Keeping Afloat in Troubled Waters
8 April, 2025
Deepak Razdan
US President Donald Trump’s trade tariffs announced on
2nd April will fully come into effect from Wednesday. Most countries,
especially the developed bloc, comprising the European Union, Canada and UK have
either announced reciprocal actions or are planning their counter-strategies. Despite
many countries reaching the US for negotiations, a global trade war has begun.
It has pushed the Ukraine war into background.
Russian President Vladimir Putin is not as much in
international focus now as US President Donald Trump is. Today, nations are
making appeals for moderation and dialogue to Mr Trump, who has launched the
tariffs offensive and is not inclined to slow down. The US was cheated by
nations whom it helped since the end of the Second World War, he maintains.
Mr Trump has threatened an additional 50 per cent
tariff on China, if it does not withdraw by Tuesday noon the 34 per cent
counter-tariff it has imposed on US imports. China earned hundreds of billions
of dollars in trade with the US and put that money into military expenditure,
Mr Trump has said. China does not, however, see any merit in US arguments and
has vowed to fight the US tariffs till the end.
How does India keep itself afloat in the troubled
waters? India is patiently watching the situation. On Monday, Indian Minister
of Commerce & Industry Piyush Goyal said that India is well poised to
convert the current global situation into an opportunity, just as it did during
the Covid-19 pandemic and in the late 1990s when the Indian IT sector leveraged
the Y2K bug crisis to mark its emergence on the global stage.
The US is persisting with the tariffs. Mr Trump again
said the US contributed huge finances into the NATO (North Atlantic Treaty
Organization) for defence of Europe. Instead of acknowledging the US gesture, the
European Union, like Japan, did not buy any cars from the US. The US had to do
something. The new tariffs will reset the table, Mr Trump believes.
The British government has repeatedly stressed that it
will not be rushed into retaliatory measures after the US slapped a 10 per cent
import tax on nearly all UK products entering the US, on top of the already-announced
25 per cent levies on aluminium, steel and cars.
UK will however accelerate measures aimed at helping its
industry weather the global economic storm, unveiling later this year a new
industrial strategy. The government wants to secure a trade deal with the US
and talks are going on with White House.
"A trade war is in nobody's interest. It is why
we must remain pragmatic, cool headed, and pursue the best deal with the United
States that is in our national interest," Chancellor of Exchequer Rachel
Reeves said.
UK Business Secretary Jonathan Reynolds separately said
he is consulting UK firms about the likely impact of the 10 per cent tariffs
imposed on nearly all UK exports to the US. If UK negotiators cannot agree a
deal to reduce the 10 per cent tariff by 1st May, the Business Secretary has said
the government could impose retaliatory tariffs on US imports.
After President Trump’s announcement of the tariffs, European Commission
President Ursula von der Leyen had said these were a major blow to the world
economy. The US imposed a blanket 20 per cent tariff on imports from the bloc,
and a flat rate of 25 per cent on cars. The EU leader said the tariffs will
hurt consumers around the world. In the past 80 years, trade between Europe and
the United States had created millions of jobs.
Proposing negotiations to settle the issue, EU offered zero for zero per
cent tariff deal to the US, but was ready with 25 per cent tariffs on some US
imports in countermeasures. EU Trade ministers met in Luxembourg to consider the
counter steps which could be announced on Wednesday.
Canada and Mexico were left out of the 2nd April announcements
but the US government had already announced certain specific tariffs for the
two countries. The Canada-United States-Mexico Agreement (CUSMA) also governs
trade among the three countries.
In quick reaction, Canadian Prime Minister Mark Carney
announced countermeasures to protect Canadian workers and business and defend
the Canadian economy.
The Canadian Prime Minister said the tariffs had
ignored the vast volume of trade totaling US $ 2.5 billion between US and
Canada. The US imposed on 4th March, 2025 tariffs of 25 per cent on Canadian
goods and 10 per cent on energy and potash exports from Canada to the US, the Canadian
government said.
On 12th March, 2025, the US imposed 25 per cent tariff
on Canadian steel and aluminum products also. On 3rd April, US tariffs of 25
per cent on Canadian automobiles came into effect.
Mr Carney, over a few days, spoke to UK Prime Minister
Keir Starmer, German Chancellor Olaf Scholz and President of Mexico Claudia
Sheinbaum.
The Canadian countermeasures included imposing tariffs
of 25 per cent on a valued $30 billion in goods imported from the US, effective
March 4, 2025. Canada imposed as of March 13, 2025, 25 per cent reciprocal
tariffs on a list of steel products worth $12.6 billion and aluminium products
worth $3 billion, as well as additional imported US goods worth $14.2 billion, taking
to a total of $29.8 billion to match US tariffs on steel and aluminum,
dollar-for-dollar.
India took some initiatives recently which can help it
during the current uncertain times. India is in advanced talks with the United
States for a multi-sector Bilateral Trade Agreement (BTA). This is not a
routine trade agreement. It aims to double bilateral trade to 500 billion
dollars by 2030. The first tranche of the agreement is scheduled to be made
public by fall of the current year. Certainly, any reciprocal action by India on
tariffs at this stage can only complicate the atmosphere.
European Commission President Ursula von der Leyen
visited New Delhi along with the European College of Commissioners February-end
this year and after high-level talks, Prime Minister Narendra Modi said on 28
February, 2025 “We have prepared a blueprint for collaboration in the areas of
Trade, Technology, Investment, Innovation, Green Growth, Security, Skilling and
Mobility. We have directed our teams to conclude a mutually beneficial
Bilateral Free Trade Agreement by the end of this year.”
This was not just the European Commission’s first
visit to India, but also the first such comprehensive engagement of the
European Commission in any single country, the PM said. Also, this was one of
the first visits of the new Commission in its latest term.
After two days of talks with EU leaders, Mr Modi said
“People-to-people connect is the strongest asset of our relationship. Today, we
have reached a new agreement to increase academia, research and industry
partnerships between us. I believe that India’s young talent and Europe’s
innovation can together create limitless possibilities.”
This was not an ordinary understanding reached with
the EU. India welcomed EU’s new visa cascade regime which will provide better
mobility to India’s talented youth. In the field of connectivity, concrete
steps will be taken to build the India-Middle East-Europe Economic Corridor!.
People-to-People relations depend heavily on trade and
strategic relations. When India is successfully concluding trade and strategic
agreements with the US and the EU, it will be unlikely for India to join any
war-games on tariffs, although the final agreements with the US or the EU may
take note of the reality of the new tariffs.
While India needs the world for trade, Indians need it
for many other purposes, like education, tourism and migration. Opportunities
for higher education and research are for the time being difficult to get in
the US because of cuts in funding for universities and scientific research.
In European countries, there is a barrier of different
languages. The European nations are at present in a disturbed state, worried as
they are about their security due to the continuing Ukraine war and uncertainty
about how far the US will defend them if they are also threatened by Russia.
Such a scenario does not see a climate suitable for
either tourism or migration. The high tariffs are universally expected to
result in high inflation and slower growth rates. Not the kind of environment people
from developing countries like India, look forward to while planning migration.
There is, in addition, a suspicion of all aliens. In
pre-tariffs weeks and months, European nations were not as afraid of the
Russian missiles crossing over to Ukraine as they are today, after the
imposition of the tariffs.
On a day which for Mr Trump was Liberation Day for the
US, nearly all of Europe appeared to have lost sense of peace. Economic
hardship worried the region even while there were fears on security. The
current international scenario is expected by many to generate new economic
alliances, as well as military treaties.
For adventurous Indians, times are difficult for
expeditions in foreign lands. Just like the Indian government is looking
towards the East and Act East, Indians may also follow suit, looking
opportunities for profit and pleasure in the Eastern lands. The tariffs may
have caused tremors all over the Earth; the East is known for stability and
conservative beliefs.
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