipol University. Her research interests are energy economics, wind energy, and renewable energy projects. She has some studies in these areas which are published in Scopus and SCI-indexed journals.

Shubhendra Singh Yadav is a Student at R.B.S. Degree College of DBRA University Agra, where he is pursuing a master degree in commerce. He is a Trader of IIFL markets and keen observer of international affairs.

Serhat Yüksel, PhD, is an Assistant Professor of Finance at Istanbul Medipol University, Istanbul-Turkey. He has more than 80 scientific articles and some of them are indexed in SSCI. He is also Editor of many different books published by Springer and IGI Global.

List of Contributors

Foreword

“No conflicts like wars and no cooperation like peace” – says Robert J. Aumann in his Nobel Lecture in Economics in 2005.

International trade creates enormous production gains, yet sharing the gains from trade has been a knotty problem, which can create and propel inter-country conflicts in the form of trade wars. Moreover, free trade creates winners and losers in an economy, which can further exacerbate intracountry conflicts.

Trade wars are a form of conflicts arising from market rivalries. In this foreword, we will strain the conflict theories to better understand the causes and co sequences of trade wars from the vantage point of modern economics. There is one crucial invariance in human history; conflicts have been raging since the dawn of human history. We seek to understand conflicts in general – not specific forms of conflicts. The economic models of conflicts suggest that for any society, or economy, an optimal mix of cooperation and non-cooperation exists as a point of attraction and a typical society gravitates toward this point of attraction due to the endogenous forces within its system. This point of attraction in economics is an equilibrium. The important milestones of economic theories of conflict can be reduced to a few nuanced questions:

• Can economic theories prove the existence of such equilibrium?

• Can economic theories characterize such equilibrium?

• What is the significance of this equilibrium?

We posit at the outset that economics can understand conflicts, economics can offer meaningful insights the mitigation and a resolution of costly conflicts including trade wars.

Any society faces a fundamental trade-off with regards to conflicts: Cooperation (production) and non-cooperation (conflict). The rational foundation of conflicts has been the primary mechanism to explain conflicts in economics, which rests upon two planks: self-interest and incentives.

A fully articulated framework of conflict came as a contest, which was initially advanced by Haavelmo (1954). This model analyses conflict as a contest in a multisectoral and general equilibrium setting. In this setting, first and foremost, agents engage in production. The distribution is subject to future grabbing and appropriative activities.

• While agents face the usual trade-off between these two sets of activities – production vis-á-vis appropriation or looting, this trade-off adds the basic elements of a general equilibrium model to any basic theory of conflicts.

• Haavelmo introduced two additional and interesting assumptions: first and foremost, agents don’t optimize. Second, the overall level of appropriate activities has an unintended negative effect on the aggregate economic outcome.

From the trade-off and the second assumption, Haavelmo explained the diminishing return from appropriative activities, which led to the determination of a unique level of appropriative activities for each decision-maker. He further highlighted the dividend from a centralized coordination of appropriative, or grabbing, activities to control the negative and unintended effects of looting. In the absence of an easily available an accessible device of centralized coordinating, every society will need to create safety nets for managing and resolving conflicts.

In their important work Tullock (1974) and Schelling (1963) amended the above model by introducing two critical elements in the original contest model:

• First, they postulated that a contest, like any other economic activities, calls forth an optimum at the individual level.

• Secondly, they argue that any meaningful contests must be modeled as an overall equilibrium at the macrolevel.

This previous strand of research has culminated into the work of Hirshleifer (1991, 1995), Azam and Mesnard (2003), Grossman (1995), and Collier et al. (2000). These new models apply the tool of Nash equilibrium that requires a mutual consistency between optimally-chosen conflictual activities of agents in the context of contests. A great deal of attention is paid to the interconnection between an economy and the contest (fighting). A simplistic interconnection was made in terms of a contest success function. The “invisible hand principle” of Adam Smith shows how self-interests, or the virtue of prudence, can work for the entire society by creating a natural and spontaneous order.

The above holds if agents settle their businesses peacefully. Yet the hell breaks loose if agents resort to violence to pursue self-interests and we then need a new theory. The apparent beauty of Hirshleifer’s model is that the hell does not break loose if we introduce hyper rationality in the economic model of conflict. As we shall see later, conflicts will be reduced to the rational conflict – some sort of a contest – either with arms and ammunitions for wars or with tariffs and quotas for trade wars.

Hirshleifer introduced four building blocks of conflicts to explain the (Nash) equilibrium conflict that is founded on the clinical and hyper rationality of agents such as: opportunities of conflicts; preferences over conflicts and production; perceptions of conflict and technology of conflicts which can provide further insights into the understanding of trade-related conflicts.

In modern models of conflicts, powerful agents choose conflicts as a rational tool to advance their self-interest. The (Nash) equilibrium in this context constitutes the optimal mix of cooperation (production) and non-cooperation (conflict) such that no agent intends to depart from the equilibrium unilaterally. Yet, the consequence of conflict is a loss of production capacity and output of final goods and services. Thus, trade wars like any form of conflicts can derail the global production system with significant costs on all countries. Yet the basic understanding is that such conflicts have limited (adverse) effects as the hell does not really break loose. This is very similar in spirit to the Hirshleifer brand of conflict models, or what is popularly called the “rational conflict theory,” which treats conflicts like a soccer, or cricket, match with suitable weapons to shoot trades. Agents set aside resources for fighting and the fighting takes the form of a contest that is akin to a zero-sum game. The contest has a prize. Only a handful of nations can gain from such conflict, as the winner of trade wars will takes all the prize. Any society can suffer from regular bouts of organized conflicts. The society pays a price for the contest that is given by the Nash equilibrium, which in turn determines the probability of success in the contest of nations against nations. The price of such conflicts also includes a fixed disappearance of production from conflicts as well. Nations have two mutually-opposite inclinations: (1) to be cooperative and produce and maximize global GDP; and (2) to be non-cooperative and sequester larger shares via trade wars. In the Nash equilibrium, these opposing inclinations balance each other so that no rational agents will deviate from the equilibrium configuration, which propels the contest success of a participant.

At the theoretical level, trade, or tariff, wars are examined in juxtaposition with a free open economy: with free trade in the absence of trade wars, the global income gets maximized and all countries can have potential gains. Yet disputes can flare up over the sharing of the production gains as the magnitudes of gain may differ. Also, there are winners and losers from free trade within an individual economy. Trade restrictions, or tariff wars, are a means to shape the gains from trading. As a result, conflicts theories can have significant imports for exploring the causes and consequences of trade wars. From Herbart Simon (1992) allow me to borrow the concept of “intelligent altruism” to highlight that the mantra of the new world will be the survival of the nicest and not the fittest. The challenges of trade theories will pivot on the possibility of altering the focus of modern trade theories from the survival of the fittest model to the model of intelligent altruism.

Keeping in all the issues in mind the present book edited by Dr Ramesh Chandra Das of Vidyasagar University, India, has attempted to compile a list of 25 studies from different countries and regions of the world in a single volume in economic, political, and social perspectives. The exerts of the studies establish the ill effects of such a tariff war in all the concerned fronts and thus it recommended for the resolutions of the issues through diplomatic alliances. I hope the title will penetrate the readers’ mind and will get huge readerships not only from the concerned countries and regions it focused on but also from the other parts of the world.

Partha Gangopadhyay,1 PhD

Professor of Economics at Western Sydney University, Australia

Acknowledgments

With long-term efforts on the stages from proposal writing to final submission of the proposed book titled, Global Tariff War: Economic, Political and Social Implications, it is now an unconceivable pleasure to disclose from my part as editor that the proposed book on the said title has been in due course unveiled. But, the ultimate achievement to such a huge volume could not be made if the contributions of the bunch of academicians all around the world were not combined. Hence, it would be culpable if I do not recognize the contributions of the concerned academicians and the other members of the society who are directly or indirectly associated to the project.

First, I must acknowledge the cooperation of the Emerald Publishing Ltd. Team for approving the proposal and continuously guiding me at all stages of developments of the book. Second, I am appreciative to my research guides Prof. Soumyen Sikdar of Indian Institute of Management, Calcutta, India and former Prof. Sarmila Banerjee of Calcutta University, India for persistently encouraging me to undertake such types of academic projects. Third, I must express gratitude to Dr Partha Gangopadhyay of School of Business, Western Sydney University, NSW, Australia and Professor and former Vice Chancellor Asist. Kumar Banerjee, Calcutta University for their unspoiled efforts in guiding me throughout the entire project. Fourth, I am highly grateful to all the contributing authors for their valuable chapter contributions and showing their patience for such a long duration project. I do hereby acknowledge the values they have added to the existing literature through this volume.

Last but not the least I am indebted to my parents, wife and daughter, brothers and other members of the family for their unceasing encouragement, supports, and sacrifice in carrying out the lengthy project. Of course, no one other than me, as the editor, discloses to remain entirely responsible for any errors that still stay behind the book.

Ramesh Chandra Das

Editor

Introduction

The world economic and political situations in the recent times have been under the phase of facing turmoil and wreckage after the US President’s announcement on March 1, 2018 which constitutes imposition of import tariff of 25% on steel products and 10% on aluminum products. It is the first strong move by the US Government in the forms of reducing grants, financial supports to some countries. The moves are the aftermath of announcing the patriotic term, “America First.” Having played the role of campaigner in favor of free trade since the World War II, the today’s United States under the leadership of Donald Trump has intended suddenly toward protectionism and patriotism. The developing countries’ labor markets have exploited a major part of the US industries and corporations directly or by outsourcing activities through supplying cheap labor force, and some countries’ breach of contracts for free trade by means of state sponsored subsidies and artificial devaluations of the home currencies. For instance, the Chinese government and its central bank are accused by the United States on the ground that they manipulated Yuan artificially against US Dollar to make their export products relatively cheaper in the US market and as a result of that there had been trade deficit of USD 342 billion faced by USA vis-á-vis China in the year 2017. On the other hand, the countries like Brazil, Mexico, and India are blamed by the United States having protected their industrialists/exporters to United States in terms of subsidy and low costs of credits for export purposes. The political sentiments of the US citizens were in favor of Trump Government as they wanted their own economy to be protected on priority basis. Donald Trump had assured the voters in the time of his election campaign in this regard. Thus, the concerned countries under the threats of the US President are China, Brazil, Mexico, India, etc. having sizeable amounts of exports of iron and steel and aluminum to the United States.

Dating back to the 1929, the year falling within the phase of the Great Depression, the United States under the presidency of Herbert Hoover had imposed the second highest tariff rates of 59% since 1830 with 67%. During campaigning for president during 1928, one of Herbert Hoover’s promises to help struggling farmers had been to increase tariffs of agricultural products. Hoover won, and Republicans maintained comfortable majorities in the House and the Senate during 1928. Hoover then asked Congress for an increase of tariff rates for agricultural goods and a decrease of rates for industrial goods. Two senators, Willis C. Hawley and Reed Smoot, were in charge of working out tariff rates. The Tariff Act of 1930 commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff was an act passed in the Senate for implementing protectionist trade policies and was signed into law on June 17, 1930. The act raised US tariffs on over 20,000 imported goods. The protestors, the anti-protectionists, including economists Paul Douglas and Irving Fisher termed this move as the cause of exacerbating the ramifications of the Great Depression. What happened that the tariff rate increased to 59.1% in 1932 and in the next election, Hoover and majority of the senators were defeated by Roosevelt who campaigned in the election against this protectionist move of Herbert Hoover. The countries like Canada, the most loyal trading partner of the United States, retaliated by around 40% of tariffs on US exported products. Also, the US trading partners at that time searched for new trading allies and so the dimensions of international trade got changed tremendously.

The theoretical basis of the effects of imposition of tariff needs to be highlighted at this juncture. In a free open economy, both countries gain by trading but the magnitudes of gain may differ. Imposition of tariff on any imported product (which is the exported product of the trading partner) is necessary when the import competing industries face losses of free trade and the government of the country takes care of them by imposing tariff on the related product/s. As tariff is imposed, the cost of importable in the domestic market increases which means the domestic consumers will import less and buy indigenous products more. As a result of that the home country may export less for fewer imports. The export to import ratio increases means the terms of trade (or international price ratio) works in favor of the tariff imposing country which further puts additional burden on the trading partner. The trading partner will not sleep upon a soft mattress and will try to impose counter tariffs on the product of the tariff imposing country. This process is called retaliation or tariff war. As a result of these counter tariff policies (known as tit-for-tat strategy), the total volume of trade or export plus import falls. That means, tariff war worsens both the trading partners.

Let us broaden the number of trading partners from the system of bilateral to multilateral trading system. When the first two countries face tariff war, the third, fourth, etc. partners will also be engaged in tariff war as they also face losses from the tariff wars of the two countries. That means, a bilateral tariff war turns down to multilateral trade war. If all the countries of the world similarly follow these policy strategies, the global trade volume will turn down to zero and all the countries will be shifted to their no trade or autarky positions. This no trade situation may provoke the countries to distrust the others and the possibility of the outbreak of another world war may not be wiped out. The World War means ultimate destruction, the history infers this.

Now come to the analysis of US tariff on steel and aluminum products. If all countries follow the example of the United States, this will undoubtedly result in a serious impact on the international trade order. And it’s not just the US trade relationship with China that’s in peril; the main US trade partners, including Canada, the European Union, Mexico, Japan, China, and Brazil, have all said they are weighing countermeasures to the new steep tariffs. Besides the United States, China’s largest export zone of steel is the East Asia where Thailand, Vietnam, Indonesia like countries import huge iron and steel products from China. Again, although India exports about two per cent of its steel product to United States, its major export areas are the UAE, Saudi Arabia, Hong Kong, Singapore, etc. Hence, it is really hard to conclude right now the possible impacts of these two tariffs upon China and India. But if there are multilateral effects, for example, UAE, Vietnam, Hong Kong like countries also engaged them in counter tariffs upon other the US, Indian, and Chinese products, then there will be real trade war whose ultimate destination will be destruction.

Hence, it is now to explore the economic, political, and demographic implications of tariff war with reference to the victims in particular and the global economy in general. The present book, under the background, intends to emphasize upon these particular aspects of tariff war. Motivated by the optimistic moves by the publisher, Emerald Publishing Limited, upon my submitted proposal, I proceeded further for its fruition. After a series of scrutiny and suggestions by the review teams of the publisher, the title is finalized as Global Tariff War: Economic, Political and Social Implications.

Keeping in mind its broad coverage, the book has been structured in two separate sections to present 25 finalized chapters. Section I encapsulates the economic implications of the tariff war. It covers the theoretical as well as empirical analysis on the issues at country and regional levels. Not only confining the analysis at economic indicators, the book also envelops the studies with respect to political, social and environmental implications of tariff war. Section II captures these issues. There are 17 chapters in Section I and 8 chapters in Section II. The kernels of the chapters are outlined below.

Section I: Economic Implications of Trade War

Chapter 1 discusses on history of tariff wars among different countries from the nineteenth century to date. Specifically, it covers the First and Second Opium war Empire between 1839 and 1842; The Smoot-Hawley Tariff Act, 1930; Chicken wars in the early 1960s; The US–Japan automobile trade war in the 1980s; 1985 Pasta War between America and Europe; and The Banana wars and today’s US–China tariff war. It arrives at the conclusion that tariff war in different forms has negative impacts in general, but has some short-term good effects.

Chapter 2 deals with the impact of tariff war upon unemployment and welfare through a theoretical model. For the purpose, the study has adopted a general equilibrium model to illustrate the probable effect of the above-stated trade war in a structure consisting both H–O nugget and export sector dualism. The effect of imposition of tariff on an MNC that has its own origin nation and production activities in other nation as well where it faces the war of tariff is considered. But it gets relief in the form of tax reduction in its origin nation. Under such a scenario, the study has shown the effect of tariff in the presence of full employment in the economy as well as in the presence of unemployment. It is seen that the MNC will continue its production procedure in both nations as well as enjoy profit, under some conditions. Further, in the presence of unemployment it is seen that if rate of tax on the MNC rises, unemployment may fall and welfare can increase under certain conditions.

Chapter 3 attempts to develop a microtheoretic model to explain the genesis of trade war in light of the behavioral interdependence of two countries connected through international trade and thereof, it analyses its welfare implication with respect to the countries at feud. It has highlighted on fundamental take ways where they are twofold. First, how evolution of tariff war can be articulated in light two-stage game governments are coming to decide on tariff policy a priori, followed by second stage featuring firms being decisive on the production level and then the games repeats where governments again come up to introspects if the a priori tariff rates are compatible with welfare optimization to be followed up by firms. Second, the nature of the ultimate fallout of the tariff-retaliation will depend crucially on how welfare function of each country is paced with the country’s tariff policy.

Chapter 4 focuses on the tradeoff between free trade and restricted trade in international perspectives. It presents empirical evidence from the European Union and the Sub-Saharan Africa region using annual times series for the period, 1980–2019. Findings indicate that for the European Union, the tradeoff is 4.31% while for the Sub-Saharan Africa region, it is 2.66%. The tradeoff is higher in the European Union than the Sub-Saharan Africa region because it is among the world’s largest economies and trading zone. This suggests that the negative effect of globalization due to trade restrictions is more in developed regions than developing regions of the world. This is an indication that whether in developed or developing countries, a tradeoff exists between globalization and restricted trade, and the imposition of tariffs and counter tariffs is capable of shutting down globalization.

Chapter 5, under the background of the US–China trade confrontation, develops a macrotheoretic model to show how a trade war can take potentially take in the wake of economic downturn led by some demand contacting force in one of the countries having trade ties and in turn can cause the recession to leap into global turmoil. This may prompt the countries to be more protective and averse to international exchange, thereby paving way to more intense trade frictions among the nations and stoking international macroeconomic propagation. Thus, the present introspection hints at tariff war among the nations engaged restricted trade with each other being a plausible consequence of macroeconomic fault having cross-country repercussion implication and that in turn becomes more pronounced in presence tariff war leading to more fierce trade frictions among the countries.

Chapter 6 aims to investigate the impact of tariff war measured by trade as a percentage of GDP on the per capita GDP of the nations. It finds that all the variables are cointegrated. The effect depends on how we measure world tariff, for example, the effect of tariff on trade is positive and significant when we measure the world tariff as simple mean of all products but the effect of tariff on trade is negative and statistically significant when we take tariff as weighted mean of all products. Similarly, the effect of tariff on per capita income is positive if tariff is measured with simple average of all products but this effect is negative and significant when it is measured with weighted mean of all products. In this case, imposition of world tariff (weighted mean of all products) declines world per capita income especially in short run.

Chapter 7 empirically investigates the effects of tariff imposition on manufacturing trade comparatively in the north and south economies across the globe during the last three decades. Along with the volume and balance of trade, the study accounts for both export and import separately in order to observe their dynamisms under the tariff regime and makes comparisons between developing and developed groups of countries. Using World Development Indicators (2019) and World Integrated Trade Solutions (2019) databases on 77 developing and 48 developed nations for 1991–2018, the robust difference panel generalized method of moments (GMM) estimates imply that impositions of domestic tariffs significantly reduce manufacturing trade in both groups of countries; however, developing countries experience this effect in a greater extent.

Chapter 8 is based upon the US–China tariff war which analyzes the trade tensions between them and the context under which it came to the fore and with what outcomes. The analysis recommends interventions of the global leaders to mitigate the issues for the betterment of the world economy.

Chapter 9 highlights the US–China conflicts surrounding the imposition of tariffs and attempts to investigate the impacts of the Economic Policy Uncertainty (EPU) of United States and China on three most important global markets, namely, crude oil, credit market, and commodity market. To attain the objectives of the chapter, the study has utilized Vector Autoregressive model and has analyzed the results. The study reveals that China’s EPU has lesser impact on the global market as compared to the US EPU. On the basis of the results obtained, few policy implications have been proposed.

Chapter 10 seeks to investigate into the historical evidences of trade wars between the United States and China, major reasons responsible for this conflict and tries to figure out the impact of this conflict on fundamental macrovariables using secondary time series data primarily on selected Asian economies including India. The empirical results clearly show that in case of China and the United States increase in weighted tariff rates will lead to a significant decrease in the trade GDP ratio whereas in case of both these countries PPPGNI is positively and significantly associated in determining TGR. In case of India, a decrease in WTR is expected to lead to a rise in TGR and it is significant. In case of Vietnam, PPPGNI is significant, but not WTR. In case of Singapore, neither of the two independent variables is significant.

Chapter 11 deals with the growth performance of export, import, and economic growth in India over the period 1970–2071 to 2016–2017 as well as tariff for the period 1990–2017 by employing the methodology of one-time endogenous structural break suggested by Zivot and Andrews (1992). Also, it has put an attempt to examine the direction of causality between the above-mentioned trade-related variables and economic growth using Granger Causality Test. Results of estimation reveal that all the variables converge toward a stationarity process having constant variability overtime. There exists structural break in the year 1996, 2006, 2008, and 2010, respectively, for economic growth, tariff, imports, and exports. Bi-directional causality is found running from economic growth to tariff and from tariff to economic growth. But there is unidirectional causality from imports to tariff, imports to exports and from exports to tariff.

Chapter 12 explores the impact of WTO which came into existence from January 1, 1995, on the export share of developing counties in the world exports of all goods together in US$ that is, in global merchandise trade. It endogenously determines the structural break in changing export share of developing countries and how are they related to the major changes in the multilateral trading systems of international trade, in particular, the introduction of the WTO by following a multiple breakpoint analysis due to Bai–Perron. This study also compares the changing share of merchandise exports and trade in commercial services for developing countries and the LDCs in the post-WTO regime. We follow a univariate time series exploratory analysis to understand the trend in world export shares of all goods and commercial services for different regions of the developing world and demonstrate the potential of these regions in the expansion of trade. The study enables to understand the role tariff cut in the developed countries on the imports from developing countries. Besides, it observes increasing inequality in terms of export share among different regions of the developing world.

Chapter 13 aims to evaluate the role of trade war between the United States and China on oil price. In the evaluation process, both Engle–Granger cointegration and Toda–Yamamoto causality analysis are considered. The results of Engle–Granger cointegration analysis indicates that there is a relationship between trade war and oil prices. Nevertheless, according to the results of Toda–Yamamoto causality analysis, it is identified that trade war does not cause oil prices. While looking at these results, it is determined that trade war between the United States and China has an influence on the oil price changes. However, it is also understood that it is not the main factor of this volatility.

Chapter 14 estimates total factor productivity growth and its components for the manufacturing industries of West Bengal and all India level, for the period 1980–1981 to 2016–2017, using Stochastic Frontier Approach. Further it tries to make a comparative analysis between the TFPG of manufacturing sector of West Bengal and all India level for the time period mentioned above. Results suggest that, for West Bengal, total factor productivity growth has decreased for the post-WTO regime but it has increased in post-WTO regime for all India level.

Chapter 15 examines the export prospect of India in the era of neo-protectionism which is characterized by increased used of trade barriers mainly by the large economies and a very sluggish growth in world export as a whole. The study shows that both tariff and non-tariff barriers as well as world income affect India’s exports significantly that shows that the present era is not very encouraging for India. As a strategic response, it may try to re-orient its exports from more restrictive developed countries like EU to countries like Japan, which are much less restrictive, as complete re-orientation from developed to developing world is not possible.

Chapter 16 aims to investigate the changing growth pattern of India’s tea export and the impacts of trade openness on India’s tea export. Applying Poirer’s Spline function approach and trade openness index the study concludes that initially with trade openness Indian tea industry was benefitting but the growth rate of tea export gets reduced over time. It is surprising that in the post-EXIM-2002-07 phase the rate of growth of India’s tea exports has declined sharply. The study ends with suitable policy prescriptions.

Chapter 17 tries to assess theoretically and empirically the impact of trade war on developing countries with special reference to India. It reveals that production and flows of goods are directly influenced by the tariff; uses input–output analysis to estimate indirect effects on gross domestic product, exports and employment; and allows redirection of trade toward other producers. The ongoing trade war with similar trade conflicts in history reveal three major causes, with varying degrees of importance from both economic and political perspectives.

Section II: Political, Social and Environmental Aspects of Trade War

Chapter 18 adds different flavor to the title by considering that political economy of trade policies and tariffs can affect welfare distribution and resources allocation as well as sustainable development. This chapter thus aims to investigate political economy of the trade tariff and trade policies with particular focus on China’s economy, United States, and China trade policies as well as their roles and impacts on global policy. It emphasizes the importance of sustainability in trade and trade policies’ roles in efficient resource allocation, welfare increase, and sustainable development. Furthermore, trade policies, taxes, and tariffs are recommended to be balanced based on the mutual trust, and common goals among trading countries.

Chapter 19 examines the current trade war between the United States and China and its impact on the two countries’ military industrial complex in relation to economic growth and development. The trade war has both positive and negative impacts on the country’s economic growth and development. Both countries depend heavily on each other for trade and account for an incredibly significant portion of the global trade. The trade war also impacts on the military industrial complex with respect to the defense budgetary allocation and trade in arms. One of the rationales for the trade war by the Trump Administration is to boost up the domestic economy, which would benefit the military industrial complex. Likewise, the retaliatory tariffs by China are designed to protect the domestic economy and showcase its ability to withstand and challenge the United States. Applying a quantitative design with canonical correlation method to multiple regression it shows that trade wars in the form of increased imposed tariffs on each other by the United States and China has had no significant adverse effect on the Military Industrial Complexes of the two biggest economies of the world.

Chapter 20 tries to investigate the causes and potentiality of China–US bilateral trade war by using the content analysis method and observation method. The result of the study is manifested based on recent trade restrictions and economic sanctions to each other. The impact of the recent Sino-American trade war resulted in a negative impact on not only both countries’ economies but also on the world economy.

Chapter 21 sheds light upon two different approaches to recent development in the world economy-economic integration and Trumponomics. Economic integration is an agreement among countries in a geographic region or unification of economic policies between different states aiming to reduce and ultimately remove tariff and non-tariff barriers on trade. The fruit of globalization is the tremendous rise of economic integration as globalization loosens barriers among the nations through reduction in cross border duties and eases trade policies. On the other hand, Trumponomics is defined as the economic policies of US President Donald Trump that prefers high import tariff to bring “America First.” There is a debate among the researchers about the choice between free trade and protection or imposition of tariff. Choice between no-tariff and tariff represents a prisoner’s dilemma situation whereby each player’s best response is to employ tariffs, which is a Nash solution.

Chapter 22 attempts to examine the effect of trade wars between countries on social factors applying fuzzy DEMATEL approach. The findings indicate that working life is the most significant criterion. However, free time and leisure and family are at the bottom of the list. Additionally, it is also defined that working life is the most influencing criterion. These results demonstrate that trade wars have the highest impact on the working life of the people. In order to solve this problem, companies should make official statements to their employees about the situation caused by the trade wars.

Chapter 23 talks about the evolution of globalization, prevailing benefits and also caters to the views of some famous economists like Stiglitz, Simon Kuznets. The crucial aspects include the review of globalization on the basis of certain parameters like Trade (as % of GDP), Trade in services (as % of GDP), per capita CO₂ emissions, and per capita GDP that have impacted the trends of both developed and developing nations. This study provides a critical taxonomy that will help scholars better understand the overwhelming literature on the subject and also outlines the key challenges that scholars and policymakers will face for a second wave of thinking on the subject. This also implies that, despite the worldwide awareness of climate change, the address of climate change in trade will become increasingly significant for reducing carbon footprints.

Chapter 24 speaks of sustainability performance of the global trade as well as of the traded products which are affected by the trade policies and trade tariffs. It aims to examine impacts of the trade policies and trade tariffs on the environmental footprint of the global trade. With this aim, recent trade policies and trade tariffs as well as roles of the trade policies, trade tariffs in reducing environmental footprint of the global trade are examined. It arrives at the conclusion that trade tariffs can affect environmental footprint of the global trade as well as of the traded products. They can have impact on the feasibility of the trading activities influencing their profit margins and costs.

Chapter 25 tries to capture the issues of inequality, specially the gender inequality, which has worsened a lot in the last two decades. On the one side, trade openness enhanced the growth, but at the cost of increasing inequality. The state wise analysis of such inequality indices for India is varying a lot over the study period. It concludes that in the post-WTO era income inequality has increased a lot with a very few exceptions. In some states like Maharashtra, Gujarat, Karnataka, and Punjab where exports have led to increase the employment in the unorganized sectors. Further, it shows that exports have generated additional employment and incomes in the economy, but these gains have not trickled down to the poor.

The entire book through its coverage of studies has addressed different aspects of the tariff war in particular and trade war in general for individual as well as regional economies. The economic variables such as income, employment, productivity, exports, etc., are covered in one hand and political instruments, social indicators, and environmental factors are on the other hand. The book has arrived at the conclusion that tariff war as well as trade war are not good for the economy as well as other sectors such as society and environment. Developed countries are impacted adversely compared to the developing zones due to this war. The studies in general have, thus, recommended for diplomatic interventions to these unfair moves by the trading nations, through tariff imposition by one and its retaliations by the others, as quick instrument toward solution. In addition, to have long run solutions to the tariff war as well as to reap the sustainable benefits of free trade, the studies have emphasized upon reducing cross-country inequalities over time.

The contents of the book, its methodologies, interpretations, and policy suggestions provided by the studies will inevitably help the readers in the respective fields, diplomats, global leaders to solve the crises arose due to unfair tariff war of the recent past.

Ramesh Chandra Das

Editor