Taxation without Exemptation
Deepak Razdan
New Delhi, 3 April, 2025
“No taxation without representation” was Americans’ slogan
to launch their freedom struggle against the British colonial raj. Last night, US
President Donald Trump’s announcement of universal trade tariffs came without
exemptions, although the US did hear representations from most countries during
the pre-tariff consultations.
For Indians, the tariffs do pose some additional challenges
for any kind of activity in foreign lands. The UK, the European Union (EU), as
also major economies in the East, are hurt by the trade-restrictive tariffs,
and certainly, these countries will not be in a welcoming mode to receive
foreigners visiting for tourism, education, business or migration.
In his Rose Garden, White House address, Mr Trump said
the US will welcome people coming in legally, “we need people,” he said, still Indians
will need to be careful about their tours in other parts of the West as they may
take some time to come to terms with the new economic situation.
Ever since the WTO pacts, the world had become
increasingly inter-dependent, confident of no sudden imposition of unilateral
tariffs or restrictions. The tariffs announced by Mr Trump can result in temporary
shortages of goods imported from the US in many countries. Prices can go up as
most countries contemplate retaliatory tariffs to counter the US action. New
trade groupings of nations are likely to emerge. It’s a New World!
Mr Trump announced a 34 per cent reciprocal tariff for
China. This was in addition to 20 per cent already announced for the major
economic power. China imposes 67 per cent tariff on US goods. The tariff
imposed on EU is 20 per cent, although it has 39 per cent tariff on US
products. For Japan the additional tariff is 24 per cent as it imposes 46 per
cent on the US. UK will have an additional tariff of just 10 per cent, which is
the same it imposes on the US imports.
India maintains 52 per cent tariff on US imports,
according to the US Administration. Mr Trump said India charges 70 per cent
tariff on US motorcycles. In response to tariffs by other countries, the US
President announced 25 per cent tariffs on all foreign made automobiles.
Giving an overview of the US economy, the biggest
market in the world, he said the US was in such a bad shape that it can’t make
sufficient antibiotics for its sick. The US today imports all of its computers,
phones, televisions and electronics. A single shipyard in China produces more
ships every year than all the shipyards in the US combined, he said.
“We are going to build all of them,” he said. The
country was moving towards a “collapse,” he said. The tariffs were needed to
rectify this situation, “we can’t be kind when we are cheated.” He said he could
be really reciprocal, but had to restrain himself as that would have made
things difficult for some nations.
Mr Trump has not spared Vietnam imposing 46 per cent
on it (saying the country is imposing 90 per cent on US goods!), Bangladesh 37
per cent, quake-hit Myanmar and Sri Lanka 44 per cent each. For Taiwan the tariff
rate is 32 per cent, South Korea 25 per cent, Thailand 36 per cent, Malaysia 24
per cent, Cambodia 49 per cent (as it charges 97 per cent on US goods), Singapore
10 per cent, Philippines 17 per cent, Pakistan 29 and Laos 48 per cent. War-hit
Ukraine is too facing 10 per cent tariff.
Unveiling the tariffs with mixed emotions, Mr Trump
said he will not be imposing as much tariff on the other countries as they are
doing. Although the world is still in a state of disbelief, Mr Trump said for
decades his country had been looted, pillaged and plundered by countries near
and far, friend and foe. It is not going to happen anymore, he said. Foreigners
had torn apart the “American dream,” he said.
The reciprocal tariffs “will make America rich” and
usher in the Golden Age of America, he said. It’s our declaration of economic
independence, he said, “It’s our turn to prosper.” Jobs and factories will come
back to America, he said, “the tariffs will give us growth.”
Most other countries however believe Mr Trump has
declared a global trade war, and many of them are announcing special economic
packages to keep their economies going. "It is the beginning of a new era,"
according UK Prime Minister Keir Starmer. French Prime Minister François Bayrou
says Trump's tariffs have created a "catastrophe" for both France and
the US. Spain has already announced a euro14.1 bn package to support its
economy. While Australia described the tariffs as “totally unwarranted,” Japan said
these were “extremely regrettable.”
European Union leader Ursula von der Leyen said the
tariffs are “a major blow to the world economy.” The tariffs will also hurt
consumers around the world. It will be felt immediately. “We are already
finalising a first package of countermeasures in response to tariffs on steel. Europe
has the largest Single Market in the world - 450 million consumers – “that is
our safe harbour in tumultuous times. Europe stands together for our businesses,
for our workers, and for all Europeans,” she said.
The Indian
Government stated the additional duty on Indian exports to the US will be 27
per cent. The government’s Department of Commerce is carefully examining implications
of the various measures and announcements made by the US President. Keeping in
view the vision of Viksit Bharat (a Developed India), the Department is engaged
with all stakeholders, including industry and exporters, taking feedback of
their assessment of the tariffs and assessing the situation. The Department is studying
opportunities that may arise due to this new development in the US trade policy.
India and the US
have been engaged in talks for quite some time to raise their trade levels and
this dialogue can prove helpful to face the current difficult situation which
is considered no less than a global crisis.
After Mr Trump’s
election for a second term of the US Presidency, Prime Minister Narendra Modi
visited the US in February this year. Jointly with Mr Trump, he had announced
on 13 February 2025 a ‘Mission 500’ – aiming to more than double India’s
bilateral trade to US $500 billion by 2030. Accordingly, discussions are going
on between Indian and US trade teams for an expeditious conclusion of a
mutually beneficial, multi-sectoral Bilateral Trade Agreement (BTA).
The on-going
talks are focused on enabling both nations to increase trade, investments and
technology transfers. “We remain in touch with the Trump Administration on
these issues and expect to take them forward in the coming days,” the
government stated on 3rd April, 2025.
The government
recalled its Comprehensive Global Strategic Partnership with the United States
and stated it is committed to working closely with the US to implement the
India-US ‘Catalysing Opportunities for Military Partnership, Accelerated
Commerce & Technology’ (COMPACT) for the 21st century to ensure that the
bilateral trade ties remain a pillar of mutual prosperity and drive
transformative change for the benefit of the people of both countries.
India has been engaging with countries on its east for
larger trade and strategic relations. None can however deny the enormity of the
trade a country has with the US. The
India-US trade and investment partnership was considered an engine for global
growth, with their bilateral trade exceeding $191 billion in 2022, nearly
doubling from 2014.
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