Trump tariffs: ‘It’s going to work out very well between India and US’

In an age of visuals being more important than words, an attractive venue with a characterful backdrop is almost essential for effective messaging.

So, with spring arriving in Washington, president of the United States Donald Trump chose the Rose Garden of the White House, his office-cum-residence, to declare his idea of America’s ‘Liberation Day’ — a declaration of a trade war against the world.

Trump imposed a base import tariff of 10 per cent on almost every country. He then added reciprocal tariffs on about 100 countries.

He suggested he was being kind to India by applying a ‘discounted reciprocal tariff’. This turned out to be 26 per cent across the board.

This regime will remain in force until and unless a trade agreement (often time-consuming to arrive at) is reached between the two countries.

He claimed he told Narendra Modi when the latter visited Washington in February, ‘You’re a friend of mine, but you are not treating us right.’

He went on to say, ‘They (India) charge us 52 per cent (import duty on an average on US goods coming into India). You have to understand we charged them almost nothing for years and years and decades …’

A free trade agreement (FTA) or a lower duty pact may well mean a slowing down of Indian exports, however. If the lack of dynamism in Indian exports under the BJP dispensation continues and if exports from India to US decline, then the trade surplus of USD 45 billion that India enjoys over the US will diminish — thereby adding to India’s deficit burden.

In the past two months, Trump has targeted India as the ‘tariff king’. He did so again on the eve of his much-vaunted policy statement.

Therefore, it’s important to decode what he means when he mentions India and Modi, because there’s a vast difference between what he says at a literal level and what he really implies.

When Trump said ‘You have a great prime minister, very smart man’, what he meant was that Modi listens to him and does what the POTUS tells him.

Evidence of the RSS pracharak cowering before the POTUS came from the lowering of duties on main or potential American exports before he went to pay obeisance in February — and a further continuation of this trend.

As psychologists would vouch for, flattery — which Modi is highly susceptible to, especially when publicly delivered, as in this case — softens the blow. But for Trump, it gets the job done.

Modi's response is in sharp contrast to the stands taken by leaders of some of the other countries, who have firmly stood their ground.

‘I think it’s going to work out very well between India and our country,’ Trump stated.

This indicates he has a distinct inkling that Modi will play ball and India will again lower tariffs, to the US’ advantage.

Trump also took aim at China in particular, unveiling 54 per cent tariffs on all imports from that country.

The intake of Chinese goods and services into the US is second only to that from Mexico. Beijing resolved to ‘resolutely take countermeasures to safeguard its own rights and interests’, adding ‘it is a typical unilateral bullying practice’.

This means an all-out conflict between the world’s two biggest economies in the immediate future, notwithstanding a section of commentators seeing it as Trump’s opening gambit in negotiating a stable and workable arrangement. China called for an ‘equal dialogue’.

Cambodia was hit by a 49 per cent tariff, Vietnam by 46 per cent, the European Union by 20 per cent and Japan by 24 per cent.

Britain will only face the base rate of 10 per cent.

No further tariffs were revealed for Mexico and Canada, who were at the outset of the second Trump presidency slapped with 25 percent tariffs, before exemptions and delays came into being. In essence, Trump backed off after an adverse market reaction in the US.

The president of the EU, Ursula von der Leyen has promised to retaliate hard. The union, with a 450 million population and a high technology economy, indeed has the capability where it need not take matters lying down. And its reprisal will only add to the turmoil that is underway.

Late trading on Wall Street in New York witnessed a predictable tumble in markets.

On Thursday morning, Japan’s benchmark Nikkei 225 index fell by 4 per cent. Japan exported USD 40 billion worth of automobiles to the US in 2024.

Now, Trump wants to reduce import of foreign cars in general. He is especially agitated about Europeans not buying US-made vehicles...