Since the day Donald J. Trump assumed the position of the President of the United States of America in January 2025 for a second term, apprehensions were felt across the globe regarding his tariff policy and other economic sanctions. As anticipated, Trump anchored his protectionist measures in the form of ‘reciprocal tariffs’ as a part of his ‘Liberation Day’ plans on April 2, 2025.
However, as a sign of relief to the trading partners of the USA and to the global economy, Trump announced a 90-day pause to his reciprocal tariff plans and intended to ink bilateral trade agreements with world nations that suit American interests.
As the 90-day tariff pause has ended on July 9th and President Trump has extended the tariff pause up August 1, this article highlights what beholds for the world economy, key US trading partners and particularly for India in the path of dealing with the unpredictable nature of ‘Trumponomics’.
Tracing the Timeline of Trump’s Tariffs
January 20, 2025: Trump assumed the position of the President of the USA and in the inaugural address, he reiterated his intention to impose tariffs on trading partners of America in order to seek American national interests and to ‘Make America Great Again’.
February 2025: Trump signed the executive order on taxing Mexico, Canada and China. Though the measures on Mexico and Canada were paused, 10 percent tariffs were imposed on Chinese imports. China retaliated with additional tariffs on American imports to China. In the same month, Trump decides to spike the steel and aluminium imports up to 25 percent.
March 2025: Trump imposes 25 percent tariff on all imports arriving from Canada and Mexico. He also raised the tariffs on Chinese imports to 20 percent, thus attracting retaliatory tariffs from these countries on American goods. However, he again paused the tariffs imposed on Mexico and Canada. But, the trade war with China was intense and continuously retaliatory in nature, leading to rigorous countermeasures from both sides.
The European Union considered retaliatory measures against Trump’s tariffs on steel and aluminium, for which Trump threatens to impose a 200 percent tariff on a few European imports to America.
April 2025: After imposing a series of tariffs on selected commodities and on selected economies such as Mexico, Canada, and China, finally on April 2, Trump officially announced his ‘reciprocal tariffs’ on all the nations that are exporting goods to America.
As per this ‘reciprocal tariffs’, a baseline tax of 10 percent is imposed on all the imports that arrive into America. Additionally, customised tariffs are imposed on respective trading partners based on their trading status with the USA. For example, 50 percent on China, 20 percent on the European Union, 24 percent on Japan, 26 percent on South Korea and 27 percent on India.
At this juncture, trade war with China spiked as China retaliated with 84 percent tariffs on American imports. This relentless tit-for-tat tariff game led Trump to impose a massive 125 percent tariff on Chinese goods as a counter-measure.
The Phase of Pause to Tariffs and De-escalation with China
After an intense escalation phase in Trump’s tariff war, in April, Trump announced a 90-day pause for his ‘reciprocal tariffs’ on almost all countries except China. However, the 10 percent blanket tariff remained in place.
Amidst these acute trade tensions with China that brought both the nations to the brink of a full-blown trade war, leading the world economy to fear about inflation, recession and other economic volatilities along with an environment of threatening economic security and interests, there was a sudden U-turn of events. The phase of limited de-escalation was seen with respect to the US-China trade dispute.
On April 11, Trump, in an executive order, declared that he was averting reciprocal tariffs on a range of electronic products, including from China. Trump also signalled his willingness to hold negotiations with the Chinese authorities in order to reduce the prevailing trade tensions.
Accordingly, officials of both nations met in Geneva on May 11, and decided to reduce the reciprocal tariffs. Per se, tariff rates on Chinese imports were reduced to 30 percent and the rates on American imports to China was reduced to 10 percent.
On June 5, President Trump held a phone conversation with his Chinese counterpart, Xi Jinping, and they decided to arrive at a trade deal. Hence, the USA and Chinese officials held trade negotiations in London. As a result of all these geopolitical manoeuvring, the US-China trade deal mentions that China is willing to render the Rare Earth Minerals(RREs) for American industries and in return, the USA will reduce tariffs on Chinese imports.
Did Trump Achieve his Intended Goals?
Donald Trump, being a conservative and protectionist leader, champions American interests as the apex motive beyond the bilateral and multilateral bonhomie. The core intention behind imposing ‘reciprocal tariffs’ was to secure American industries, boost manufacturing, thereby raise employment prospects for the citizens and thwart the flooding of foreign commodities into American markets. He also aimed to tweak the deficit trade to a trade surplus in favour of America by spurring manufacturing and exports. The agenda behind the pause to the ‘reciprocal tariff’ mechanisms is also to strike trade deals in favour of America in order to achieve the aforementioned goals. Otherwise, threatening to impose highly cumbersome tariffs.
But the reality is, it’s been more difficult than said to conclude bilateral trade agreements. In 3 months of tariff pause, Trump has been able to sign only 2 to 3 trade agreements, i.e., with the UK, Vietnam and China. Even these agreements are limited in nature and can be said to be a first step to a comprehensive deal. Beyond this, dozens of other agreements have been lying on the negotiation table of the respective countries. Further, as soon as Trump announced the ‘reciprocal tariffs’, the US government bonds and stock markets faced a severe backlash that led to a panic sell-off and a crash in financial markets.
Thus, it’s a mammoth exercise and an extremely lengthy process to fulfil Trump’s goal of MAGA. The pause for tariff implementation might be aimed at rectifying the loopholes and recalibrating the intended goals.
What Does the Tariff Pause Extension Mean?
July 9, was the end of Trump’s 90-day tariff pause. However, he extended it upto August 1. In the backdrop of extension, Trump wrote letters to 14 countries, including South Korea, Malaysia, South Africa, Thailand, Indonesia and others, threatening higher tariffs from August 1, if unable to reach a deal. Thus, extension of the deadline might be intended by America as an additional timeframe to negotiate with trading partners and cease deals in America’s favour.
Given Trump’s rhetoric and his deal-making styles, what happens next in the global economic and geopolitical landscape is a difficult question to answer. Will America be able to sign a series of trade deals as per its vision and goals or will the Trump administration spike the tariff rates again in the aftermath of 1st of August? Will there be selective appeasement or selective trade sanctions on nations by the American President or will there be another extension? Only Trump and time can answer, given his transactional leadership style!
India’s Antidote to Tariff Trouble
India’s economic and geopolitical moves have always been rooted in securing national interests and the well-being of its people. Even with respect to Trump’s tariff trouble, the government is relentlessly working to strike a bilateral trade deal. The tariff compulsions ultimately hurt the manufacturers, exporters and consumers of the country, thereby disrupting the Indian market potential. Thus, the government is pursuing for a trade deal with the USA in order to protect the Indian market and its people.
In this direction, the government is optimistic of signing a ‘mini-trade deal’. This is part of a larger Bilateral Agreement (BTA) initiated during Prime Minister Narendra Modi’s visit to the USA earlier this year. Reaching a deal before the tariff pause deadline ends will be a relief and help to avert the 26 percent tariff that Trump has imposed on India as part of his reciprocal tariffs. The mini-deal will also boost the prospects of signing a more comprehensive trade agreement with the USA in the coming days. As an result of intense diplomatic manoeuvring by the Indian government, the USA and India are on the verge of signing this ‘mini’ trade agreement.
Commerce Minister Piyush Goyal has reiterated that India is not going to sign any deal under pressure of a deadline. The country accepts the trade deal only if its suits the national interests and welfare of the people. In order to achieve this goal, the Commerce Minister and numerous officials from New Delhi have frequently visited Washington, DC and have tried to overcome all the disagreements, especially with respect to dairy, agriculture, and related areas.
The trade deal is in its conclusion phase and is definitely an antidote to the Indian economy in terms of employment and market opportunities for Indian people and commodities in the USA. Along with reducing the burden on Indian manufacturers and exporters, the government is seeking to bring stability to Indian market and economy amidst entangling geopolitical, geo-economic and trade complications.
Given Trump’s assertive leadership style, there will always be geopolitical unpredictability. However, the vision, prospective policies and diplomatic skills of the Indian government help to navigate all the economic impediments and geopolitical challenges to secure the interest, prosperity and sustainability of the Indian economy and its people!
Comments