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World Trade War Begins With US Action, How Will India Navigate Crisis?

After imposing 10% tariffs on all goods coming from China, Canada and Mexico, US President Donald Trump also threatened the European Union to crack the whip. How will India-US ties develop now?

Where does India stand in the trade war, that has begun between the US on one side and Canada, Mexico and China on the other?

Will US President Donald Trump impose tariffs on India, as he has threatened many times in the past?

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If Washington decides to punish India for the bilateral trade in New Delhi’s favour, when and how much will it impose the punitive tariffs?

Donald Trump Sends Shock Waves

After imposing 10% tariffs on all goods coming from China, Canada and Mexico, Donald Trump also threatened the European Union to crack the whip.

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He told journalists that he would impose tariffs on all imports from EU member states, but he did not specify when and how much tariffs he would impose.

However, he warned that “the levies will come soon”.

While China threatened the US to drag it to the World Trade Organisation, Mexico and Canada retaliated by imposing a 25% hike in tariffs on all US goods.

Hitting back at the US, Canadian Prime Minister hopeful Chrystia Freeland called for 100% tariffs on Trump ally Elon Musk’s EV manufacturing company Tesla.

Global Trade War Begins

British Columbia Premier David Eby threatened to “stop buying American liquor from red states”.

Unions representing Mexico’s auto parts manufacturers the National Auto Parts Industry warned that the fresh US tariffs could put millions of jobs at risk and may result in an increase of $3,000 in the cost of an average automobile.

It appears that the world trade war has begun and all the warring sides are gearing up for further attacks and counter-attacks.

Will Donald Trump Target EU, UK?

The trade war is most likely to expand and many more nations may join it, and it may prove to be detrimental not only to those who are directly involved in the trade war, but all countries, irrespective of their wish.

Some of the nations are taking pre-emptive steps to avoid the trade war and control the damage to their economy.

Seeking a strong trade relation with the US, UK Prime Minister Keir Starmer said, “In the discussions that I have had with President Trump, that is what we have centred on, a strong trading relationship.”

Trump reciprocated as he said, “Prime Minister Starmer has been very nice. We’ve had a couple of meetings, we’ve had numerous phone calls, we’re getting along very well, and we’ll see whether or not we can balance out our [trade].”

Asian Stock Markets Crash

Donald Trump’s announcement sent shockwaves across the world, share markets and currency suffered and some of them tumbled.

Asian stock markets reacted sharply and their indices fell down steeply. While the Taiwan stock exchange’s benchmark TAIEX tumbled 3.90%, South Korea’s KOSPI and Japan’s Nikkei 225 slipped 3.03% and 2.62% respectively.

Reactions of China’s stock exchanges of Shanghai, Beijing and Shenzhen could not be known as these were closed for the Lunar New Year holidays.

The reverberations were felt in the US as well with S&P 500 futures sinking by nearly 2% on Sunday. Similarly, futures for the tech-heavy Nasdaq Composite slid 2.4%.

Currencies Tumble

The currencies of China, Mexico and Canada nosedived after the announcement.

While China’s yuan fell to a record low in offshore trading, the Mexican peso and Canadian dollar tumbled.

In what may be said the result of Trump’s announcement, the world’s biggest and best-known crypto, Bitcoin, slipped to $94,476.18 on Monday morning in Asia.

Will Donald Trump Target India Too?

India is also on the US list of countries that enjoy a trade balance with the US in their favour. In the first meeting with his Indian counterpart S Jaishankar, US Secretary of State Marco Rubio raised the issue of tariffs and expressed concerns on the trade deficit and indicated that fresh tariffs may be imposed on Indian goods.

Earlier when Donald Trump had threatened China, Mexico and Canada to impose punitive tariffs, he also put India on that list.

Many business associations in India now apprehend that after imposing tariffs on China, Mexico and Canada, Washington may target India as well, it is just a matter of when and not if.

US-India Trade Deficit

India-US trade increased by 30.3% between 2018 and 2024 from $54 billion to $70.5 billion. However, the trade deficit has been increasing continuously.

It touched $21.94 billion in December 2024, widening from the $19.8 billion in the corresponding period of the previous year. However, it was less than the market expectations of a sharper $27.3 billion deficit.

According to the data of the Commerce Ministry, the US-India bilateral trade increased by 7.65% to $128.55 in 2022-23 from $119.48 billion in 2021-22.

The US is upset with the widening gap and wants India to open its market for its firms. It believes that India does not allow a level playing field and exploits the US largesse. Donald Trump administration wants New Delhi to lower tariffs on its goods.

Did Nirmala Sitharaman Send Good Wibes To US?

Hours before the US decision to impose tariffs on the three countries, Indian Finance Minister Nirmala Sitharaman in her budget presented on the floor of Parliament, removed seven customs tariff rates for industrial goods over and above the seven tariff rates removed in Budget 2023-24.

The government said in a press release, “This will leave only eight tariff rates, including ‘zero’ rate. The Budget also proposes to levy not more than one cess or surcharge. This will exempt Social Welfare Surcharge on 82 tariff lines that are subject to a cess.”

In what may be said as a signal to the US policymakers, Finance Secretary Tuhin Kanta Pandey said that the customs duty changes would send the right signal to the world and the domestic industry that “India is focussed on rationalising and simplifying its import tariff structure.”

Will the US spare the rod?

HISTORY

Written By

Pramode Mallik


Get Breaking News First and Latest Updates from India and around the world on News24. Follow News24 on Facebook, Twitter.

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