Being protectionist doesn’t benefit anyone: Finance Secretary

United States is intensifying its protectionist trade policies

With a broader trend of rising protectionism among major economies, notably the US, Finance Secretary Tuhin Kanta Pandey said that such policies risk harming global economic stability and trade relations. Protectionist trade policies ultimately hurt global growth rather than support it, Pandey said, emphasising that economic history and theory both indicate their adverse impact. He warned that when one country adopts opportunistic protectionist measures, it triggers a chain reaction from others, leading to a damaging cycle of retaliatory actions that stifle international trade.

"One point which we have to keep in mind – and always remember – is 1929 and the Great Depression. History tells us that protectionism doesn't help. It lowers global trade, slows trade growth, and ultimately dampens overall economic growth," Pandey told Moneycontrol in an interview. "Economic theory supports this, and history has proven it. If one country engages in opportunistic protectionism, it will invite a similar response from others, creating a vicious cycle," he added. The Finance Secretary was referring to the Smoot-Hawley Tariff Act of 1930, enacted in the wake of the Great Depression with the aim of protecting US domestic manufacturers.

Amid rising geopolitical tensions and trade restrictions, Pandey underscored the challenges of deglobalisation and the need for India to adopt policies that align with its long-term interests.

"Geoeconomic fragmentation has been happening for a long time. I am not commenting on the rationale behind it because these are societal processes that unravel over time. Sometimes, these shifts stem from long-standing grievances about unfair global trade practices. But rather than moving apart, countries should focus on working together," he said.

US Tariff Moves

Pandey’s remarks come at a time when the United States is intensifying its protectionist trade policies under former President Donald Trump. On Monday night, Trump announced a 30-day postponement of proposed tariffs on imports from Canada and Mexico after high-level discussions with both countries’ leaders. The proposed tariffs included a 25 percent duty on all Mexican imports and most Canadian goods, with a 10 percent exemption on energy products.

However, the US is proceeding with the 10 percent tariff on Chinese goods, as no agreement has been reached with the Chinese government.

Viksit Bharat

India, as the fastest-growing major economy, must focus on its development trajectory while navigating the evolving global trade landscape, Pandey said. He stressed the importance of deregulation and productivity enhancement for sustaining growth.

"When we pursue economic rationalisation, we don’t need the World Bank or the International Monetary Fund to tell us that deregulation helps, we know it helps. If we have to increase productivity, we must improve total factor productivity, remove friction, and reduce transaction costs. Any inefficiency, even a small one, negatively impacts growth. If every sector eliminates inefficiencies in its own domain, together, it will create significant positive impact," he explained.

"As a growing economy, India must remain focused on pragmatic policy choices that drive sustainable development rather than get caught in short-term protectionist impulses. Our vision of Viksit Bharat (Developed India) must be built on concrete action, rational policies, and long-term economic planning," he said.

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