Trump, tariffs and the one trick pony act: how it started and how it's going!

Indian Express

a day ago

Less than six months ago, when US President Donald Trump kicked off his tariff onslaught, the global trade landscape seemed vastly different: China was seen as having a target on its back while India was among the early frontrunners for a quick deal. Treaty allies including Japan and South Korea were sitting pretty, as were the UK and Australia that had goods trade deficits with America. Russia, as the aggressor in a war that Trump seemed determined to stop, was expected to get a rough treatment while Switzerland, a country that has prided itself on its neutrality, would have been, even in the worst case scenario, looking to end up with slightly higher rates than the EU in terms of headline tariffs.
Just months down the line, and the picture is vastly different. While discerning trends in Trump's trade policy is a tough task, given that his tariff stance has a half life of less than ten days, there are some really unexpected results. India and Brazil, two of the three democracies in the BRICS group, are now the worst off in the five nation grouping, facing the highest American tariffs in the world. South Africa, the third democracy in that bloc, not too far behind. Despite continuing to bomb Ukrainian towns, Russia is now on the favourable end of the American's President's bristled stick, having escaped without a tariff even as uninhabited islands got whacked.
China, which was among the few countries to hit back at the US with retaliatory tariffs, also finds itself in a much better off situation, and could get an even more favourable tariff treatment once a bilateral deal kicks in. Meanwhile, Like Russia, Israel, the aggressor in another continuing war that Trump promised to stop, has gotten off relatively easy. Russian oil may be a subject of vilification of other countries that includes India, but Moscow is only faced with secondary tariffs on its oil exports, that too paid by the importers of Russian oil. China, the biggest buyer of Russian oil, is inexplicably insulated for now from these secondary tariffs. And instead of sanctions for continuing its aggression against Ukraine, Russia now gets a Presidential summit with the US.
Israel is meanwhile faced with 15 per cent, which is the best case scenario for countries that have a goods trade surplus with the US. Switzerland is facing tariffs more than double that of the EU, while the UK and Australia seem to have settled in for 10 per cent, three times the average tariff the US charged the world on an average pre-Trump, despite these two countries selling less goods to the US than the other way around.
And Trump is now unabashedly using tariff as a tool to not just meet economic goals but to also further diplomatic and geopolitical interest. Canada is facing a higher 35 per cent tariff, in part because of its support for Palestinian statehood while Brazil is paying a 50 per cent tariff for 'ill treating' and prosecuting former President Jair Bolsonaro. Mexico continues to pay high tariffs for failing to curb imports of fentanyl and migration flows while Colombia was threatened with high tariffs if it resisted taking back deportees sent by America. Spain was earlier threatened with tariffs for resisting to step up defence spending.
What happens 10 days later in this tariff policy is anybody's guess. Trump is the judge and jury in most of these tariff decisions, even as he has progressively legitimised protectionism as a fundamental tenet of American foreign policy.
China is clearly working its way down the ascending tariff charts, helped by some tit-for-tat responses and threats to weaponise trade. Washington DC is now more accommodating than ever to humour Beijing.
There is a chance that possibly by August 12, Trump could announce an extension of the truce on the tariff pause with China, alongside plans for a summit meeting with President Xi Jinping. Analysts expect a grand rapprochement of sorts – the type that Trump pursued with North Korea in his first term. There could be deals, including a settlement on Tiktok, and maybe even some acknowledgement of Chinese initiatives on fentanyl control, alongside concessions by Beijing in the form of buying more gas or agriculture products from the US.
When Trump embarks on this renewed China project, it puts in jeopardy decades of American effort to wean India away from Russia, and to join the western project attempting to push back on Chinese hegemony along its long Indo-Pacific perimeter. The irony here is that while the secondary tariffs against India are intended to ostensibly hurt Russia, it could push India back closer to an alliance with Russia and possibly, even closer to China.
From Washington DC's perspective, one of the biggest diplomatic projects in many respects that's been underway in the Indo Pacific for the last three decades is the building of a more accommodative relationship with India. Multiple complementarities exist: besides being democracies, both countries have scope for leveraging technology, military cooperation and the oversized impact of the Indian diaspora in the US. Painstakingly, a series of Republican and Democratic Party governments have built that relationship in a bipartisan manner with successive governments in India.
When Trump's tariff onslaught commenced, the implicit assumption in New Delhi was that Washington DC will maintain a differential of 10-20 per cent in tariffs between China and countries such as India; and that the American side would be cognisant of India's traditional redlines that have endured for decades, including concerns over GM food crops and the need to safeguard the interest of the country's vast subsistence-level manufacturing base that has an oversized contribution to the country's labour-intensive exports. All that is now under cloud.
Also, as countries and democratic leaders are realising, there is a domestic political fallout of trying to reconcile Trump's public assertions aimed at his own political base with the messaging they hope to give in their respective jurisdictions after a deal, or even while negotiating one. That gap is proving difficult to bridge for most leaders, especially democratically elected ones. The only ones to have gotten off lightly on this count are China, Russia and dictatorships in West Asia, where Trump has been conspicuously measured in his utterances.
While President Trump is deeply attuned to his own domestic politics, he couldn't care less about the politics of leaders of other countries, especially allies. Explicitly interweaving economic policy with political outcomes has its shortcomings, especially when pursued in a one-sided manner. The other side is simply pummeled into a corner, and then left to counter Trump's vocal assertions of having bullied the trade deal signatory into giving unprecedented concessions. That's difficult for the other party to sell at home.
It's not surprising that the brazen tariff aggression has started to have the opposite effect of what Washington DC envisaged in some cases. India, Brazil, Russia and even China seem to be getting closer at this point, given the collective grouse against the US. Most of what the US has pursued so far, alienating allies more than non-allies, is almost to the benefit of both Russia and China. That trend is only set to intensify.
Anil Sasi is National Business Editor with the Indian Express and writes on business and finance issues. He has worked with The Hindu Business Line and Business Standard and is an alumnus of Delhi University. ... Read More