Trump’s tariff plans could impact global trade — including India

Nov 27, 2024 04:45 IST

First published on: Nov 27, 2024 at 04:45 IST

During his campaign for the presidential election, Donald Trump had advocated levying a 60 per cent tariff on imports from China, and 10-20 per cent on others. At a talk at the Economic Club of Chicago, he argued that higher tariffs would help facilitate manufacturing in the US, rebalance trade with other countries, and improve government finances. The president-elect has now gone a step ahead, announcing on a social media platform that after being inaugurated in January, he would impose a 25 per cent tariff on all products from Mexico and Canada, and levy an additional 10 per cent on China. The tariffs are expected to be in place ostensibly until the countries clamp down on drugs and illegal immigration. The three countries account for a significant share of goods imports to the US.

The imposition of steep tariffs, which are essentially a tax on imported goods, could possibly disrupt supply chains, become inflationary, raising costs for consumers and business, and have implications for interest rates. In fact, Trump’s proposals could end up costing a typical household in the US more than $2,600 a year, as per a study by economists at the Peterson Institute of International Economics. However, the policy of raising tariffs appears to have found favour across both Republicans and Democrats. In 2018 and 2019, during his first administration, Trump had levied tariffs across several product categories. The Tax Foundation, a Washington based think tank, has noted that the Biden administration not only kept most of them in place, but also announced additional hikes. Protectionist impulses now guide the policy choices of many erstwhile advocates of free trade.