Trump 2.0: Will tariffs help MAGA or slowdown the global economy?

“Make America Great Again” was the ambitious dream Trump painted during his campaign. After being re-elected, he has taken similarly transformative steps to achieve this dream. One of them is the imposition of reciprocal or retaliatory tariffs. It started with 25% tariffs on Colombia on 27th of January. Similar tariffs on Canada, China etc followed. But what shook the world was when he unveiled global tariffs on 2nd of April.

America’s Liberation Day

On 2 April 2025, Mr. Donald Trump announced tariffs to reduce trade imbalance and boost American manufacturing. He called this day “America’s Liberation Day”. He announced two types of tariffs. A base tariff of 10% (previously about 2.5%) which would be applicable on all trading partners. Further, country specific tariffs would depend on how much the partner charges on US goods. This triggered tensions in global trade. Yet, Trump maintained he was being generous. He stated he was applying only half the reciprocal tariffs compared to what other countries charge from the US.

Country Specific Tariffs

Some countries only faced the base rate. These countries include the United Kingdom, Singapore, and Chile. Others are Brazil, Australia, and New Zealand. Additionally, there is Turkiye, Colombia, and Argentina. Finally, this also includes El Salvador, United Arab Emirates, and Saudi Arabia.
Other countries termed the “worst offenders” faced higher rates like China (54%), Cambodia (49%), Vietnam (46%), Sri Lanks (44%) etc.
Trump declared that India charged 52% tariffs. This includes “currency manipulation and trade barriers.” America would now charge India a “discounted reciprocal tariff” of 26%.
Due to retaliatory measures by China, a tariff row ensued between them and the US. The tariff rates for China rose as high as 145%. Although both sides have slashed tariffs for 90 days now.
Trump has also suggested 50% tariffs on all imports from the EU (European Union).

Also read: Trump-Era Trade Pressure Sees India Among Nations Considering Tariff Cuts

Impact

The announcement raised concerns about trade wars and stock markets worldwide declined. In response, on 9th April, President Trump paused tariffs of 75 nations, including India, for 90 days. Even so, distortion in production patterns, decrease in efficiency and an increasingly opaque trade system are likely byproducts.

In the US, the predicted increase in domestic output is not sufficient. It cannot offset the decline in production based on global inputs. Citizens may face short term price rise or inflation, as well as recession or low economic growth. The burden will fall on low to middle income groups.

Globally, trade may decrease by up to 5% and global economic growth rate by 1.2%. The value of the US Dollar, considered a safe asset, has fallen. Countries may direct trade away from the US. They may form stronger bonds with each other. This strategy helps build economic insulation from US tariffs. On the other hand, some nations may become economically protective and engage in further trade wars.

India’s position

The positive speculators say that India would be best off among the G20 nations even after tariffs. India’s economic growth is driven by strong domestic consumption. Reduced personal taxation in this year will also increase spending and domestic demand. Local market focus, infrastructure growth and FTAs with other economies like the UK also provide insulation from tariff effects.
The US is a major market for India exports. However, there is limited dependence on global trade for India’s economic growth. Further, relief measures have been carried out. Indian products could even gain if negotiations lead to preferential tariff treatment as compared to other nations.

The negatives include harm to certain sectors like automobiles, steel and aluminium etc. which face high imports. Trade flows and supply chains will be disrupted. There is a threat of dumping and regional supply increase, particularly from China.

India-US are currently working to finalise a trade deal by early July before Trump’s tariffs kick in. However, India suggested imposing retaliatory tariffs on 29 American products to counter American duties on the aluminium and steel industry. The American President has also exhibited protectiveness and tried to restrict manufacturing plants of MNCs to America. In a social media post, he said he has asked Apple to build in America. He does not want them to build in India, or anyplace else. Otherwise, the company would face 25% tariffs on its products.

Way forward

India’s diplomatic negotiations to secure economic stabilisation seem to be working. However, one can only speculate about the India-US trade deal. It will soon emerge. However, India is being projected as a “China +1” alternative by global investors. Manufacturing in India may receive a boost from policy reforms. These include rationalised tariffs and a pro-trade stance. PLI (Production Linked Incentive) schemes and diversifying areas of export are also crucial.

As for the world, global trade organisations like WTO become more relevant and multilateral trade should be secured. A strategic vision might help contain this protective American policy.

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