Editorial: Trump Tariffs

The Trump juggernaut is on a roll. The world is watching warily – with a mix of dismay and even fear – as to what would come under its rumbling wheels. The tariff wars and the consequent disruption are not the only things in Donald Trump’s address to the US Congress that have set off alarm bells and confirmed the worst fears of countries which could end up on the wrong side of America and its unpredictable and all-powerful President. On the US radar are countries ranging from neighbouring Canada and Mexico and faraway China, South Korea and India. Even the EU, the old, trusted American ally, is unlikely to be spared either. The portents are ominous, to say the least.

In his address to the joint session of Congress on Tuesday, Trump, among other things, menacingly threatened more impending tariffs – both retaliatory, tit-for-tat reciprocal tariffs, and non-tariff measures from April 2. Canada, Mexico and China are already facing the brunt of US tariffs. Canada and Mexico have not only remained defiant but also shown a semblance of aggression in retaliation both in words and in action. While Trump initially said tariffs were in the context of undocumented immigrants and the opioid drug Fentanyl, now Canada sees it as an arm-twisting move to force it to give up its sovereignty. China, on the other hand, interpreted Washington’s decisions as almost a proclamation of war – tariff or otherwise – and declared it was “ready to fight till the end”.

When it comes to India, Trump clubbed it with other nations and cited India’s tariffs on automobiles to substantiate his claim of “very unfair” tariffs. Experts pointed out that Trump selectively cherry-picked the exceptional cases while ignoring the fact that India’s tariffs on goods imported from the US are mostly low – as low as in single digits. However, the US could argue that other import duties which are meant to protect and grow Indian domestic firms could be construed as non-tariff barriers. India needs to tread carefully and leverage its clout to escape punitive tariffs. Going by the business-like tone and tenor of Trump-Modi dialogue during the latter’s visit to the White House and how Trump is not inclined to prioritise friendship, loyalty and other sentiments, India will have to work so much harder to hold its ground in international trade and beyond.

Besides the Indian government, Indian companies also need to get their act together to deal with a new tariff regime which will affect a wide range of sectors – from automobiles, chemicals and pharmaceuticals to agriculture and food products to jewellery. Indian companies could be hit by tariff-related losses in the range of $7 billion a year. Brainstorming at different levels – individual company to sector to government – is need of the hour. The government has already responded by preemptively reducing some tariffs and might do more. There’s however skepticism in certain quarters as to how effective the defence and oil deals and the proposed bilateral trade agreement could be in minimizing the tariff threat.

The question is will Trump be able to sustain his tariff policy in the long run as it will result in inflation and rising prices which will affect US consumers, including diehard Trump voters and MAGA supporters? Also, it could negatively impact the pace of economic growth, which even before the tariff saga has been forecasted as bleak. If Trump manages to retain his popularity among Americans and consolidate further his control over the Conservative party, then the world needs to brace itself for widespread turbulence and new coping strategies.