Trump’s tariff terrorism and the global trade war
Weaponizing trade and tariffs, dictating which country should trade with whom, when, why, and where, international trade relations are being turned topsy-turvy by Mr. Donald Trump. His acerbic aggressiveness makes him thunder even to Modi, “I said, I don’t want to make a trade deal with you…You guys are going to end up in a nuclear war…I said, Call me back tomorrow, but we’re not going to do any deals with you, or we’re going to put tariffs on you that are so high, your head’s going to spin”. This is certainly not the language of a dignified statesman; it smacks of some drug peddler’s language on New York’s ‘The Hole’.
No world leader has escaped his diatribe, no nation that he has not chastised, in his hurried quest to Make America Great Again (MAGA). Trade parleys have deteriorated into becoming personality clashes, and outright crass statements are being issued like “countries are ‘kissing my a**‘ to secure trade deals”. Anyway, Trump’s newly implemented trade policies have sent global markets into a downward spiral and are stoking fears of a looming recession. Whether he is going to push America into becoming great again or into a dreaded recession, only Time will tell. One thing is evident: the so-called world’s greatest democracy, the USA, is ironically totally uncomfortable dealing with other democracies, but is at total ease with monarchies and dictatorships!
Stiff tariffs have been imposed on India, an additional 25% for India’s purchase of Russian oil. These are over and above the existing 25% tariffs, taking the total to 50%. As a result, many items exported from India are set to lose their competitive edge against China (30% tariffs), Vietnam (30%), Bangladesh (20%), and Indonesia (19%). Labour-intensive sectors such as textiles, gems and jewellery, and the leather industry have to bear the brunt, and need a lot of resilience to face the extraordinary challenge.
It is abundantly clear that Trump’s move is not truly about India’s purchase of Russian oil. The US itself, along with its NATO allies in the EU, has increased imports from Russia. China, the largest importer of Russian oil, has not been targeted. Despite Trump’s fiery, hypocritical rhetoric, he seems to be pussyfooting to impose higher tariffs on China due to fears over spiralling inflation.
Though the US is India’s largest export market, accounting for 18% of exports, this represents only 2.2% of India’s GDP. Therefore, the tariff terrorism unleashed by Trump can be successfully handled and encountered. Admirably, Prime Minister Narendra Modi has maintained a dignified profile against the silly rantings and ravings of Mr. Trump.
India is not alone in facing Trump’s hostile tariff manoeuvres. He has threatened to impose International Emergency Economic Powers Act (IEEPA) tariffs on Canada, Mexico, and China related to fentanyl; national security tariffs on autos, auto parts, steel, and aluminium from all countries; and IEEPA tariffs on all countries related to an economic national emergency at a baseline rate of 10 percent with scheduled increases for more than 50 trading partners later in 2025.
China, Canada, and the European Union have announced or imposed retaliatory tariffs, altogether affecting $330 billion of US exports. The tariff wars are set to further intensify. Countries are already gearing up to face head-on the tariff bullying. Brazil has announced a $6 billion stimulus plan to shield its exporters. India is expanding vigorously its ‘Make in India’ initiative, and Canada and Japan are retaliating with enhanced tariffs. South Korea is exploring opportunities in the Middle East and Latin America. It is quite apparent that no nation is willing to succumb to unreasonable tariff impositions, and there is going to be a realignment of the power axis. A quiet Russia-India-China (RIC) triangle is taking shape. Putin-Modi-Xi Jinping can be a formidable trio that Trump may not be able to handle.
Meanwhile, American domestic consumers are also going to feel their pockets pinch. Analysis by Bloomberg Economics shows that the new tariffs could reduce overall US imports by 15 percent. While the Washington, D.C.-based Tax Foundation estimates that the tariffs will generate around $100 billion per year in extra federal tax revenue, they could also impose significant costs on the broader economy: disrupting supply chains, raising costs for businesses, eliminating hundreds of thousands of jobs, and ultimately driving up consumer prices.
The ordinary American will soon experience rising grocery costs as Mexico is the United States’ biggest source of fresh produce, supplying more than 60 percent of US vegetable imports and nearly half of all fruit and nut imports. This could well turn out to be Trump’s moment of reckoning, for people in democracies do not have tight-lipped endurance like in dictatorships. Very soon, Trump will face agitations, uprisings, and a spate of litigation, as nobody wants to face an economic Gaza-style battering. Sane voices will shout to Make America Sensible Again (MASA).
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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