Trump’s Tariff Policies Reshaping Global Trade Dynamics

Source: The post Trump’s Tariff Policies Reshaping Global Trade Dynamics has been created, based on the article “Ready, set, tariff: Donald Trump’s bargaining chip and Delhi’s chance to reshape bilateral trade” published in “Indian Express” on 4th December 2024

UPSC Syllabus Topic: GS Paper2- International Relations-Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Context: The article discusses Donald Trump’s tariff-driven policies, focusing on reshaping global trade and finance. It highlights his threats against BRICS, emphasis on leveraging tariffs for foreign policy, and India’s need to adapt its trade strategy with the US. Trump’s Tariff Policies Reshaping Global Trade Dynamics

For detailed information on Trump’s Tariffs and Their Impact on Trade read this article here

What is Trump’s tariff strategy?

High Tariffs on Imports: Trump plans to impose 60% tariffs on Chinese imports and 20% on imports from other countries, aiming to reduce trade deficits and strengthen domestic industries.

Tariffs for Foreign Policy: Trump’s nominee Scott Bessent highlights tariffs as tools to achieve objectives like increasing allies’ defense spending, stopping drug trafficking, and deterring military aggression.

Leveraging US Market Power: The US, being the largest importer, uses its market size to dictate global trade terms.

Actions During First Term: Trump withdrew from the Pacific Free Trade talks, renegotiated NAFTA, and imposed tariffs on China, Canada, and the EU, reshaping global trade relations.

Why does Trump target BRICS nations?

1. Trump threatened 100% tariffs on imports from BRICS nations if they create an alternative currency to the US dollar.
2. He wants to defend the dollar’s global reserve currency status.
3. However, BRICS countries lack unity and financial capability for such a move.
4. India’s economic ties with the US remain vital, despite echoing BRICS rhetoric on de-dollarisation.

What challenges do US trade partners face?

1. Pressure on Negotiations: Mexico and Canada faced 25% tariff threats over drug and migrant issues, prompting them to negotiate.
2. Europe’s Trade Surplus: Trump labeled Europe “more dangerous than China,” pushing it to reduce trade imbalances.
3. Limited Retaliation: European Central Bank President Christine Lagarde advised against retaliatory tariffs, favoring negotiation.
4. Uncertainty in Trade Relations: Partners must adapt to Trump’s tariff-led foreign policy goals.

What should India do?

1. Reassess Trade Policies: India should adapt to Trump’s tariff-driven policies by emphasizing reciprocity and mutual benefit, as highlighted by S. Jaishankar.
2. Leverage US-China Rivalry: India can strengthen trade ties with the US by using Trump’s focus on China to its advantage.
3. Focus on Mutual Gains: India should align with Trump’s vision of a “fair-trade block” among allies with shared interests. India has an opportunity to align with this vision while protecting its economic interests.

Question for practice:

Examine how Trump’s tariff-driven policies influence India’s trade strategy and its relationship with the United States.