National responses to global tariff disruptions

Hindustan Times

24-04-2025

The imposition of unilateral tariffs by the US on China in 2018 marked the onset of a conflict that rapidly expanded beyond a bilateral dispute into a global tariff war. This escalation, particularly pronounced during the second term of the Trump administration, signalled a departure from the post-Cold War paradigm of rules-based globalisation and liberalised trade that had facilitated decades of shared economic progress. In a symbolic declaration of economic sovereignty, President Donald Trump proclaimed April 2 as 'Liberation Day,' framing the imposition of tariffs as a strategy to restore domestic prosperity by opening foreign markets and dismantling trade barriers. This vision materialised through the implementation of reciprocal tariffs on a broad range of trading partners.
The US levied tariffs exceeding $360 billion on Chinese imports, targeting electronics, machinery, textiles, and steel sectors. These actions were legally justified under Sections 201, 232, and 301 of the US Trade Act of 1974, citing national security and allegations of unfair trade practices. Washington estimates saving about $330 billion, but it is at the cost of raising consumer prices by over 7% and lowering its GDP by about 1%, as reported. The scope of these measures soon extended to other major trading partners. Under Section 232, the US imposed tariffs between 10% and 25% on steel and aluminium imports from several countries, including India, Turkey, Brazil, Mexico, and EU member States. Despite their participation in the US–Mexico–Canada Agreement (USMCA), even Canada and Mexico were initially affected, creating temporary strains within the North American trade bloc. Additional trade barriers targeted various goods—agricultural products, automobiles, and intermediate commodities—from economies across Asia and Latin America.
These unilateral actions triggered widespread retaliatory measures. National governments responded with targeted interventions aimed at shielding vulnerable economic sectors, stabilising domestic prices, and repositioning themselves within an evolving global trade architecture. China, for instance, implemented reciprocal tariffs of about 34% on US-origin goods valued at $24 billion and sector-specific stimulus packages by expanding the fiscal deficit. Strategic emphasis was placed on sectors like semiconductors and agriculture, alongside efforts to diversify trade through deepened relations with Association of South East Asian Nations (ASEAN) and increased investment in Belt and Road Initiative (BRI) partners.
Other countries also adapted in distinct ways. Mexico leveraged the USMCA framework to maintain trade stability while promoting nearshoring by US firms. Industrial policy reforms, infrastructure development, and incentives for workforce training supported this. In Southeast Asia, Indonesia pursued foreign direct investment in manufacturing and engaged actively in the Regional Comprehensive Economic Partnership (RCEP), complemented by domestic price controls to curb inflation. It is using the ASEAN route towards a collective response. Jakarta also relies on diplomatic engagement and trade diplomacy with the US instead of retaliatory tariffs.
At 10%, Turkey falls within the lowest bracket of US tariffs, impacting its economy moderately compared to others. India adopted a combination of retaliatory tariffs and industrial policy measures oriented toward self-reliance. Initiatives such as Make in India and Atmanirbhar Bharat were supported through fiscal incentives and credit facilities for micro, small, and medium enterprises (MSMEs). India is anticipated to offer strengthened incentives targeting sectors such as semiconductors, renewable energy, and aircraft components to attract investment from the US. Concurrently, the government is collaborating with domestic manufacturers and plans to launch an online platform to document export restrictions encountered by Indian businesses systematically.
In South America, Brazil and Argentina redirected agricultural exports toward China to compensate for lost access to US markets. African countries are looking toward the African Union for a coordinated strategy to tackle the US tariffs. They can strengthen regional cooperation under the African Continental Free Trade Area (AfCFTA) and diversify their exports to the European Union and Asia. Island economies in the Caribbean and Pacific are facing US tariffs starting with the baseline 10% tariff.
Despite the diversity of responses, five trends emerged across national strategies. First, many countries pursued new or expanded trade agreements to reduce dependence on the US market. These included RCEP in Asia, AfCFTA in Africa, and numerous bilateral agreements in Latin America and South Asia. Second, efforts to improve manufacturing, including improvements to logistics infrastructure, establishing export zones, and regulatory reforms. Third, governments expanded subsidies and welfare programmes to protect vulnerable populations from the adverse effects of trade disruptions. Fourth, there was a marked emphasis on strengthening local value chains, maintaining strategic reserves, and achieving technological independence, particularly in India, China, and the EU. Lastly, several nations sought negotiations with the US to get favourable tariffs. Despite persistent tariff-related challenges, India and the US are nearing the finalisation of a multi-sectoral bilateral trade agreement. India has lowered tariffs on select US products as part of this process. The visit of Vice President JD Vance serves as a political signal, underscoring the positive trajectory of economic relations between the two nations.
These developments suggest that countries adopting adaptive trade strategies, domestic industrial investment, and social protection measures were comparatively more successful in mitigating the socio-economic impacts of escalating trade tensions. Several policy recommendations arise from here. First, enhanced regional integration, particularly through South-South cooperation, such as the BRICS Plus platform, can bolster resilience by diversifying value chains and strengthening collective bargaining power. Second, flexible support mechanisms for MSMEs and informal sectors are essential for safeguarding employment and stimulating post-disruption recovery. Third, investment in localised production capacities, especially in strategic industries such as pharmaceuticals, agriculture, and semiconductors, can reduce exposure to future trade volatility. Fourth, reforming multilateral trade institutions is crucial to curbing unilateral actions and promoting equitable dispute-resolution mechanisms.
The global response to US-initiated tariffs reveals a broader transformation in the international political economy, characterised by growing regionalism and a focus on economic self-reliance. Although the trade war originated with a hegemonic actor, its ripple effects necessitated coordinated and multipolar responses. The policy innovations that emerged during this period provide valuable insights for managing future disruptions in global trade, especially for developing economies seeking to balance interdependence with strategic autonomy.
This article is authored by Mehdi Hussain, research associate, Indian Council of World Affairs, New Delhi.