Trump’s shock-and-awe tariffs: Too thin a silver lining for India

Subscribe to enjoy similar stories. For opponents of free trade, Donald Trump’s ‘Liberation Day’ may seem like ‘vindication day.’ The world’s top power, the US, which generates a quarter of the globe’s output, took an inward turn that ‘nuked’ the aim of open borders for commerce. Globalization, which had long wobbled along, suddenly looks skeletal.

America is poised to wall itself off with a steep hike in tariffs to an average level last seen more than a century ago. It spells a bleak outlook for others. Trump’s bombshell of 2 April won’t affect US trade-pact carve-outs of the kind that Canada and Mexico have.

But it’s grim news on the whole. On 5 April, the US will erect a universal import barrier of 10%. Next, on 9 April, imports from some 60 countries with which the US runs trade deficits will be shifted to a punitive regime of country-specific tariffs.

Labelled ‘reciprocal,’ these don’t cover vehicles, some metals and other sectors already shielded by America’s sectoral levies (plus a few more), but the surprise is that they don’t really mirror what others levy on its stuff. India’s service exports escape, as expected, but merchandise shipments to the US will face a 26% levy. This rate looks calculated to reflect half our US trade surplus as a proportion of US-bound exports.

American data puts our trade gap at $45.7 billion in 2024, which is 52.3% of the $87.4 billion worth of goods we exported. As this formula would push us to buy more from the US and sell it less, in lieu of easier access to its market, it may serve Trump’s aim of balanced trade. Yet, it will also spark off inflation, shrink demand, cramp output and foster inefficiency in the US, even as tariff and currency wars flare up to hold global prosperity