Trade wars in the offing?

The US wants a "fair economic competition". This official statement stems from President Donald Trump's eagerness to implement his "America first" agenda as early as possible. Coming as it does from a top US economic official, it tells the world that the global trade is skewed against Washington's economic interests. Seeking to turn this "unfair" competition into a "fair" one, the US wants to weaken its currency as a first, and major, step towards "striking a delicate balance". There could be no two opinions about the fact that the Trump administration has set a cat among pigeons by announcing that a weaker dollar is "good for us as it is related to trade and opportunities". While no one can dispute the plausibility of US Treasury Secretary Steven Mnuchin's argument which is clearly aimed at boosting Washington's exports and containing its growing trade deficits with China, and the European Union in particular, it has the potential to trigger trade wars for obvious reasons. Fully appreciating the gravity of the situation that his remarks have caused in the European capitals, Mnuchin has sought to clarify his position - a day after sending the dollar reeling - in relation to the US currency by saying that the Trump administration is not seeking a trade war but will defend its economic interests.
At a news conference at the World Economic Forum in Davos, Mnuchin tried, unsuccessfully, to play down his comments that were seen by markets as departing from traditional US currency policy: "I thought my comment on the dollar was actually quite clear yesterday. ...I thought it was actually balanced and consistent with what I've said before, which is, we are not concerned with where the dollar is in the short term." But the US believes that the risks of trade wars were already there. Its Commerce Secretary Wilbur Ross, for example, has made a profound comment: "Trade war has been in place for quite a little while, the difference is the US troops are now coming to the ramparts".
The US currency move has therefore invited warnings from the EU finance ministers who have expressed concern about Mnuchin's remarks that had pushed the dollar down to multi-year lows. Their anguish could be gauged from the fact that a stronger euro could hurt the European economy by making its exports less competitive and creating new obstacles to the European Central Bank's exit from years of ultra-easy monetary policy. But the Chinese reaction to the development has been found to be either ambivalent or prudent. Addressing a regular news briefing in Beijing, a foreign ministry spokeswoman has reportedly said that the country's leaders were committed to openness. "I believe everyone has already noticed that at the end of last year China has taken real steps to greatly loosen its financial industry, market access and others," she has been quoted as saying.
Be that as it may, a weaker currency is generally regarded as an advantage for a country insofar as the prospects of its exports are concerned. A country's exports can gain market share as its goods get cheaper relative to goods prices in stronger currencies. But there are always two sides of the coin. A weaker dollar could be good for some and relatively bad for others. From Pakistan's perspective, a weaker dollar would certainly hurt the prospects of its beleaguered exports that have already caused an adverse impact on the country's foreign reserves position, in addition to widening current account deficit and its worsening balance of payment woes. Hence, the need for articulating a new policy in response to a likely weaker dollar in order to protect and preserve the country's economic interests.
Last but not least, it was only after the signing of the historic 1985 Plaza Accord that forced the US to devalue its currency, globalization of economies began to take place on a massive scale. In other words, it ushered in an era under which countries would be exchanging their sovereignty for globalization. President Trump, who has told the Davos summit that his country will "no longer turn a blind eye to unfair trade practices", therefore, needs to answer a key question: Will a weak dollar really help US increase its exports in the global market where Japan and Germany, in particular, are known for producing very high-quality goods? What, then, is his real objective if he does not answer in the affirmative? The US president must not lose sight of the fact that growing protectionism was the hallmark of his country's economy in the 1930s while rising nationalism forced Washington to go off the gold standard in the 1970s. But the German economy too had been doing well somehow under the Third Reich, by pursuing policies based on ultra-right nationalism and strong protectionism in a world hit by the Great Depression.