Tariff weaponizing trade – Hindustan Times

Donald Trump, who was elected President of the United States (US), announced that he would impose customs duties on countries other than China on his first day in office. The list includes the USA’s northern and southern neighbors, Canada and Mexico. This is a list that will grow even longer during Trump’s presidency.

Of course, it became fashionable during Trump’s first presidency for the United States to use tariffs and abandon its policy of promoting free trade around the world. And the idea has gained bipartisan attention, with even Joe Biden’s administration imposing tariffs against China. Its appeal crossed the Atlantic and beyond European countries; Customs duties on imports from China, such as electric vehicles, are also being increased, although there are tactical opponents here.

Trump only wants this policy to be further escalated in his second term. What makes this even more powerful is that Trump is considering using tariffs not only to rebalance trade, but also to achieve goals beyond trade, such as curbing illegal immigration and the drug trade. While things like illegal immigration are widely condemned, they are critical in labor markets like American agriculture, and a serious crackdown could harm the constituencies that helped Trump’s political resurgence.

How will all this change the world? Uncertainty will be the biggest byproduct. Trump and his advisers have made clear that tariffs will be a dog on a leash while the United States negotiates with other countries. They argue that even if he is not released, his presence will work to the US’s advantage. Such an approach by the world’s largest economy will only accelerate the collapse of the already one-sided multilateral trading order. Additionally, the Trump administration may redraw tariffs as companies move to circumvent borders. This will further worsen policy uncertainty, especially in terms of long-term investment decisions.

In the rest of the world, not everyone will be equally affected. Countries that can offer something in return to the USA will be able to do better in this bargain than those who cannot. Remember Trump’s Harley Davidson speech for Indian mangoes? US strategic partners in the Indo-Pacific (this includes India) can hope to negotiate better than their historical allies in the Atlantic. Still, these potential upsides aside, everyone, including India, will need to work with a more transactional and mercantilist White House. Global trade as we have known it for the last three decades will not be the same.