Trump’s Tariff Chaos Hits India and Other Nations Hard – But Is His “Dollar for Dollar” Policy Justified? A Blow to the Ailing Global Economy – Is Recession Now Inevitable?
The Sword Has Finally Dropped and the world has finally woken up to the long-feared economic hammer – Donald Trump’s “reciprocal” tariffs. On Wednesday, the US president announced massive tariff hikes on dozens of nations, justifying them as a fair “dollar-for-dollar” match of what other countries charge the US. This includes not just traditional tariffs but also non-tariff barriers like value-added taxes and other hidden trade restrictions.
India, however, got one of the worst deals. This despite Trump’s often-professed friendship with Prime Minister Narendra Modi, the US slapped India with a whopping 26% tariff – higher than the 20% on the EU, 24% on Japan, and 25% on South Korea. China, as expected, took the biggest hit, with tariffs soaring to at least 54% on several key goods.
This is a significant setback for India, especially since New Delhi had been working behind the scenes to soften the blow. During Modi’s visit to Washington in February, both countries had agreed to move toward a trade pact, hoping to avoid exactly this kind of escalation, but Trump made it clear at a White House press event on Wednesday:
“India, very, very tough. Very, very tough,” he said. “The prime minister just left, and he’s a great friend of mine. But I said, you’re a friend of mine, but you’re not treating us right. They charge us 52%.”
Pressure Mounts on India
The new tariffs put India in a tight spot. Until now, US tariff rates were relatively low, averaging 3.3%, while India’s stood at 17%, according to the White House. In an effort to smooth things over, India recently slashed import duties on 8,500 industrial products, including American favorites like bourbon whiskey and Harley-Davidson motorcycles – addressing a long-standing complaint from Trump himself.
New Delhi also promised to buy more American oil, liquefied natural gas (LNG), and defense equipment, hoping to reduce its trade surplus with the US. Yet, despite these efforts, Washington seems to be pushing for even more.
With these fresh tariffs, India will likely face pressure to further lower its trade barriers, particularly for US agricultural products, a sector where Trump has been aggressively seeking concessions. There’s also the question of non-tariff barriers, like import restrictions and licensing hurdles, which the US has been keen on dismantling.
The irony is that the US has long positioned India as a strategic partner and a counterweight to China’s growing influence. And yet, in the latest round of Trump’s trade war, India finds itself in Washington’s crosshairs.
How Will Trump’s Tariffs Hit India’s Economy?
The US tariffs come at a tricky time for India; with global supply chains shifting and companies looking for alternatives to China, India had been positioning itself as a key player. But now, Trump’s tariff shock risks derailing some of those plans.
However, not everyone is sounding the alarm. A recent SBI Research report suggests that the overall impact of these tariffs will be limited, a view echoed by Goldman Sachs, Nomura, Morgan Stanley, and Fitch. According to SBI’s analysis, the hit to Indian exports would be around 3 to 3.5%, which, while significant, isn’t catastrophic.
The report outlined India’s diversification strategy, focus on value addition, and new trade routes through the Middle East as factors that could help offset the tariff blow. Goldman Sachs also points out that India’s exports to the US are relatively low compared to other emerging markets, making the country less vulnerable to a US-driven slowdown. Fitch adds that India’s economy is not heavily reliant on external demand, giving it a degree of insulation from the tariff war.
Despite the immediate impact, global economists still believe India is on track to remain the world’s fastest-growing major economy. According to the IMF’s January World Economic Outlook, India is set to become the world’s third-largest economy in the coming years.
Which Sectors Will Take the Biggest Hit?
While the overall impact might not be devastating, certain industries will feel the pinch more than others:
Electronics: Nearly $14 billion worth of electronic goods will now face higher tariffs.
Gems & Jewelry: The sector, which exports over $9 billion worth of products to the US, will take a hit.
Auto Parts & Aluminum: While these won’t face the 26% tariff, they’ll still attract a 25% duty under previous US measures.
Pharmaceuticals & Energy: Exempt from the latest round, but still a crucial part of India’s trade equation.
For context, before these tariffs, the average US tariff on Indian exports was:
Automobiles – 1.05%
Gems & Jewelry – 2.12%
Chemicals & Pharmaceuticals – 1.06%
Electronics – 0.41%
That’s a massive jump.
Who Gets Hit the Hardest?
Trump’s latest tariff blitz has sent shockwaves across the global economy, with allies and rivals alike feeling the heat. While India faces a 26% tariff, other key economies are bearing even heavier burdens:
Vietnam – 45%
Thailand – 36%
Taiwan – 32%
China – 34% (54% total with fentanyl-related tariffs)
Japan – 24%
South Korea – 25%
European Union – 20%
Meanwhile, countries like Britain, Brazil, and Singapore have escaped with only a 10% baseline tariff, thanks to their trade deficits with the U.S. Canada and Mexico remain exempt, except for earlier fentanyl-related duties and a 10% tariff on Canadian energy and potash.
Global Backlash, Allies and Rivals Lash Out
The response from global leaders has been swift and furious:
European Union: European Commission President Ursula von der Leyen vowed countermeasures, saying, “We will always stand up for Europe.”
Australia: Blasted the tariffs as “unwarranted.”
Italy: Called them “wrong.”
Japan: Labeled them “extremely regrettable” but held off on immediate retaliation.
New Zealand: Warned that the trade war is “not good for global economics.”
China: Threatened countermeasures to “safeguard its own rights and interests.”
South Korea: Declared a trade crisis and vowed to “exert all its capabilities” to counter the impact.
Canada: Warned that these tariffs would “fundamentally change the international trading system.”
Are Trump’s Tariffs Actually “Reciprocal”?
Trump’s justification for the tariffs was that they were “reciprocal”, meant to match what other countries charge the U.S. dollar for dollar, including non-tariff barriers like VATs and regulations.
But analysts and journalists have debunked this claim. Instead of complex tariff-matching calculations, Trump’s team appears to have used a simple formula:
The country’s trade deficit divided by its exports to the United States times 1/2.
For example, in China’s case:
U.S. trade deficit with China in 2024 = $295.4 billion
U.S. imports from China = $439.9 billion
China’s trade surplus with the U.S. = 67% of its exports
Trump administration used this number to set a “tariff charged to the U.S.” – even though no actual tariffs were referenced.
Mike O’Rourke, chief market strategist at Jones Trading, noted:
“These so-called ‘reciprocal’ tariffs are actually surplus-targeting measures. The Trump administration is specifically hitting nations with large trade surpluses, regardless of their actual tariff policies.”This flawed calculation could have serious consequences for U.S. supply chains and multinational corporations dependent on these countries for production.
“It’s hard to imagine how these tariffs won’t wreak havoc on major corporate profit margins,”
Is a Recession Inevitable? Trump’s Tariffs Could Trigger a Global Economic Crisis
JPMorgan analysts have sounded the alarm – if Donald Trump sticks to his newly announced tariffs, the U.S. and global economies are headed straight for a recession in 2025.
Even before these tariffs, JPMorgan had already pegged the U.S. economy’s recession risk at 40%. Now, with tariffs adding $660 billion in new taxes annually, they say a downturn is all but guaranteed.
How Trump’s Tariffs Could Break the Economy
Major Inflation Surge – The tariffs will raise consumer prices, adding 2% to the Consumer Price Index (CPI) – pushing inflation higher at a time when the Fed has struggled to bring it down.
Everyday goods could become more expensive, straining household budgets.
Massive Tax Hike on Americans – The tariffs act as a stealth tax, with JPMorgan calling this the largest tax increase in recent memory. It will erode disposable income, dampen consumer spending, and hit business investments hard.
Global Retaliation & Economic Fallout – If countries retaliate with tariffs of their own, it could cripple U.S. exports, hurt American manufacturers, and shake Wall Street.
Consumer sentiment is tanking, businesses are bracing for impact, and the global supply chain could spiral into chaos – a recipe for economic disaster.
JPMorgan analysts minced no words – “These policies, if sustained, would likely push the U.S. and global economy into recession this year.”
The Last Bit, Will Trump Blink?
Trump has doubled down on tariffs before, and his supporters argue that they’ll pressure foreign countries into fairer trade deals. But if these tariffs stay in place, the world may be staring down its next major recession and history won’t be kind to those who ignored the warnings.
