Former chief economist of the International Monetary Fund (IMF, 2003-2006) and former governor of India's central bank (2013-2016), Raghuram Rajan is one of the few economists to have anticipated the 2008 financial crisis. A professor at the University of Chicago's business school, he believes that Western countries seeking to protect their industries are overestimating the impact on employment, and argues that indebted countries should default rather than sacrifice their education and health spending.
Over the past 20 years, developed countries have seen many jobs destroyed, particularly middle-income jobs that could have been filled by people without qualifications. These job losses have given rise to a feeling of frustration, fueled by growing job insecurity. This anxiety is amplified by the speed of technological change. Machines and computers are replacing humans in routine tasks, whether on an assembly line or in an office. Yet it's much easier to point the finger at the factory that's moving abroad.
This attachment to manufacturing is excessive. Firstly, because the jobs that have disappeared from developed countries are not coming back, and secondly, because industry creates far fewer jobs than it used to. It is now capital-intensive, not labor-intensive.
There are countries with which tariff blackmail is used as negotiating leverage, such as when Mr. Trump threatens Mexico with tariffs if it doesn't improve its fight against drug trafficking, and it often stops there. The case of China is different and relates to two approaches. Among Mr. Trump's advisers, there are those who believe that raising tariffs will create jobs in the US. But there are also those who want to contain China's expansion. All this leads me to believe that Washington will take action against Beijing. And if Chinese exports fall significantly, this will also lead to a drop in its demand, which poses a problem for the rest of the world.
Luxury brands, for example, will suffer the consequences, as will the developing countries that sell their raw materials to China. And this time, Washington won't let Chinese imports transit through other countries like Mexico or Vietnam. In fact, Trump has threatened to impose 100% tariffs on electric vehicles assembled by Chinese manufacturer BYD in Mexico. Trump's next trade wars are going to be increasingly indiscriminate, no longer differentiating between China and other countries, so they're going to be far more serious.
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