'Not fair, India!' Trump hits India with tit-for-tat tariffs

US President Donald Trump has detonated an all-out global trade war with his MAGA-weaponised tariffs policy. Early on Wednesday morning India time, Trump specifically named India as a tariff target. In his address to Congress, he said India was ‘very unfair’ for taxing American automobiles at more than 100% and that he was bringing in reciprocity as early as April 2. He called out India more than once in his speech and also mentioned the EU, China and Brazil, apart from the other targets of his tariffs, which are Canada and Mexico.

There were indications of this coming when Prime Minister Narendra Modi visited Washington last month. At the time, Trump had called Modi "a tough negotiator" but also made his unhappiness over India’s taxes on US goods clear. The India-US trade is estimated to be worth close to $130 billion. The balance of trade is in India’s favour, with the US importing $87 billion from India while exporting $42 billion. The trade deficit is $45 billion tilted towards India.

However, Indian markets opened in the green after a period of downturn despite Trump’s announcements. Global markets rallied a bit at opening too.

Just hours before dropping India into the tax net, Trump announced 25% levies on goods imported from Canada and Mexico. For China, it is 20%, doubling it from earlier.

Trump had threatened to impose tariffs on his two neighbours as soon as he took office but delayed it by a month while negotiations over drug trafficking and illegal immigration were going on.

Canada, China retaliate

Both Canada and China have reacted to the US move and announced levies of their own, on goods coming in from the US.

Canada imposed 25% tariffs on $30 billion worth of US goods, including farm equipment and steel. Mexican president Claudia Sheinbaum did not immediately react but hinted at levies on agriculture goods from the US.

China announced 10-15% duties on US wheat, soybeans and beef starting March 10. Beijing also increased the number of US companies subject to export controls and other restrictions by about two dozen.

This action-reaction has sent global markets into a downward spin, with international indices going into the red. Dow Jones was down 1.5%, S&P 1.8% and the Nasdaq 2.1%. European and Asian markets followed, with the FTSE 100 down 1.2%, the Nikkei 225 by 1.5% and DAX 1.4%.

The US imports billions of dollars worth of goods from both Canada and Mexico. From Canada, the US imports more than $100 billion of petroleum products and oil, and $40 billion in automobiles among several other manufactured and farm produce. Mexico similarly sends about $100 billion in automobiles, $78 billion in auto parts along with computers and accessories, electronics, telecom equipment and farm produce.

With increased tariffs, all these products will cost the US citizens more. The Trump administration is preparing consumers for the increased prices by saying that these hikes will be temporary and essential to bring production and jobs back to the US. Experts, however, say that setting up manufacturing at that scale and cost will be impossible in the short- and medium-term.

The effect of these tariffs will be felt by the entire world, not merely the handful of nations in the midst of this trade war. Global supply chains and established manufacturing hubs are likely to get disrupted. More importantly, given the impetuous nature of Trump, it will become difficult for corporations as well as countries to make firm future plans. This move goes hand-in-hand with Trump’s upending of geopolitical alliances, especially with the EU, which is already creating its own set of uncertainties.

The US president had made tariffs part of his policy offensive in the first term as well, but not as brutally and rapidly as in this second term. His campaign had talked about fighting tax with tax. Tuesday’s decision, which came with swift retaliation, could set off the entire global economy into uncharted waters, with no clear guiding compass to follow.