Even before he assumed office, Trump had clearly stated that he would resume the trade war started in the previous regime. Historically, most of the protectionist Republican leaders in the US have tried to raise tariffs only to push the country into recession and even depression and have proved that the notion of low tariffs harms American manufacturers is a myth.
In a global value chain, the entity that owns intangible assets like brand and patented technology takes away the lion’s share of revenue and the US, with around 10,000 companies of over $1 billion revenues, holds the highest share of intangible assets, refuting the claim that the largest economy is deprived.
In January itself Trump opened his tariff salvo against Mexico, Canada, China and Columbia. He took his ill-researched trade policy to a global level in February, he announced a 25 per cent tariff on the imports of steel, aluminium and their derivatives, which were subjected to 25 per cent and 10 per cent respectively in the previous term. He also withdrew the exemptions provided by the Joe Biden administration to several countries, including India. The new tariffs which came into effect by March 12 can possibly shrink engineering goods exports by $5 billion in FY26.
On February 13, Prime Minister Narendra Modi and US President Donald Trump resolved to negotiate a trade agreement and the process started from March 26.
On March 26, Trump announced a 25 per cent tariff on imported automobiles and auto components. India’s $2.2 billion worth auto components exports to the US are likely to be hit by this.
On April 2, Trump unveiled the reciprocal tariffs on its trading partners. This was above the basic tariff of 10 per cent on all goods imported into the country. Despite the ongoing trade talks, Trump brought out erroneous data of India charging 52 per cent tariff on US goods and imposed 26 per cent reciprocal tariffs. China’s total tariff went up to 54 per cent, while Vietnam faced 46 per cent reciprocal tariffs, Bangladesh 37 per cent, and Cambodia 49 per cent among India’s competitors. Among them, China retaliated with 34 per cent tariffs.
The basic tariffs came into effect on April 5 and the reciprocal tariffs on April 10. On the next day, Trump announced that reciprocal tariffs on all trading partners, except China, will be on hold for a 90-day period as many countries had evinced interest in signing trade treaties with the US. By then, the total tariffs on China had moved up to 145 per cent and the retaliatory tariffs by China on the US to 125 per cent.
China’s higher tariff gave India an advantage as several Chinese suppliers approached India exporters of textiles, footwear, leather and engineering goods to fulfill orders from the US to retain their customers.
Meanwhile, on April 22 the Trump administration launched probes into pharmaceutical and semiconductor imports to impose tariffs.
On May 4, Trump charged a 100 per cent tariff on all movies produced outside the US. This is likely to hit the business of Hindi as well as south Indian movies that are released in the US.
On May 12, the US and China announced a temporary truce for trade negotiations, reducing reciprocal tariffs for 90 days. American duties on Chinese goods were brought down from 145 per cent to 30 percent, and Chinese tariffs from 125 percent to 10 percent.
On the same day, he signed a wide-reaching executive order directing drugmakers to lower the prices of their medicines by 59 – 90 per cent in 30 days to align with what other countries pay. The measures taken by Big Pharma to save margins are likely to have an impact on Indian generic drug makers.
Meanwhile, Trump claimed to have mediated a ceasefire between India and Pakistan using trade concessions for brokering. This irked the Indian administration which denied any mediation in the ceasefire decision. In his speech in Doha, Trump proclaimed that India was offering ‘no tariffs’ for all US imports, a statement which did not go well with the Indian side. The government refuted it by saying that trade talks were still on. Trump also requested Apple’s Tim Cook not to increase production in India.
India, which had remained diplomatic in the trade war, has informed the World Trade Organisation that it was withdrawing concessions given to US imports and proposed to levy retaliatory tariffs on the US for imposing safeguard duties on aluminium and steel.
Tariff uncertainty still on, the roller coaster ride for global trade is not yet over.
