Trump has discarded market economy: Rehman Sobhan

The manner in which US President Donald Trump is attempting to tackle trade deficits at a bilateral level is rare in global history. There has never been such an approach before. In doing so, Trump has effectively discarded the principles of market economy.

These remarks were made today, Tuesday, by eminent economist and Chairman of the Centre for Policy Dialogue (CPD), Rehman Sobhan. He was delivering a talk at an event organised by the Policy Research Institute.

He noted that those who had initiated the process of globalisation, meaning the United States, are now dismantling the very framework they once promoted. In this evolving global context, countries like Bangladesh and others must find ways to survive. The global order, which had operated in a particular manner for an extended period, is now undergoing a fundamental shift, he observed.

Rehman Sobhan further stated that the principle of ‘survival of the fittest’ is no longer applicable. It is no longer about the strongest prevailing; rather those who are most adept at negotiation and striking favourable agreements will be the ones to endure.

Rehman Sobhan made these remarks as the chief guest at a seminar held today at the office of the Policy Research Institute (PRI) in Dhaka. The seminar was moderated by PRI Chairman Zaidi Sattar. Selim Raihan, Executive Director of SANEM, also spoke at the event.

Rehman Sobhan observed that the world appears to be reverting from a rules-based trading system to a command economy reminiscent of the Stalin era. He stated that economics and trade are now being used as weapons. Economic challenges are no longer being addressed through established economic principles, but rather through other considerations.

Rehman Sobhan expressed the view that the method by which President Trump is attempting to reduce the trade deficit is unlikely to yield the intended results. He further commented that Bangladesh’s suggestion to increase exports as a means of avoiding the impact of high tariffs is not consistent with the principles of a market economy.

He noted that cotton or yarn imported from the United States enters duty-free and is used to produce garments for export to various countries. However, he questioned is it possible for Bangladesh to increase yarn import from the U.S?

Bangladesh manufactures garments tailored to different designs, prices and market demands. Therefore, it is not possible to produce all garments using .S yarn. Such imports cannot be increased simply through directives, as if operating under a command economy, he argued.

PRI Chairman Zaidi Sattar remarked that a new trade war has commenced, which will be remembered as a troubling chapter in the history of international trade. He described it as the final shock, adding that no one knows how the world will emerge from this situation.

He pointed out that the United States itself is experiencing a trade deficit, as it spends more than it produces. Bangladesh, on the other hand, is facing a current account deficit, meaning the country is investing more than it is saving. This, he noted, is not necessarily a negative development.

Zaidi Sattar further stated that the United States claims Bangladesh bears a high tax burden, lacks transparency in regulations and is affected by corruption, with inadequate protection of intellectual property rights. While the government may reduce tax rates, he questioned how the other issues beyond taxation can be solved.

On 2 April, U.S President Donald Trump imposed retaliatory tariffs on goods from all countries in an effort to reduce the U.S trade deficit. Tariffs on Bangladesh products have been raised to 37 per cent.