Dawn of the Don Era

 

History will bookmark 2025 as a year of chaos, confusion, fear and disasters triggered by one man storm – Donald ready to carry out his orders and translate his of tariff s, deportation and dictating world order. Trump’s disdain for alliances that other presidents nurtured for it hard for America’s friends to manage normal relations with the United States when he is in power. He has already started stoking political mayhem nearer home -- in Canada -- by intensifying a crisis that threatens to oust Prime Minister Justin Trudeau. Trump loves bullying and that is what he did with his northern neighbour by taunting an embattled political foe, whom he mocked as the governor of the 51st state. Insulting headlines/ into an ally’s domestic politics ought to be a warning to other like France, Germany and South Korea, where political chaos and internal divides could make it hard to fi ght back. Trump’s threat to impose 25% tariff son Canadian goods to coerce action from Ottawa on border issues saddled Trudeau with fears of a profound recession ahead of an election year which will pull him into deep trouble.

Who’s next?

While Canada and Mexico are in Trump’s sights now, he’s certain to turn to what he regards as other unfair trading relationships once he takes office next month. Trump is likely to try his divide-and-rule strategy among European nations, seeking to mirror his success in creating discord inside Canada. While some of these states enjoy the protection of the European.

India to Be Hit

In recent months, Trump has once again stirred tensions between the US and India by threatening to impose new tariff s on Indian goods. Th is latest salvo in the ongoing trade friction between the two nations could have profound economic and diplomatic implications. While Trump’s trade policies have traditionally focused on reducing the US trade deficit and bringing manufacturing jobs back to American soil, his renewed threat to tax Indian goods raises questions about the long-term consequences for both economies.

The Basis of Trump’s Latest Threat

Trump’s most recent trade threat revolves around the notion of “fair trade.” According to his rhetoric, India has been benefi ting unfairly from trade policies that the US has pharmaceuticals. He has argued that India’s trade the playing field. Th is comes aft er the Trump included withdrawing India’s preferential trade status under the Generalized System of Preferences (GSP). Th is action, which ended duty-free access for many Indian goods, set the stage for the latest round of tariff threats. Trump’s team has been vocal in its belief that India should do more to address market access, intellectual property protections, and regulatory concerns, all of which he claims disadvantage American producers.If Trump follows through with his latest threat, several key sectors in India’s export economy could be directly impacted by new tariff s. Some of the most likely targets include:

Pharmaceuticals: India is a global leader in generic drug manufacturing, supplying aff fordable medications to millions around the world, including the US. Th e pharmaceutical sector is one of India’s largest export industries, and new tariff s would likely increase the cost of essential medicines for American consumers. With the US facing rising healthcare costs, any disruption in this supply chain could exacerbate the problem. Textiles and Apparel: India is one of the largest exporters of textiles and garments to the US, including products like cotton, denim, and ready-made apparel. A significant tariff hike would make these goods more expensive for US consumers, potentially decreasing demand. Th is would hit India’s textile industry hard, which is one of the largest employers in the country.Steel and Aluminium: India has long been one of the top suppliers of steel and aluminium to the US Under Trump’s past tariff s, the US imposed a 25% tariff on steel imports and a 10% tariff on aluminum. A further escalation could negatively affect Indian exporters, while US manufacturers could see input costs rise, potentially leading to higher prices for American consumers and industries dependent on these materials. Agricultural Products: Indian agricultural exports, such as basmati rice, tea, coffee, and spices, are popular in the US market. If these products are hit with new tariff s, it would directly impact Indian farmers and exporters, potentially leading to a drop in exports and reduced income for many in rural India.

Export Sector

If Trump follows through with his tariff threats, India’s export sector would face significant challenges. While it’s unclear how much of an increase in tariff s would be imposed, even a modest hike could result in:

Export Decline: A rise in tariff s on key export categories could signifi cantly dampen demand for Indian goods in the US market. As one of India’s largest trading partners, the US represents a vital revenue stream for Indian manufacturers. Reduced exports could negatively impact the economy, particularly sectors that are already vulnerable to global disruptions.

Job Losses: Sectors like textiles, pharmaceuticals, and agriculture employ millions of people in India. A sharp reduction in demand from the US could lead to plant closures, layoff s, and reduced income for workers in these industries. Th is would be especially damaging for smaller businesses and rural populations that rely on exports for income.India’s economy has been recovering from the impact of the COVID-19 pandemic, but trade disruptions could slow this recovery. If tariff s reduce exports to the US, India’s GDP growth could take a hit, and government revenue from trade could also decline.

Supply Chain Disruptions: Indian industries that supply goods to US companies could face delays, increased costs, and disruptions in the supply chain. Th is would have a ripple eff ect throughout India’s economy, especially in sectors like manufacturing, technology, and services that rely on US demand.

Impact on the US Economy

While the direct impact of new tariff son India would primarily be felt in India, the US economy would also face ignifi ant repercussions. Key areas of concern include:

Higher Consumer Prices: Tariff s on Indian goods would inevitably lead to higher prices for US consumers. For example, an increase in textile tariff s could raise the cost of clothing, while pharmaceutical tariff s could make essential medications more expensive. Th e burden of these higher costs would fall on American consumers, particularly in industries that rely heavily on imports from India.

Increased Inflationary Pressure: Rising costs of imports due to tariff s could add to infl ationary pressures in the US economy, already exacerbated by supply chain issues and high energy prices. This would affect everything from the cost of everyday goods to services, reducing purchasing power for consumers.

Retaliatory Measures: India, which is one of the largest and fastest- growing economies in the world, could retaliate by imposing tariff son US goods. Th is could lead to a trade war that harms American exports, especially in sectors like agriculture (e.g., almonds, apples) and technology. US farmers and manufacturers who rely on access to Indian markets could be left vulnerable.

Disruption to Global Supply Chains: Th e US and India are deeply integrated into global supply chains, especially in sectors like technology, pharmaceuticals, and manufacturing. Disrupting trade between the two countries could reverberate throughout the global economy, disrupting supply chains and increasing production costs for businesses.

Diplomatic Fallout

Th e renewed threat to tax Indian goods would not only have A new tariff escalation could lead to retaliatory Trade frictions between the US and World Trade Organization (WTO) to resolve disputes, but prolonged trade tensions could undermine eff orts to build a cooperative global economic order.

Trump’s latest threat to tax Indian goods underscores the fragility of international trade relations in an era of economic nationalism.

While the full impact of such tariff s remains uncertain, the consequences for both the US and India could be signifi ant—ranging from economic slowdowns and job losses to heightened geopolitical tensions. Both countries would be wise to seek diplomatic solutions before these trade disputes escalate into a full-fl edged crisis. As history has shown, trade wars oft en result in unintended consequences, and in this case, both nations could ultimately lose out from an escalation in tariffs.

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Courtesy:  SHANKAR RAJ and Spade A Spade- JANUARY  2025