Modi & Trump are both great leaders
Trump is a businessman. He was born with a silver spoon.
Modi is not either, Trump has no chance against Modi.
My understanding of classical economics is limited. In college, I read Paul Samuelson who won a Nobel. In real life, it was Dr Manmohan Singh who helped me to unlearn Samuelson. It is with a clean slate thereafter that I learnt venture capital economics. VC Economics challenge conventional economics. VCs don’t built capacity to cater to demand. They believe supply can create it’s own demand. The radical price on the Internet is FREE. And free can be very profitable. No economist will ever understand this. Economics seeks profits and thinks profits drive valuation. VCs don’t fund profitable businesses but do a great job of making loss making businesses valuable.
Let me try to analyse the Trump tariffs from a VC economics perspective. Firstly he has not subjected India to any tariffs or payments. He has subjected Americans to pay an import duty. This is fundamentally different. He has put a tariff on Americans hoping that they will import less. He also hopes they will consume less. And in doing so, he will incentivise Americans to spend within means. He has ZERO chance of success.
Americans have got used to spending more than they earn
They make up the difference by borrowing.
As regards Indian exporters, they will figure out how to get to America through some other country. Or they will set up factories in USA. Most will just focus on other easier markets. This will lead to Americans getting poor quality goods at shabby prices. In fact, he has major meeting of minds with our very own Piyush Goel. His policies have been so good – that Indian industry has become unviable for exports even at zero tariff. So how does it matter if tariff is 50% or 500%. Anyway we have nothing much to export. As regards the minor exports – we can just give the exporters a reimbursement of tariffs and all is well. In simple terms, we just need to dole out an export subsidy.
We should not retaliate in any way to the trump tariffs. Import duties is their internal matter. Also 50% of WHAT will they charge. If I export goods at low cost or lower than cost then duty will be on the invoice value. Indians will under invoice exports and also sell through other countries. Mr Trump has among the most incompetent and inefficient bureaucrats and govt officials. He doesn’t have enough of them. Indians on the other hand are past masters at dealing with import duties etc. Trump is dependent on a C grade team to execute. He couldn’t even get a proper treasury secretary. He has one who used to work with Soros.
His old treasury secretary Steve Mnuchin was a genius. This one is gay. Gay men don’t make good accountants in general. Unless Trump can find a better treasury secretary, he has no access to data to understand the implications of his actions.
He will first have to hire a few thousand Indians to collect that data.